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33

Mmiul Forces

ling CA questions and 1 hour apiece writing MU questions. This quarter, however, they intend lo specialize. John will spend 2 hours writing questions of die tvpe iu which he has a comparaii\e ad\aniage and Kevin will do likewise. How mail) additional C\ and MU questions will they be able to produce respectively? (a) 2 and 5 (b) and 4 (c) I and 3 (d) 9 and ].o (e) 4 a)id .

Tl. Suppose that when the price of good X increa.s-es by $15, the quandt) demanded falls from 100 units to 70 units. What is the loss in consumer surplus? (a) S250 (b) $525 (c) $1275 (d) $1950 (e) none of the above.

78. Assume that the break-up of AT&Ts long distance phone monopoly lead to a 20% decrease in the price of long distance phone calls and a 35% increase in the quantit) of calls made. This implies: (a) TR will decrea.se (b) TR will be constant (c) TR will increa.se (d) elasucity of demand Avill increase and then decrease (e) elasticit) of demand will decrease and then increase.

79. Due to a technological advance, the price of shatterproof safet) glass decreases substantially; because of this, the price of automobiles will: (a) decrease since demand for cars decreases (b) increase since .supply of cars decreases (c) increase since demand for cars increases (d) decrease since supply of cars increases (e) not change.

80. \\ die price of oil rose dramatically in the 1970s, the demand for natural gas shifted to the:

(a) right; oil and natural gas are complements

(b) right; oil and natural gas are subsdtutes (c) left: oil and natural gas are complements (d) left: oil and natural gas are subsdtutes (e) none of the above.

81. Given two persons who have idendcal marginal utilit) schedules, who face the same prices, but who have different incomes, we would expect all of the following except: (a) the low income person would equate marginal udlity per dollar on each good put-chased (b) the high income person would purchase at least as much of each good as the 1 income person (c) the marginal utility per dollar spent on the first unit of each good purchased Avould be the same for both con.sumers (d) the high income person would achiexe at least as much total udlit) from each good purchased (e) the high income person would

have a higher marginal udlity per dollar spent on the last unit of each good purchased.

82. icll of the following statements is impossi- w ith regard lo the two goods, A and B? (a) good is inferior yet has a unitary demand elasticity

(b) cross elasticity is positive for good A (relative to good B) and negative for good (reladve to good A)

(c) good is both a normal good and a complement to good A (d) both good A and have unitar) demand elasdcides at all price levels (a) good A has an inelastic demand at some price Pq and an elasdc demand at a higher price Pj.

83. The Santa Barbara City Council imposes a tax on mo\ie tickets. Movie audiences would bear no burden of this tax if (a) the demand for dckets is per-fectlv inelastic (b) the demand for dckets is perfectly elastic (c) the demand for tickets is unit elastic

(d) supply is infinitely elasdc (e) supply is unit elasdc.

84. Which are typical consequences of a price floor? (a) reduced quandty sold (b) development of surplus (c) formation of black markets trading below the price floor (d) a reduced consumer surplus

(e) all of the above.

85. If coffee" and cookies are complements then: (a) the lower the price of coffee, the lower the demand for cookies (b) the higher the price of coffee, the lower the demand for cookies (c) the lower the price of coffee, the smaller the quantit) of cookies demanded (d) the lower the price of coffee, the larger the quantity of cookies demanded (e) none of the al)0\e.

80. Apples are $1.00/lb. and oranges are $1.50/lb. If the marginal utilit) from consuming the last poimd of apples is 8 udls, then in equilibrium the marginal udUt\ of die la.st pound of oranges is: (a) 8 mils (b) 5utiis (c) i mil (d) 1/2 mil (e) 12 utils.

87. If good "A" is represented on the horizontal axis and good "B" on the verUcal axis, then the steep er the ])roduction possibility fronder at a given le\ el of producdon of good "A," the; (a) larger the quantit) of resources being devoted to the producdon of good "A" (b) smaller the quandty of resources being devoted the production of good "A" (c) larger the opportunity cost of producing an extra unit of good "A" (d) smaller the opportunit) cost of producing an



extra unit of good "A" (e) none of tiie above.

