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Professor: M.

Rush
ECO 2023
SPRING 2013
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. 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.
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 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 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.

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An answer key will be posted on the class web page later this
evening at about 10:00.
The test scores will be on class web page probably by Tuesday or
Wednesday; the grades will be on the class page probably
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) The Sherman Act makes it illegal to
A) increase market share.
B) merge firms in the same industry.
C) attempt to monopolize an industry.
D) price discriminate.
E) set your price below the prices set by you competitors.
2) Trumpets are a normal good and peoples incomes increase. As a result, the
equilibrium price of a trumpet ____ and the quantity ____.
A) rises; increases
B) rises; decreases
C) falls; decreases
D) falls; increases
E) does not change; increases

3) In the above figure, if a single-price monopolist charged the profit-
maximizing price, the triangle abc represents
A) consumer surplus.
B) producer surplus.
C) deadweight loss.
D) the monopolys economic profit
E) None of the above answers are correct.
4) In the above figure, if a single-price monopolist charged the profit-
maximizing price, the rectangle bcde represents
A) consumer surplus.
B) producer surplus.
C) deadweight loss.
D) the monopolys economic profit
E) None of the above answers are correct.
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5) Suppose Microsoft has a monopoly in producing operating systems
(Windows). If the marginal cost of producing an additional copy of
Windows is $0, then when Microsoft maximizes its profit, its marginal
revenue is
A) positive.
B) equal to $0.
C) negative
D) More information is nee4ded to answer the question
6) A new technology that raises the marginal product of labor ____ the
equilibrium wage rate and ____ the equilibrium quantity of labor.
A) raises; increases
B) raises; decreases
C) lowers; increases
D) lowers; decreases

7) The figure above shows the market for pizza. Suppose the cheese used to
produce pizza falls in price. Which figure shows the effect of this change in
the market for pizza?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
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8) Cars and trucks are substitutes for consumers. The price of a car rises. As a
result, the equilibrium price of a truck
A) rises and the equilibrium quantity increases.
B) falls and the equilibrium quantity decreases.
C) rises and the equilibrium quantity decreases.
D) falls and the equilibrium quantity increases.
9) Which of the following applies to the problem of a common resource?
i) In the absence of government action, there are incentives to overuse the common
resource.
ii) The resource is subject to free-riding.
iii) Even with government action, it is impossible for an efficient level of output to be
achieved.
A) i only.
B) i and ii.
C) ii and iii.
D) i, ii and iii.
E) i and iii
Sears

Lower prices
Dont lower
prices


Lower
prices
S: $9 million
W: $7 million
S: $1 million
W: $3 million
Walmart Dont
lower
prices
S: $2 million
W: $4 million
S: $9 million
W: $1 million
10) 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
E) More information is needed to determine if either Sears or Walmart has
a dominant strategy.
11) A monopolistically competitive firm finds that its marginal revenue exceeds
its marginal cost. In order to increase its profit, the firm will
A) raise its price and decrease its output.
B) lower its price and increase its output.
C) raise its price and increase its output.
D) lower its price and decrease its output.
E) More information is needed to answer the question.
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12) Travel by bus is an inferior good and peoples incomes decrease.
Simultaneously, the price of the diesel fuel used by bus companies rises. As
a result, the equilibrium price of bus travel ____ and the quantity ____.
A) might change, but whether it rises or falls is ambiguous; increases
B) rises; increases
C) falls; decreases
D) rises; might change, but whether it increases or decreases is ambiguous
E) might change, but whether it rises or falls is ambiguous; decreases

13) In the above figure, if the price is $10, the profit maximizing perfectly
competitive firm will
A) produce 40 units.
B) produce 35 units.
C) produce 25 units
D) produce 10 units.
E) choose not to produce.
14) Producing steel creates pollution. If the market for steel is unregulated, there
is
A) overproduction of steel compared to the efficient amount.
B) underproduction of steel compared to the efficient amount.
C) sometimes overproduction and sometimes underproduction of steel
compared to the efficient amount.
D) an external benefit from producing steel.
15) Two companies in a market agree to raise their price. This agreement is
A) legal only if the companies have market shares less than 5 percent.
B) legal only if the price these two companies charge is lower than the price
charged by the other companies in the market.
C) illegal only if the companies boost their price by more than 10 percent.
D) always illegal.
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16) Suppose a natural monopoly does not inflate its costs. Then compared to the
situation in which it is unregulated, when the firm is regulated according to
an average cost pricing rule, the firm produces ____ output and sets ____.
A) more; a lower price
B) more; the same price
C) less; a lower price
D) less; a higher price
E) less; the same price
Sears

