Professor: M.

Rush
ECO 2023
FALL 2013
MAKE UP TEST
Read all instructions on this page
This test is governed by UFs academic honesty code.

This test has 34 questions. IF you are using this test to make up for
missing either Midterm 1 or 2, answer the first 30 questions; if you
using this test to make up for missing the final exam, answer all 34
questions. Choose the best answer for each question.


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.
Check if 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 FORM 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 3 POINTS!

TURN OFF ALL CELL PHONES AND OTHER
COMMUNICATION DEVICES
You may not use a cell phone or any other sort of device that allows for communication
as your calculator.
E CO 2023 MAKE UP E XAM F ALL 2013
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 after 10 PM.
The test scores will be on class web page within a few days.

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 MAKE UP E XAM F ALL 2013
1) In the long run, ____ can make an economic profit and in the long run ____ will
incur an economic loss.
A) a monopoly firm; a perfectly competitive firm
B) no firm; no firm
C) a monopolistically competitive firm; a perfectly competitive firm
D) a monopoly firm; no firm
E) None of the above are correct.
2) More people are eating high protein diets. Eggs are high in protein. As a result, the
price of an egg will ____ and the quantity will ____.
A) rise; increase
B) rise; decrease
C) fall; increase
D) fall; decrease
3) A firms total revenue definitely increases if the price of the good
A) rises and demand is elastic.
B) rises and demand is inelastic.
C) rises and demand is unit elastic.
D) falls and supply is inelastic.
E) None of the above are correct.
4) If an early frost destroys most of the apple crop, the price of a pound of apples will
____ and the quantity of apples will ____.
A) rise; increase
B) rise; decrease
C) fall; increase
D) fall; decrease
5) The price elasticity of demand for corn is 0.5 and the price of a bushel of corn rises
10 percent. As a result, the quantity demanded decreases by ____ percent.
A) 20
B) 2
C) 10
D) 5
6) Firms in monopolistic competition always will
A) earn an economic profit.
B) set their price equal to their marginal cost.
C) set their price above their marginal cost.
D) produce at the minimum average total cost.
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E CO 2023 MAKE UP E XAM F ALL 2013
7) Which of the following business practices, if proven to exist, will always be held to
be illegal under U.S. antitrust law?
A) Tying arrangements.
B) Price fixing among competitors.
C) Exclusive dealing.
D) Setting a price too low in order to drive rivals out of business.
E) All of the above.
8) Which of the following could cause the price of an airline ticket to rise and the
quantity of airline travel to decrease?
A) An increase in income if airline travel is a normal good.
B) An increase in income if airline travel is an inferior good.
C) A fall in the price of travel by bus, a substitute for travel by airline.
D) A rise in the price of the jet fuel used by airliners.
9) Taxes can yield the efficient level of pollution if the tax is set equal to
A) marginal benefit of the pollution.
B) marginal external cost of the pollution.
C) marginal social cost of the pollution.
D) marginal private cost of the pollution
E) equilibrium price of the pollution.
10) There is no deadweight loss if the regulatory rule for a natural monopoly
A) is an average cost pricing rule.
B) sets the price at an amount that enables the regulated firm to earn a specified rate of
return on its capital.
C) is a marginal cost pricing rule.
D) prevents the firm from engaging in any form of price discrimination.
11) An NFL football game played in a non-crowded stadium is not a public good
because it is
A) nonexcludable.
B) excludable.
C) rival.
D) both answers B and C are corrct.
12) The demand curve for high-skilled labor lies to the right of the demand curve for
low-skilled labor because
A) there are more high-skilled workers than low-skilled workers.
B) high-skilled workers require more compensation to convince them to work than do
low-skilled workers.
C) high-skilled labor is more productive than low-skilled labor.
D) firms are not concerned with the minimum wage in the market for high-skilled labor.
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E CO 2023 MAKE UP E XAM F ALL 2013
13) Suppose firms in a perfectly competitive market are earning an economic profit. As
new firms enter, the price ____ and the economic profit of each existing firm ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; does not change
E) falls; decreases
14) The technology used to manufacture computer memory chips advances. As a result,
the price of a memory chip ____ and the quantity of memory chips ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
15) If a duopoly has a collusive agreement that maximizes their total profits, then each
firm has
A) no incentive to cheat.
B) an incentive to cheat by lowering its price.
C) an incentive to cheat by raising its price.
D) an incentive to cheat by decreasing its output.
16) The price of a burrito at Burrito Brothers is $5. You are willing to pay a maximum of
$6 for the burrito and Burrito Brothers is willing to sell the burrito for a minimum of
$3. The producer surplus for this burrito is ____.
A) $6
B) $5
C) $3
D) $2
E) $1
17) If the Lorenz curve for income moves farther away from the 45 line, then the
A) distribution of income has become more unequal.
B) distribution of income has become more equal.
C) median household income increased.
D) median household income decreased.
E) mean (average) household income increased.
18) A good or service or a resource is nonexcludable if
A) it is possible to prevent someone from consuming it if they do not pay for it.
B) it is not possible to prevent someone from consuming it even if they do not pay for it.
C) one persons consumption decreases the amount available for everyone else.
D) one persons consumption does not decrease the amount available for everyone else.
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E CO 2023 MAKE UP E XAM F ALL 2013
19) When marginal revenue equals marginal cost, a monopolistically competitive firm
is
A) determining the price it will set.
B) maximizing its revenues.
C) maximizing its profit.
D) establishing its shutdown point.
20) A tax is imposed on the sale of a product. As long as neither the supply nor the
demand is perfectly elastic or inelastic,
A) there will be no change in the price paid by the consumers.
B) the price paid by the consumers will increase by the full amount of the tax.
C) the price paid by the consumers will increase by less than the amount of the tax.
D) the price paid by the consumers will increase by more than the amount of the tax.
21) Automobiles are a normal good and peoples incomes increase. As a result, the price
of an automobile ____ and the quantity ____.
A) rises; increases
B) rises; decreases
C) probably changes but more information is needed to determine if the price rises or falls;
increases
D) falls; decreases
22) Producing a product that has an external cost creates a deadweight loss because
A) more than the efficient amount of output is produced.
B) less than the efficient amount of output is produced.
C) the price firms charge for the good is too high.
D) not enough resources are allocated to the production of the good.
23) Why does the production possibilities frontier bow outward?
A) Unemployment is inevitable.
B) Resources are not equally productive in all activities.
C) Technology is slow to change.
D) Labor is scarcer than capital.
24) The price elasticity of demand for cigarettes is 0.5. If government wants to reduce
the quantity of cigarettes sold by 10 percent, by how much should it raise the price
of cigarettes?
A) By 10 percent.
B) By 20 percent.
C) By 5 percent.
D) By 50 percent.
E) None of the above are correct.
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E CO 2023 MAKE UP E XAM F ALL 2013

