Professor: M.

Rush
ECO 2023
FALL 2012
FINAL EXAM
This test is governed by UFs academic honesty code. It is intended to have 33
multiple choice questions. Please check to be sure your copy has all 33. Chose the
best answer for each question.
The next is important: Unless you are specifically told otherwise, on this test do
not assume that demand or supply is either perfectly elastic or perfectly inelastic.
On the bubble sheet, please enter:
1. Your name and initials
2. Your UF ID number
3. Form code: A
4. Sign your name on the bubble sheet.
TURN OFF ALL CELL PHONES AND OTHER
COMMUNICATION DEVICES
Check that the form code and UF ID number you bubbled-in are correct now. Also check
to be sure your name is correctdo it now. I investigated the rumor that the ability to
correctly record these had been mastered by a few students at FSU. This rumor turned
out to be false. But, the rumor that an accounting major and a journalism major did
successfully record these on a test is true. These students have since been bronzed and
are on display outside their respective colleges to serve as an inspiration for all other
accounting and journalism students.
CHECK YOUR TEST CODE AND UF ID NUMBER. IF YOU GET EITHER OF THESE
WRONG, YOUR TEST MIGHT NOT BE GRADED AND IF IT IS GRADED, YOU WILL
LOSE 6 POINTS (which equals 2 questions)!
I have become increasingly concerned that some students are at a real disadvantage
because they are unwilling to ask questions during the exam while others ask a lot of
questions. Hence, to level the playing field, I have decided to eliminate all questions
during the test. I dont like this policy, but it seems the fairest policy.
Do not ask questions of me or the TAs; in the interest of fairness I
have instructed them not to answer any questions during the exam.
You will have one hour (60 minutes) to complete the exam and bubble in all your
answers. When the TAs say that time is up, you must hand in your exam. We will not
give extra time to finish bubbling in the answers, so be sure you are done when the 60
minutes are up. Of course, you may hand in your test at any time before the 60 minutes
are up.
An answer key will be posted on the class web page later this
evening at about 10:00.
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The test scores AND GRADES will be on class web page probably by
Wednesday or Thursday.
Once you see the answer key, you might have a question about why one answer
is right and another is wrong. For these questions, email me at
mark.rush@warrington.ufl.edu Do NOT email the grader about these questions!
After the scores are posted, if you think your posted score is incorrect, then email
the grader at eco2023.grader@warrington.ufl.edu If you email me about your test
score, I will not forward the email nor respond to youyou MUST email the
grader. You have one week after the curved score is posted to request a grade
check. After a week, the score will not be changed. If the web reports what you
bubbled in for each question and you ask the grader to check an answer because
you believe you bubbled in something other than what is reported and the
reported answer on the web is correct, you will lose 1 additional question.

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1) Which of the following does shifts a nations PPF outward?
i. An increase in a nations capital stock.
ii. A decrease in inefficiency.
iii. An increase in a nations technology.
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii

2) The figure above illustrates a linear demand curve. In the range from $80 to $100,
A) the demand is price elastic.
B) the demand is unit elastic.
C) the demand is price inelastic.
D) more information is needed to determine if the demand is price elastic, unit elastic, or
inelastic.
3) The demand for and supply of tablets both increase. The demand increases by less
than the supply. As a result, the equilibrium price of a tablet ____ and the quantity
____.
A) rises; increases
B) does not change; increases
C) falls; decreases
D) falls; increases
E) more information is needed to determine if it rises, falls, or does not change; increases
4) A monopolistically competitive industry has
A) insurmountable barriers to entry.
B) firms making differentiated products.
C) mutually dependent firms.
D) firms making identical products.
E) a small of firms.
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5) An oligopolist firm cheats on a collusive price-fixing agreement by setting
A) a lower price and producing less output than agreed upon.
B) a higher price and producing more output than agreed upon.
C) a higher price and producing less output than agreed upon.
D) a lower price and producing more output than agreed upon.
6) ____ is per se illegal under the Sherman Act.
i. An oligopolistic firm lowering its price to drive a competitor out of business
ii. A price hike by an unregulated monopoly
iii. Price fixing among competitors
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
7) A tariff harms
i. domestic producers.
ii. domestic consumers
iii. the domestic government.
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
8) Bobs Lawn Care Services is a perfectly competitive firm that currently mows 22
lawns a week for a price of $25 per lawn. Bobs marginal cost is $30. Bob will
increase his profit if he
A) charges a higher price.
B) charges a lower price.
C) mows fewer than 22 lawns a week.
D) mows more than 22 lawns a week.
E) Both answers A and C are correct.
9) If a market produces the efficient quantity of a good, then the marginal social cost,
MSC, of producing the good equals
A) MC +MB.
B) MB +marginal external cost.
C) MB +marginal external benefit.
D) P +marginal external cost
E) MC +marginal external cost.
10) New cars are a normal good and peoples incomes fall. As a result, the equilibrium
price of a new car ____ and the quantity of new cars ____.
A) rises; increases
B) rises; decreases
C) falls; decreases
D) falls; increases
E) does not change; increases
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11) The government imposes a tax on sellers of pizza. Which of the figures above best
illustrates the effect of this tax?
A) Figure A
B) Figure B
C) Figure C
D) Figure D

