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Professor: M.

Rush
ECO 2023
Fall 2012
MIDTERM 1
On-campus and in-state exam
Read all instructions on this page
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. Choose
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.
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 have heard a rumor that the ability to
correctly record these had been mastered by a few students at FSU as well as a couple of
accounting and journalism students. I will investigate these rumors but in the
meanwhile,
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 6 POINTS (which equals about 2 questions)!

TURN OFF ALL CELL PHONES AND OTHER
COMMUNICATION DEVICES
You may not use a cell phone, a Blackberry, or any other sort of device that allows for
communication as your calculator.
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
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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 all Study
Abroad students have taken it.
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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1) If the demand curve for a good is a downward sloping straight line, the demand for
the good will be more price elastic the higher is the
A) price of the good.
B) price of substitutes.
C) income of consumers.
D) income elasticity of demand for that good.
2) A hurricane sweeps through a city and destroys a substantial portion of available
housing. The hurricane
A) increases the demand for housing and the demand curve shifts rightward.
B) decreases the demand for housing and the demand curve shifts leftward.
C) increases the supply of housing and the supply curve shifts rightward.
D) decreases the supply of housing and the supply curve shifts leftward.
E) Both answers A and D are correct.
3) Increasing opportunity cost occurs along a production possibilities frontier because
A) resources are not equally productive in all activities.
B) increasing wants need to be satisfied.
C) in order to produce more of one good decreasing amounts of another good must be
sacrificed.
D) production takes time.

4) The above figure shows the market for pizza. Pizza and hamburgers are substitutes
for consumers. Which panel shows the effect of a rise in the price of a hamburger?
A) Figure A.
B) Figure B.
C) Figure C.
D) Figure D
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5) Plywood is used in the construction of houses. If the price of plywood rises, then the
price of a house ____ and the equilibrium quantity of houses ____.
A) rises; increases
B) does not change; decreases
C) falls; decreases
D) rises; does not change
E) rises; decreases
6) (This is an out-of-the-book question.) According to Utilitarian principles first
discussed in the nineteenth century, fairness implies
A) equality of outcome.
B) equality of opportunity.
C) winner takes all.
D) maximizing consumption.
E) minimizing deadweight loss.

Point
Production
chocolate bars
Production
cans of cola
A 0 100
B 10 90
C 20 70
D 30 40
E 40 0
7) The above table shows production points on Sweet-Tooth Lands production
possibilities frontier. What is the opportunity cost of one chocolate bar if Sweet-
tooth Land moves from point C to point D?
A) 3.5 cans of cola
B) 1 1/3 chocolate bar
C) 3 cans of cola
D) 40 cans of cola
E) More information is needed to answer the question
8) The price of DVD players fell over the past decade because a combination of
improving technology, rising incomes, and falling prices of DVD discs caused the
A) demand curve for DVD players to shift rightward faster than the supply curve of DVD
players shifted rightward.
B) supply curve of DVD players to shift rightward faster than the demand curve for DVD
players shifted rightward.
C) supply curve of DVD players to shift rightward and the demand curve for DVD players
to shift leftward.
D) demand curve for DVD players to shift leftward and the supply curve of DVD players
to shift leftward.
E) demand curve for DVD players to not shift and the supply curve of DVD players to
shift rightward.
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9) Which of the following statements is FALSE?
A) The fewer substitutes for a good, the smaller the elasticity of demand.
B) The larger the proportion of income is spent on an item, the larger the elasticity of
demand.
C) The more narrowly a good is defined, the smaller the elasticity of demand.
D) The longer the time that has elapsed since a price change, the larger the elasticity
demand.
10) A rent ceiling creates a shortage. This result means that
A) there is an efficient allocation of housing.
B) the rent ceiling is set above the equilibrium rent.
C) there is an increase in the producer surplus in the housing market.
D) there is a decrease in the producer surplus in the housing market.
11) If the cross elasticity of demand between two goods is 0.56, then a fall in the price
of one good leads to a ____ shift in the ____ of the other good.
A) rightward; demand
B) rightward; supply
C) leftward; demand
D) leftward; supply
12) As the quantity consumed of pizza increases,
A) the marginal social benefit increases.
B) the marginal social benefit decreases.
C) the marginal social benefit increases or decreases depending whether or are not the
economy is on the PPF.
D) the price of the pizza must rise.
13) The marginal benefit from the 10 millionth pizza consumed is the maximum
amount a person is willing to pay for
A) all of the pizzas the person buys.
B) the 10 millionth pizza.
C) all of the pizzas the person consumes divided by the number of pizzas he or she
purchases.
D) one pizza divided by the number of pizzas purchased.
14) The price of a pizza falls. Which of the following is a possible cause?
A) A decrease in the price of soda, a complement to pizza.
B) A discovery that pizza cause diabetes.
C) An increase in the income of the average household, with pizza being a normal good.
D) An increase in the wages paid workers who produce pizza.
15) The deadweight loss from a price ceiling is
A) a loss to the consumers but a gain to the producers.
B) a loss to the producers but a gain to the consumers.
C) a gain to the consumers and the producers, but a loss to the rest of society.
D) None of the above are correct.
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16) Which graph shows the impact of scientists developing a more powerful fertilizer?
A) Figure A.
B) Figure B.
C) Figure C.
D) Figure D.