25) The figures above show the market for beef. If mad cow disease is discovered in the
United States, which figure most likely shows the immediate consequence of the
discovery?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
Sears

Lower prices
Dont lower prices


Lower
prices
S: $5 million
W: $5 million
S: $7 million
W: $3 million
Walmart Dont
lower
prices
S: $30 million
W: $1 million
S: $20 million
W: $2 million
26) Sears and Wal-Mart must decide whether to lower their prices, based on the
potential economic profits shown in the table above. 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.
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E CO 2023 MAKE UP E XAM F ALL 2013
27) Which of the following is the BEST example of a common resource?
A) A can of Mountain Dew
B) Fish in the ocean
C) A gold mine
D) Cable television
E) National defense
28) Older people use more pharmaceutical drugs and the population is aging.
Simultaneously the cost of producing pharmaceutical drugs rises. As a result, the
price of pharmaceutical drugs ____ and the quantity ____.
A) rises; does not change
B) rises; probably changes but more information is needed to determine if the quantity
increases or decreases
C) probably changes but more information is needed to determine if the price rises or falls;
increases
D) rises; decreases
E) None of the above answers is correct.

29) The figure above depicts the marginal revenue and costs of a perfectly competitive
firm. The firms profit is maximized when the firm produces
A) 90 units of output.
B) 130 units of output.
C) 170 units of output.
D) 210 units of output.
30) Keeping in mind that you are to email the grader (within 1 week after the test scores
are posted) if you have a question about your test score and you are to email me if
you have a question about a question, then the director is so fat that
A) he influences the tides.
B) he eats Wheat Thicks.
C) when you walk around him, you can get lost.
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E CO 2023 MAKE UP E XAM F ALL 2013
IF YOU ARE MAKING UP EITHER MIDTERM 1 OR MIDTERM 2
STOP NOW; DO NOT ANSWER THE NEXT 4 QUESTIONS; IF YOU
ARE MAKING UP THE FINAL EXAM, YOU MUST ANSWER THE
NEXT 4 QUESTIONS.


31) In the above figure, if a single-price monopolist produces the profit-maximizing
quantity and charges the profit-maximizing price, the deadweight loss is equal to
area ____.
A) hbcd.
B) fjem.
C) abc.
D) cde
E) gcem.
32) If the government imposes a tariff on imported bananas, then consumer surplus
____, producer surplus ____, and the deadweight loss ____.
A) decreases; increases; decreases
B) increases; increases; decreases
C) increases; decreases; increases
D) decreases; decreases; increases
E) decreases; increases; increases
33) Janes Garage Cleaning is a perfectly competitive firm that currently cleans 80
garages a week. Janes marginal cost is $40, her average total cost is $40, and the
price of cleaning a garage is $50. Jane
A) is maximizing her profit and is earning an economic profit.
B) is not maximizing her profit and is earning an economic profit.
C) is not maximizing her profit and is incurring an economic loss.
D) might be maximizing her profit and is earning an economic profit.
E) is not maximizing her profit and is earning a normal profit anyway.
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E CO 2023 MAKE UP E XAM F ALL 2013
34) The technology of producing paper advances while simultaneously the number of
book publishers buying paper decreases. As a result, the equilibrium price of paper
____ and the equilibrium quantity ____.
A) rises; increases
B) rises; probably changes but more information is needed to determine if it increases or
decreases
C) probably changes but more information is needed to determine if it rises or falls;
increases
D) falls; probably changes but more information is needed to determine if it increases or
decreases

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