Sears
Lower prices Dont lower prices


Lower
prices
S: $6 million
W: $5 million
S: $9 million
W: $10 million
WalMart Dont
lower
prices
S: $30 million
W: $17 million
S: $20 million
W: $20 million
12) Sears and Wal-Mart must decide whether to lower their prices, based on the
potential economic profits shown in the table above. (An S indicates Sears profit
and a W indicates Wal-marts profit.) Who has a dominant strategy?
A) Walmart has a dominant strategy but Sears does not.
B) Sears has a dominant strategy but Walmart does not.
C) Both Walmart and Sears have dominant strategies.
D) Neither Walmart nor Sears has a dominant strategy
E) More information is needed to determine if either Sears or Walmart has a dominant
strategy.
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13) The figure above shows the U.S. demand and the U.S. supply of shirts. If the world
price of shirts is $20 per shirt, when the United States trades with the rest of the
world, total surplus in the United States ____.
A) increases by $128 million
B) increases by $256 million
C) decreases by $288 million
D) does not change.
E) None of the above.
Sears
Set low
prices
Set high
prices


Set low
prices
S: $9 million
W: $3 million
S: $6 million
W: $4 million
Walmart Set
high
prices
S: $10 million
W: $4 million
S: $9 million
W: $3 million
14) Sears and Wal-Mart must decide whether to lower their prices, based on the
potential economic profits shown in the table above. (An S indicates Sears profit
and a W indicates Wal-marts profit.) Who has a dominant strategy?
A) Walmart has a dominant strategy but Sears does not.
B) Sears has a dominant strategy but Walmart does not.
C) Both Walmart and Sears have dominant strategies.
D) Neither Walmart nor Sears has a dominant strategy
E) More information is needed to determine if either Sears or Walmart has a dominant
strategy.
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15) The above figure shows the Lorenz curve for wealth for the nation of Rusha. The
wealthiest 40 percent of the population owns ____ percent of the total wealth and
the poorest 40 percent of the population owns ____ percent of the total wealth.
A) 40; 20
B) 60; 20
C) 40; 40
D) 60; 40
E) None of the above answers are correct.
16) The concept of externalities means that subsidizing education can be justified on the
grounds that as a student becomes better educated, the student will
A) earn a higher income.
B) enhance the lives of people around the student.
C) make contributions to the students alma mater.
D) None of the above answers is correct.
17) Golf balls and tennis balls are substitutes for consumers and tennis balls rise in
price. As a result, the equilibrium price of golf balls ____ and the quantity of golf
balls ____.
A) rises; increases
B) rises; decreases
C) falls; decreases
D) falls; increases
E) does not change; increases
18) The demand curve for low-skilled labor lies to the left of the demand curve for high-
skilled labor because
A) there are more high-skilled workers than low-skilled workers.
B) high-skilled workers require more compensation than low-skilled workers.
C) high-skilled workers are more productive than low-skilled labor.
D) firms do not see any difference between high-skilled labor and low-skilled labor.
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19) Suppose that there is a technological advancement in the production of paper.
Which of the following will happen?
A) A leftward shift of the supply curve of paper and both the equilibrium price and
equilibrium quantity fall.
B) A rightward shift of the supply curve of paper and both the equilibrium price and
equilibrium quantity fall.
C) A rightward shift of the supply curve of paper and the equilibrium price falls while the
equilibrium quantity increases.
D) A rightward shift of the supply curve of paper and both the equilibrium price and
equilibrium quantity rise.
Quantity
(pizzas per hour)
Total cost, TC
(dollars per hour)
1 18
2 30
3 48
4 70
5 98
6 120
20) Giuseppes Pizza is a perfectly competitive firm. The firms costs are shown in the
