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Professor: M.

Rush
ECO 2023
SPRING 2013
MIDTERM 1
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 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
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 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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1) Research is publishing which shows that using cell phones results in an increased
chance of cancer. As a result, the efficient quantity of cell phones ____ and the
producer surplus from cell phones ____.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; does not change
E) decreases; decreases
2) Suppose the number of Asian restaurants falls as some restaurants close. As a result,
the equilibrium price of Asian food ____ and the equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
E) More information is needed to answer the question
3) The elasticity of demand for gasoline is equal to 0.5 and the elasticity of supply of
gasoline is 1.1. If the government imposes a tax on gasoline, the tax incidence is
such that
A) producers pay more of the tax.
B) consumers pay more of the tax.
C) consumers and producers pay equal amounts of the tax.
D) None of the above answers is correct because information is needed about whether the
tax is imposed on buyers or sellers.
E) None of the above answers is correct because information is needed about the amount
of the tax.
4) The most anyone is willing to pay for another purse is $60. Currently the price of a
purse is $40, and the cost of producing another purse is $10. The marginal social
benefit of another purse is
A) $60.
B) $30.
C) $20.
D) $10
E) $50.
5) New technology for producing ethanol is discovered. As a result, the equilibrium
price of ethanol ____ and the equilibrium quantity ____.
A) falls; decreases
B) falls; increases
C) falls; does not change
D) rises; decreases
E) rises; increases
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6) When the price of a pizza is $11, 19 million pizzas per day are demanded. When the
price of a pizza is $9, 21 million pizzas per day are demanded. The price elasticity of
demand equals
A) 0.50.
B) 2.00.
C) 1.73.
D) 1.00.
E) None of the above are correct.

7) The above figure shows the market for pizza. Pizza and hamburgers are substitutes
for consumers. Which panel shows the effect of a fall in the price of a hamburger?
A) Figure A.
B) Figure B.
C) Figure C.
D) Figure D
8) The equilibrium wage rate is $8.00 per hour and the government imposes a
minimum wage of $9.00 per hour. The quantity of employment ____ and a
deadweight loss ____ created.
A) decreases; is not
B) decreases; is
C) increases; is
D) does not change; is not
E) More information is needed about the efficient quantity of employment to answer this
question.
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9) If immigration into the United States is reformed so that the number of immigrants
increases and thereby increases the U.S. labor force, then the U.S. PPF
A) shifts outward.
B) shifts inward.
C) does not shift.
D) More information is needed to determine the answer.
10) The initial equilibrium price of a bushel of wheat is $8 per bushel and then people
decide that they would rather eat wheat bread than rye bread. After this decision, at
the price of $8 per bushel of wheat, there is a
A) shortage
B) surplus
C) new equilibrium
D) None of the above answers is correct.
11) Producers total revenue will increase if
A) income increases and the good is an inferior good.
B) the supply decreases and demand is elastic.
C) the supply decreases and demand is inelastic.
D) income falls and the good is a normal good.
12) Susan thinks the only fair outcome is one in which she has three slices of pizza a
week. Susan is using a ____ concept of fairness.
A) its not fair if the result isnt fair
B) its not fair if the rules arent fair
C) big tradeoff
D) symmetry principle
13) If the marginal cost of sandwiches exceeds the marginal benefit of sandwiches, then
compared to the efficient quantity we are producing too ____ sandwiches and too
____ other goods.
A) many; few
B) many; many
C) few; few
D) few; many
E) None of the above answers are correct.
14) Because of an increase in the minimum age, the wage rate paid to workers in fast
food restaurants rises. As a result the equilibrium price of fast food ____ and the
equilibrium quantity ____.
A) rises; decreases
B) rises; increases
C) falls; increases
D) falls; decreases
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15) 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 United States ____ shirts per year.
A) imports 24 million
B) exports 24 million
C) exports 40 million
D) exports 16 million
E) None of the above.