Lower prices
Dont lower
prices


Lower
prices
S: $11 million
W: $9 million
S: $13 million
W: $8 million
Walmart Dont
lower
prices
S: $4 million
W: $1 million
S: $12 million
W: $6 million
17) 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
E) More information is needed to determine if either Sears or Walmart has
a dominant strategy.
18) A firms average variable cost is $60, its average fixed cost is $30, and its
output is 100 units. Its total cost is
A) less than $58.
B) between $58 and $62.
C) between $62 and $88.
D) between $88 and $100.
E) more than $100.
19) In perfect competition,
A) each firm can influence the price of the good.
B) there are few buyers.
C) there are significant restrictions on entry.
D) all firms in the market sell their product at the same price.
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20) In the figure above, in which country do the 30 percent of households with
the highest-income have the largest fraction of the nations income?
A) Country A.
B) Country B.
C) Country C.
D) It is impossible to answer the question without more information.
21) A technological improvement lowers the cost of producing coffee. At the
same time, consumers preferences for coffee increase. The equilibrium price
of coffee
A) rises.
B) falls.
C) remains the same.
D) might rise, fall, or stay the same, depending on the relative size of the
shifts in the demand and supply curves.
22) Free riding is a problem for
A) common resources.
B) public goods.
C) private good.
D) natural monopoly.
23) Teddy has a part-time job at which he is willing to work 30 hours each week.
During Teddys annual review, his boss boosts his wage by 10 percent. As a
result of the wage hike, Teddy is now willing to work 25 hours each week.
Teddys opportunity cost of time spent at ____ has risen and, for Teddy, the
substitution effect of the wage hike is ____ than the income effect
A) work; greater
B) work; less
C) leisure; greater
D) leisure; less
E) None of the above answers are correct
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24) The more substitutes available for a good or service, the
A) larger is its price elasticity of demand.
B) smaller is its income elasticity of demand.
C) smaller is its price elasticity of demand.
D) higher its price.
E) larger is its income elasticity of demand.
25) Since 1979, in the United States the share of income going to the top fifth of
all households has ____ and the share going to the bottom fifth of all
households has ____.
A) risen; risen
B) risen; fallen
C) fallen; risen
D) fallen; fallen
26) When operating on its PPF a country can produce 2 tons of butter and 200
cars OR 3 tons of butter and 150 cars. The opportunity cost of 1 ton of butter
is
A) 300 cars.
B) 200 cars.
C) 50 cars.
D) 1 ton of butter.
E) None of the above answers are correct.
27) When a tax is imposed on the sellers of a good or service, then
A) in general the sellers pay all the tax.
B) in general the buyers pay all the tax.
C) the buyers pay a larger part of the tax as the demand for the product
becomes less elastic.
D) the buyers pay a larger part of the tax as the demand for the product
becomes more elastic.
28) The number of firms producing solar panels to generate electricity decreases.
As a result, the equilibrium price of a solar panel ____ and the equilibrium
quantity ____.
A) rises; increases
B) rises; decreases
C) falls; decreases
D) falls; increases
E) does not change; increases
29) Two years ago cupcake producers were making an economic profit. There
are no barriers to entry into this market, so in the long run cupcake
producers will
A) make an economic profit.
B) make a normal profit.
C) incur an economic loss.
D) More information is needed to answer the question.
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30) If the price of a pair of shoes increases by 4 percent and the quantity of shoes
demanded falls by 2 percent, the price elasticity of demand is ____ and the
total revenue collected by shoe producers ____.
A) 2.0; increases
B) 4.0; decreases
C) 0.5; decreases
D) 4.0; increases
E) None of the above answers are correct.
31) When comparing a single-price monopoly to a perfectly competitive
industry with the same costs, the monopoly produces ____ the perfectly
competitive industry and the monopolys price is ____ the perfectly
competitively industrys price.
A) less output than; less than
B) less output than; higher than
C) more output than; higher than
D) less output than; the same as
E) the same amount of output as; the same as
32) Sarahs Garage Cleaning is a monopoly that currently cleans 40 garages a
week. Sarahs marginal cost is $35, her price is $40, and her average total cost
is $45. Sarah
A) is maximizing her profit and is incurring an economic loss.
B) might be maximizing her profit and is making an economic profit.
C) might be maximizing her profit and is incurring an economic loss.
D) is not maximizing her profit and is incurring an economic loss.
E) is not maximizing her profit and is making an economic profit.
33) Keeping in mind that you are to email the grader (within 1 week after the
test scores are posted) at eco2023.grader@warrington.ufl.edu 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 eats Wheat Thicks.
B) fat people jog around him for exercise.
C) when he gets on the scale it says to be continued.