table above. The price of a pizza is $12 and the variable cost of the first pizza is $8. If
Giuseppe shut down, in the short run its economic loss is _____ per hour.
A) $0
B) $4
C) $10
D) $12
E) More information is needed to answer the question.
21) At one point along a PPF 40 tons of wheat are produced while 80 tons of rice are
produced. At another point along the same PPF, 41 tons of wheat are produced
while 70 tons of rice are produced. The opportunity cost of producing a ton of
wheat between these points is
A) 1/2 ton of rice.
B) 10 tons of rice.
C) 1/10 ton of rice.
D) 70 tons of rice.
22) Which of the following products is the most likely to have an external benefit?
A) A slice of pizza.
B) A diamond ring.
C) A flu vaccination.
D) An Internet web page
E) A magazine.
23) A rent ceiling set below the equilibrium rent
A) increases producer surplus.
B) decreases producer surplus.
C) does not affect producer surplus.
D) might increase or decrease producer surplus.
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24) In the United States, government tax and redistribution programs
A) generally redistribute income away from the poor and give it to the rich.
B) have no net redistributive effects.
C) generally redistribute income away from the rich and give it to the poor.
D) are dwarfed by the scale of government programs designed to give away goods and
services below cost.
25) Which of the following is rival and nonexcludable?
A) A public good
B) A natural monopoly
C) A private good
D) A common resource
26) Which of the following illustrates the concept of external cost?
A) Bad weather decreases the size of the wheat crop.
B) An increase in the demand for cheese raises the price paid by consumers of pizza, thereby
harming these consumers.
C) Smoking harms the health of the smoker.
D) Smoking harms the health of nearby non-smokers.
27) The Clayton Act of 1914 prohibits
A) price discrimination if the effect is to substantially lessen competition or create
monopoly.
B) unfair methods of competition and unfair or deceptive business practices.
C) combinations, trusts, or conspiracies that restrict interstate or international trade.
D) business practices that allow one firm to profit at the expense of another whenever the
first firm is a monopoly.
28) Compared to a single-price monopoly, a price discriminating monopoly decreases
____ and increases ____.
A) its economic profit; its costs
B) the demand for its product; its economic profit
C) its costs; its price
D) consumer surplus; its costs
E) consumer surplus; its economic profit
29) Janes Garage Cleaning is a monopoly firm that currently cleans 40 garages a week.
Janes marginal cost is $35, her marginal revenue is $40, and her average total cost is
$40. Jane is
A) maximizing her profit and is making an economic profit.
B) not maximizing her profit and is making an economic profit.
C) maximizing her profit and is making a normal profit.
D) not maximizing her profit and is making a normal profit.
E) None of the above answers are correct.
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30) In the above figure, to maximize its profit a monopoly produces ____ units per day
and sets a price of ____ per unit.
A) 5; $40
B) 10; $10
C) 10; $30
D) 15; $20
E) 20; $10
31) Product variety for consumers is a gain from
A) perfect competition.
B) oligopoly.
C) monopoly.
D) monopolistic competition.
32) The price elasticity of demand for Pepsi is 2.0. A 5 percent increase in the price of a
Pepsi decreases the quantity demanded of Pepsi by ____ percent.
A) 0.4
B) 2.0
C) 10.0
D) None of the above answers is correct.
33) After the scores are posted, if you have a question about your test score, email the
grader at ECO2023.Grader@warrington.ufl.edu and the director is so stupid (HINT:
Be SURE to answer this question because youll get credit for any answer.)
A) he asked Whats the number for 911?
B) he got fired from the M&M factory for throwing away all the Ws.
C) he returns bowling balls because they've got holes in them.
D) some village somewhere is missing its idiot.
E) he got an AM radio and it took him months to figure out he could use it at night.