17) The figure above illustrates a linear demand curve. In the range from $4 to $2,
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.
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18) The price of new cars increases by 10 percent. If the price elasticity of demand for
new cars is 1.25, the quantity of new cars demanded will decrease by
A) 2.5 percent.
B) 8 percent.
C) 10 percent.
D) 12.5 percent.
E) None of the above are correct.
19) Peoples incomes increase and pizza is a normal good. As a result, the equilibrium
price of a pizza ____ and the equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
20) When the price of a pizza is $11, the quantity demanded is 37 million. When the
price is $9, the quantity demanded is 43 million. Between these prices, the price
elasticity of demand is
A) 0.33.
B) 3.00.
C) 1.33.
D) 0.75.
E) None of the above are correct.
21) If a freeze destroys oranges before they are harvested, the equilibrium price of an
orange ____ and the equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
22) Cupcakes and granola bars are substitutes in consumption. The price of a granola
bar increases. As a result, the demand for
A) granola bars will increase, that is, the demand curve will shift rightward.
B) cupcakes will increase, that is, the demand curve will shift rightward.
C) granola bars will decrease, that is, the demand curve will shift leftward.
D) cupcakes will decrease, that is, the demand curve will shift leftward.
23) At the quantity of 1000 tacos the marginal social benefit is of a taco $.50 and the
marginal social cost is $.60. To produce the efficient quantity of tacos,
A) more tacos should be produced.
B) fewer tacos should be produced
C) there should be no change in the amount of tacos produced.
D) more information on production costs is needed to determine the efficient level of
tacos.
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24) The elasticity of demand for Nike shoes is probably
A) smaller than the elasticity of demand for shoes overall.
B) the same size as the elasticity of demand for shoes overall.
C) larger than the elasticity of demand for shoes overall.
D) different from the elasticity of demand for shoes overall but without more information
it is not possible to tell if it is larger or smaller.

25) In the above figure, if there is no minimum wage, the equilibrium employment is
____; if the government imposed a minimum wage of $8 per hour, employment is
____.
A) 4,000 hours; 2,000 hours
B) 3,000 hours; 4,000 hours
C) 3,000 hours; 2,000 hours
D) 4,000 hours; 3,000 hours
E) None of the above answers are correct.
26) In the above figure, if there is no minimum wage, the equilibrium employment is
____; if the government imposed a minimum wage of $4 per hour, employment is
____.
A) 4,000 hours; 2,000 hours
B) 3,000 hours; 4,000 hours
C) 3,000 hours; 2,000 hours
D) 4,000 hours; 3,000 hours
E) None of the above answers are correct.
27) Using a production possibilities frontier, economic growth is illustrated by a
A) point inside the curve.
B) point on the curve.
C) movement from one point on the curve to another point on the curve.
D) rightward shift of the curve.
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28) If the market price of a pizza increases and the demand curve for pizza does not
shift, then the consumer surplus from pizza will ____.
A) increase
B) decrease
C) equal the producer surplus if the market produces the efficient quantity of pizza
D) remain the same.
29) Home delivered pizza is a normal good and peoples incomes rise. Simultaneously
the price of the cheese used to produce pizza rises. As a result, the equilibrium price
of a pizza ____ and the equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) does not change; might increase, decrease, or not change
D) might rise, fall, or not change; increases
E) None of the above answers is correct.
30) Increasing opportunity costs suggests that
A) the PPF is a straight line.
B) all labor and capital are costlessly interchangeable.
C) various types of labor are perfect substitutes for one another.
D) various types of labor are not perfect substitutes for one another.
31) 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) 5.00.
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32) In the above figure, if output is 10 units, then the total surplus is
A) $10.
B) $30.
C) $70.
D) $40.
E) None of the above answers are correct.
33) After the scores are posted, if you have a question about your test score, email the
grader at ECO2023.Grader@cba.ufl.edu and the director is so stupid that (HINT: Be
SURE to answer this question because youll get credit for any answer.)
A) he tripped over a cordless phone,
B) he got fired from the M&Ms factory for throwing out all of the Ws.
C) when he hears its chilly outside, he grabs a spoon.
D) when he watches the Three Stooges, he takes notes