Econ 203 Fall 2020 Exam 1 Date October 18 2020 Time 11:00 AM ✓ Solved

Econ 203 Fall 2020 Exam 1date October 18 2020 Time 1100 Am 2

Cleaned assignment instructions:

Answer the following multiple-choice questions and analytical problems based on economic concepts. Provide thorough explanations and well-structured answers, demonstrating understanding of supply and demand, elasticity, consumer choice, and market equilibrium. Support your answers with appropriate economic theories, formulas, and graphical illustrations where necessary.

Sample Paper For Above instruction

Multiple Choice Questions

  1. Most economists are against rent control (Price Ceiling) because it

    A) discourages tenants from searching for apartments.

    B) encourages landlords to build too many apartments.

    C) discourages the building of new apartments.

    D) leads to surpluses.

  2. A hailstorm kills all of the wheat in Saskatchewan. What will happen to the price and quantity of wheat sold in Canada?

    A) Equilibrium price rises, equilibrium quantity rises.

    B) Equilibrium price falls, equilibrium quantity increases.

    C) Equilibrium price falls, equilibrium quantity falls.

    D) Equilibrium price rises, equilibrium quantity falls.

  3. A long hot summer has increased the demand for beer; at the same time a tax is placed on alcohol. What can we say about the equilibrium price and quantity of alcohol?

    A) Equilibrium price falls; equilibrium quantity is unknown.

    B) Equilibrium price rises; equilibrium quantity is unknown.

    C) Equilibrium price rises; equilibrium quantity rises.

    D) Equilibrium price rises; equilibrium quantity falls.

  4. Assuming ð‘ˆð‘ˆ (ð‘¥ð‘¥, ð‘¦ð‘¦) = 4(ð‘¥ð‘¥y)0.5+10, what is the Marginal Rate of Substitution of y for x when x=2 and y=4?

    A) 2

    B) 1/2

    C) -2

    D) -1/2

  5. A difference between luxuries and necessities is that

    A) luxuries are not purchased by low-income people.

    B) rich people buy fewer necessities than do poor people.

    C) the percentage of income spent on luxuries rises as income rises, whereas the percentage of income spent on necessities falls as income rises.

    D) all necessities are inferior goods and all luxuries are normal goods.

  6. An increase in the price of one good will cause

    A) an outward rotation of the budget curve.

    B) a parallel shift in the budget curve.

    C) an inward rotation of the budget curve.

    D) an inside shift of the budget curve.

  7. The marginal rate of substitution is the

    A) rate at which the consumer increases utility.

    B) absolute value of the indifference curve.

    C) total utility derived at any point.

    D) tradeoff rate between the two goods under consideration at any particular point.

  8. If a demand curve for cigarettes was given by Q = 0.38P, when P = 20, a further increase in the price will

    A) decrease total revenue.

    B) leave total revenue the same.

    C) increase total revenue.

    D) we can't answer with the information given.

  9. The indifference curves for right shoes and left shoes will be:

    A) L-shaped.

    B) a straight line with positive slope.

    C) a straight line with negative slope.

    D) convex.

  10. Which of the following goods are likely to have a positive cross-price elasticity?

    A) Butter and margarine

    B) Tires and automobiles

    C) Pepsi and pizza

    D) Peanut butter and jelly

Analytical and Essay Questions

  1. The market for concert T-shirts is supplied by the equation P = 6Q. Market demand is given by P= 18 – 3Q. What is the total revenue for the market? If the band decides to charge $18 per T-shirt, how much of a surplus or shortage will exist? By how much will they have to shift demand in order to regain equilibrium at that price? (solve for the new demand curve)
  2. A consumer has a budget of M = $133 per month to spend on two goods, X and Y. The consumer’s utility derived from the purchase of these two goods is U (X, Y) = 3X² + Y². If PX = 3, and PY = 2

    a. What is the optimal bundle of goods that the consumer will purchase?

    b. How much does the consumer spend on each good?

    c. If the price of good Y increases to PY = 4, what is the new optimal bundle?

  3. The demand for Coke is: ð‘„ð‘„C = ð‘ƒð‘ƒC + 0.2I + 0.3ð‘ƒð‘ƒP where PC is the price of Coke, PP is the price of Pepsi, and I is the level of income.

    a. What is the relationship of these two drinks?

    b. If ð‘ƒð‘ƒC=$6, ð‘ƒð‘ƒP=$10, and I=500, solve and graph the inverse demand curve for Coke.

    c. How many Cokes will be sold at ð‘ƒð‘ƒC=$6 per case?

    d. What is the income elasticity of demand for Coke? (Æž= [(dQ/dI). I/Q])

References

  • Varian, H. R. (2014). Intermediate Microeconomics: A Modern Approach. W.W. Norton & Company.
  • Pindyck, R. S., & Rubinfeld, D. L. (2018). Microeconomics. Pearson Education.
  • Frank, R., & Bernanke, B. (2015). Principles of Economics. McGraw-Hill Education.
  • Perloff, J. M. (2016). Microeconomics: Theory and Applications with Calculus. Pearson.
  • Sloman, J., et al. (2018). Economics. Pearson Education.
  • McConnell, C. R., et al. (2017). Economics Principles, Problems, and Policies. McGraw-Hill Education.
  • Hubbard, R. G., & O’Brien, A. P. (2018). Microeconomics. Pearson.
  • Colander, D. C. (2014). Microeconomics. McGraw-Hill Education.
  • Stiglitz, J. E. (2015). Economics of the Public Sector. W.W. Norton & Company.

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