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Professor: M.

Rush
ECO 2023
FALL 2013
FINAL EXAM
This test is governed by UFs academic honesty code. It is intended to have 34
multiple choice questions. Please check to be sure your copy has all 34. 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 today at
about 2:00.
E CO 2023 F I NAL E XAM F ALL 2013
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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E CO 2023 F I NAL E XAM F ALL 2013
1. As the wage rate rises, the income effect influences workers to work ____ hours, and
the substitution effect influences workers to worker ____ hours.
a. more; fewer
b. more; more
c. fewer; fewer
d. fewer; more
2. Suppose the market for pork is perfectly competitive. If the demand for pork
increases so that the market price of pork rises, then an individual hog producer
_____ its equilibrium quantity of hogs and _____.
a. increases; suffers an economic loss
b. increases; earns an economic profit
c. does not change; suffers an economic loss
d. decreases; earns an economic profit
e. decreases; suffers an economic loss
3. If macaroni and cheese is an inferior good, then a decrease in income will result in
a. an increase in the demand for macaroni and cheese.
b. a decrease in the demand for macaroni and cheese.
c. an increase in the supply of macaroni and cheese.
d. a decrease in the supply of macaroni and cheese.
4. Suppose a product with an external cost is produced in a competitive market. If the
government takes no action, then the market will generally produce
a. more than the efficient quantity.
b. less than the efficient quantity.
c. the efficient quantity.
d. the efficient quantity in the short run and more than the efficient quantity in the long run.
e. more than the efficient quantity in the short run and the efficient quantity in the long run.
5. Suppose that the equilibrium wage in the low-skilled labor market is $8.00. Further,
suppose the federal government raises the minimum wage to $7.75 an hour from its
present level of $7.50. The governments action of increasing the minimum wage
will result in
a. a decrease in unemployment.
b. an increase in unemployment.
c. a shortage of low-skilled labor.
d. neither a shortage nor a surplus of labor in the low-skilled labor market.
6. Neither the demand nor the supply of gasoline is perfectly elastic or inelastic. When
the government increases the federal tax on gasoline, the effect on buyers is that the
price of gasoline
a. rises.
b. falls.
c. does not change.
d. cannot be determined with the information given.
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E CO 2023 F I NAL E XAM F ALL 2013
7. If demand for the firms output increases so that the price of the good being
produced increases, then
a. the firms demand for labor will decrease.
b. the firms demand for labor will increase.
c. the firms supply of labor will increase.
d. the firms supply of labor will decrease.
e. Both answers b and c are correct.

8. In an effort to protect endangered species from the effects of logging in Americas
national forests, the federal government passes a law prohibiting logging in most of
the state of Washington. Which of the figures above best illustrates the effect of this
law?
a. Figure A
b. Figure B
c. Figure C
d. Figure D
9. In the long-run, if firms in a perfectly competitive industry are making persistent
economic losses
a. some firms will exit and the price will fall.
b. some firms will exit and the price will rise.
c. some firms will enter and the price may either rise or fall.
d. some firms will exit and the price may either rise or fall.
e. None of the above are correct.
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E CO 2023 F I NAL E XAM F ALL 2013
Sears
Lower prices Dont lower prices


Lower
prices
S: $15 million
W: $5 million
S: $11 million
W: $3 million
WalMart Dont
lower
prices
S: $5 million
W: $7 million
S: $20 million
W: $20 million
10. 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.

11. The figure above shows the U.S. demand and the U.S. supply of shirts. If the world
price of shirts is $32 per shirt and the United States trades with the rest of the world,
the U.S. consumer surplus equals ____.
a. $144 million
b. $256 million
c. $288 million
d. $576 million.
e. None of the above.
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E CO 2023 F I NAL E XAM F ALL 2013
12. A perfectly competitive firm is producing at the point where its marginal cost
equals its marginal revenue. If the firm boosts its output, its total revenue will ____
and its profit will ____.
a. rise; rise
b. rise; fall
c. fall; rise
d. fall; fall
13. For a monopoly, the market demand curve is the firms
a. supply curve.
b. marginal revenue curve.
c. demand curve.
d. profit function.
14. There are technological advances in the production of HD televisions. As a result,
the equilibrium price of an HD television ____ and the equilibrium quantity ____.
a. rises; increases
b. rises; decreases
c. falls; increases
d. falls; decreases
15. Demand is price inelastic if ____ percentage change in the price leads to a ____
percentage change in the quantity demanded.
a. a small; large
b. a large; small
c. any; large
d. None of the above answers are correct.
16. Researchers have found a hybrid of corn that is cheaper to grow. This technological
breakthrough will
a. increase the demand for corn.
b. increase the supply of corn.
c. decrease the supply of corn.
d. Both answers a and c are correct.
17. Since about 1980, the income distribution in the United States has ____
a. become more equal.
b. become less equal.
c. not changed its degree of inequality.
d. changed so that the distribution in 1980 is no longer comparable to that now.
18. In part, the Coase theorem is a proposition about
a. assigning property rights.
b. measuring private costs.
c. subsidizing external benefits.
d. using vouchers.
e. taxing external costs.