16) The figure above illustrates a linear demand curve. In the range from $6 to $4, the
elasticity of demand
A) is greater than 1.0.
B) equals 1.0.
C) is less than 1.0..
D) more information is needed to answer the question.
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17) The price elasticity of demand for insulin is zero. As a result, if the cost of producing
insulin rises, then the equilibrium price ____ and the equilibrium quantity ____.
A) rises; increases
B) probably changes but more information is needed to determine if the price rises, falls,
or does not change; decreases
C) rises; decreases
D) rises; probably changes but more information is needed to determine if the quantity
increases, decreases, or does not change
E) rises; does not change
18) Americans spend a smaller fraction of their income on food than do people living in
Bangladesh. As a result, it is likely that the ____ for food is larger in ____.
A) price elasticity of demand; the United States
B) price elasticity of supply; the United States
C) price elasticity of demand; Bangladesh
D) income elasticity of demand; the United States
E) price elasticity of supply; Bangladesh
19) When the efficient quantity of blue jeans are produced, then
A) the total consumer surplus from blue jeans equals the total producer surplus.
B) the marginal social benefit of a pair of blue jeans exceeds the marginal social cost by as
much as possible.
C) the total consumer surplus from blue jeans plus the total producer surplus equals zero.
D) the marginal social benefit of a pair of blue jeans equals the marginal social cost.
20) (This is an out-of-the book question.) If the government says the purchase of egg
rolls is legal but simultaneously outlaws the sale of egg rolls, then the equilibrium
price of egg rolls will ____ and the equilibrium quantity will ____.
A) rise; decrease
B) not change; decrease
C) fall; decrease
D) fall; not change
E) probably change but in an ambiguous direction; decrease
21) The number of people owning cats increases. As a result, the equilibrium price of
cat food ____ and the equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
22) When a chicken is processed into food, both chicken wings and breast meat are
produced. If the demand for chicken wings increases and the demand curve for
breast meat does not shift, then the equilibrium price of breast meat ___ and the
equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
E) None of the above are correct.
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23) Which of the following is NOT illustrated by a production possibilities frontier?
A) scarcity.
B) opportunity cost.
C) necessity for choice.
D) who gets the goods.
24) The gifts of nature are included as part of which factor of production?
A) labor
B) land
C) capital
D) entrepreneurship.
25) A nations PPF curve is bowed outward. As it produces more of a good, what
happens to the opportunity cost of an additional unit of the good?
A) It remains constant.
B) It decreases.
C) It increases.
D) None of these depict what happens to opportunity cost.
26) More people decide to eat pizza. Simultaneously the cost of the tomato sauce used
to produce pizza falls. The equilibrium price of a pizza ____ and the equilibrium
quantity ____.
A) rises; increases
B) falls; probably changes, but in an ambiguous direction
C) probably changes, but in an ambiguous direction; increases
D) rises; probably changes but in an ambiguous direction
E) None of the above are correct.
27) (This is an out-of-the-book question). Dumping helps ___ and harms ____.
A) domestic producers; the importers of the good
B) domestic consumers; the domestic government
C) the domestic government; domestic consumers
D) domestic producers; domestic consumers
E) None of the above answers is correct.
28) If the elasticity of demand for a good is equal to 1.0, then its
A) supply curve is vertical.
B) demand curve is a straight line with a negative 45 degree slope.
C) demand curve is vertical.
D) demand curve is horizontal.
E) None of the above are correct.
29) A quota benefits ____ and harms ____.
A) domestic producers; the importers of the good
B) domestic consumers; the domestic government
C) the domestic government; domestic consumers
D) domestic producers; domestic consumers
E) None of the above answers is correct.
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30) Combinations of goods and services that are production efficient are the production
points that lie
I. beyond the production possibilities frontier.
II. on the production possibilities frontier.
III. within the production possibilities frontier.
A) only I is correct.
B) both I and II are correct.
C) only II is correct.
D) both II and III are correct.
31) The demand for corn increases and simultaneously the supply of corn decreases by
the same magnitude so that the shifts in the demand and supply curves are the
same distance. The equilibrium price of corn ____ and the equilibrium quantity
____.
A) rises; increases
B) probably changes, but more information is needed to determine if the price rises, falls,
or stays the same; decreases
C) rises; probably changes, but more information is needed to determine if the quantity
increases, decreases, or stays the same
D) rises; does not change
E) does not change; does not change

32) In the above figure, if the price is $4, then the consumer surplus is
A) $10.
B) $30.
C) $25.
D) $20.
E) None of the above answers are correct.
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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 went to The Gap to have his teeth fixed.
B) he thinks the Internet is used to catch fish.
C) he tried to drown a fish.
D) he tried to put M&Ms in alphabetical order.
E) he took a spoon to the Super Bowl.