88. Australia & Belgium have the following data:

Output per man hour in the production of jujubees vegimite

Australia 2 tons 8 gallons

Belgium 3 tons 9 gallons

The opportunity cost per gallon of vegimite produced in Australia would be: (a) 8 gallons of vegimite (b) 9 gallons of vegimite (c) 2 tons of jujubees (d) one third ton of jujubees (e) one quarter ton of jujubees.

89. Belgium would be-unwilling to trade 1 ton of jujubees for which of the following? (a) 5.5 gallons of vegimite (b) 4.5 gallons of vegimite (c) 3.5 gallons of vegimite (d) 2.5 gallons of vegimite (e) any of the above because Belgians love jujubees.

90. A straight-line production possibilit) frontier is associated with: (a) constant opportunity cost (b) specializadon in production (c) diminishing marginal utility (d) specialized factors of producdon (e) unlimited technology.

91. The price of a good mardni is $3.00, and the marginal udlit) of this manini is 12 utils. The price of a gin and tonic is $2.50. If a consumer who consumes some of both goods seeks to maximize his udlity, the marginal unlit} of the gin and tonic must be: (a) 7.5 udls (b) 10 utils (c) 12 utils (d) 13.5 udls (e) none of the above.

92. computing the niarket consumer surplus using the area of a triangle formula, several assumptions are made. \\ 1 of the following is not one of these assumptions? (a) the demand curve is approximately a straiglit liiie (b) everyone is charged the same price (c) the demand curve is unit elastic (d) individuals are utility- maximizers (e) the demand curve reflects consumer welfaie.

93. Which of the following would not cause an individuals demand for a product to increase? (a) a decrease in die products price (b) a favorable change in the individuals preferences (c) an increase in the individuals income (d) an increase in the price of a substitute (e) a decrease in the price of a complement.

94. Consider a 3-firm industry w iih the following iirnis supply schedides (in thousands)

Price M \m L50 2:00 1

Firm A 1 2 3 4 5 6

Firm 3 5 7 9 n 13

Firm 0 I (j 10 i.T

and the following market demand schcdide:

Price 3.00 2.50 2.00 1.50 1.00 M Quandtv- 13 16 19 22 25 28

How much, in equilibrium will the two firms A and combined sell? (a) 4 (b) ( ) JO (d) 13 (e) 16.

95. If both supply and demand simiiltaneouslv increase, then at die new equilibrium: (a) the price is higher (b) the quantit) is lower (c) the price and quantity are both greater (d) the price is lower (e) the quandt) is greater.

96. If one %vere interested in knowing if a good is a normal good, he would wish to know the value of:

(a) demand elasticit) (b) cross elasticit) (c) income j elasticity (d) the slope of the supply cmve (e) thej slope of the demand curve.

97. Preseiidy, there are two economically feasible] methods of generating electricit)- on a large scale; coal- fired power plants and nuclear fission reactors. IiiI recent years, public protest has led to lengthy conj struction delays for nuclear reactors causing the pnca of new reactors to rise dramaticall)-. \ icll of the foil lowing would not be a consequence of the higher price of reactors? (a) an increase in the price of electricit

(b) an increase in die number of coal-fired plant

(c) a decline in the number of nuclear reactors builj

(d) an increase in the amount of coal mined (e) aO increase in the supply of new coal-fired plants.

98. WHiat effect does a simultaneous increase i both income and the cost of inputs have on a produC (a) the products price increases, but the effect quantit)consumed is indeterminate (b) the produc price decreases, but the effect on quantit) coii.suniedj indeterminate (c) fhe quantin consimicd increase but the effect on the products price is indetermiua (d) the quantit) consumed decreases, but the effeci die products price is indeterminate (e) none ol il above.

99. If the supply curve for a product is hoiizon



then the elasticity of supply is: (a) equal to 0 (b) greater than 0 but less than 1 (c) equal to 1 (d) greater than ] but less than infinit) (e) equal to infinity.

100. If a price increase causes total expenditure on

a product to fall, but not cease endrely, then the pnce elasdcit) of demand is: (a) equal to 0 (b) greater than 0 but less than 1 (c) equal to 1 (d) greater than 1 but less than infinity (e) equal to infinity.



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