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E CO 2023 F I NAL E XAM F ALL 2013

19. The above figure shows a monopolistically competitive firm. To maximize its profit,
the firm will produce ____ and set a price of ____ per unit.
a. 40 units; $3
b. 60 units; $2
c. 40 units; $1
d. between 40 and 60 units; between $2 and $1
e. 40 units; $2
20. The price of jet fuel rises. As a result the equilibrium price of airline travel ____ and
the equilibrium quantity ____.
a. rises, increases
b. rises, decreases
c. falls, increases
d. falls, decreases
21. Suppose a perfectly competitive market is in long-run equilibrium and then there is
a permanent increase in the demand for that product. Ultimately, the new long-run
equilibrium will have
a. fewer firms.
b. more firms.
c. the same number of firms.
d. probably have a different number of firms, but it is not possible to determine if there will
be more or fewer firms.
22. Because of cost hikes, the price of tennis rackets rises. As a result, the equilibrium
price of a tennis ball ____ and the equilibrium quantity ____.
a. rises; increases
b. rises; decreases
c. falls; increases
d. falls; decreases
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E CO 2023 F I NAL E XAM F ALL 2013
23. If a monopolistically competitive firm does not close, then the firm always
maximizes its profit by producing the output at which marginal cost equals
a. average total cost.
b. marginal revenue.
c. price.
d. zero.
e. None of the above answers is correct because there is no rule that always maximizes the
firms profit.
24. If the price of a soda increases by 2 percent and as a result the quantity of sodas
demanded decreases by 5 percent, the price elasticity of demand equals
a. 0.40.
b. 1.50.
c. 2.50.
d. 1.00.
e. None of the above are correct.
25. Janes Garage Cleaning is a monopoly that currently cleans 40 garages a week.
Janes marginal cost is $45, her price is $40, and her average total cost is $30. Jane
____ and definitely is ____.
a. definitely is maximizing her profit; making an economic profit
b. might be maximizing her profit; incurring an economic loss
c. definitely is not maximizing her profit; making an economic profit
d. might be maximizing her profit; incurring an economic loss
e. None of the above are correct.
26. A natural monopoly that is regulated to set its price equal to its marginal cost
a. incurs an economic loss.
b. makes a normal profit.
c. makes an economic profit.
d. maximizes producer surplus.
Production possibilities

Possibility
Pizza
(per hour)
Soda
(cases per hour)
A 0 100
B 1 95
C 2 80
D 3 60
E 4 35
F 5 0
27. In the above table, the opportunity cost of the 2nd pizza is
a. 2 pizzas.
b. 15 cases of soda.
c. 95 cases of soda.
d. 80 cases of soda.
e. None of the above are correct.
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28. In the figure above, the richest 20 percent of households own ____ percent of all
wealth.
a. 20
b. 40
c. 60
d. It is impossible to tell the percentage owned by the richest 20 percent without more
information.
e. It is possible to tell the percentage owned by the richest 20 percent but the answers are
incorrect.
29. A single-price monopolist produces a ____ quantity than a perfectly competitive
industry with the same costs and charges a ____ price than the perfectly competitive
industry.
a. greater; higher
b. greater; lower
c. lesser; lower
d. lesser; higher
30. The Sherman Act
a. prohibits a firm with a large market share from lowering its price when its competitors
lower their prices.
b. prohibits a firm with a large market share from raising its price when its competitors raise
their prices.
c. has been interpreted by the Supreme Court to make price fixing among competitors per
se illegal.
d. prohibits all mergers between competing firms.
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E CO 2023 F I NAL E XAM F ALL 2013
31. Floods in Thailand have shut down many factories that make hard drives for
computers. As a result, the equilibrium price of a computer hard drive ____ and the
equilibrium quantity ____.
a. rises; increases
b. rises; decreases
c. falls; decreases
d. falls; increases
32. When the price of oranges changes from $200 to $160 per bushel, the quantity of
oranges demanded changes from 1000 to 1400 bushels. What is the price elasticity of
demand for oranges?
a. 1.5.
b. 0.1.
c. 10.0.
d. 0.67.
e. 0.75.
33. When duopoly games are repeated and a tit for tat strategy is used,
a. the competitive outcome is more likely to be reached than when the game is played once.
b. the monopoly outcome is more likely to be reached than when the game is played once.
c. both firms begin to incur economic losses.
d. one firm goes out of business.
34. 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 tried to drown a fish.
b. threw away all the doughnuts because they had holes in them it.
c. he went to the dentist to get a blue tooth
d. he climbed over a barbed wire fence to see what was on the other side.

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