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Professor: M.

Rush
ECO 2023
SUMMER A 2012
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 9:30.
The test scores AND GRADES will be on class web page probably by
Monday.
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 figure above shows the demand and cost curves for a single-price monopolist.
The firm will produce ____ units and set a price of ____ per unit.
A) 15; $20
B) 10; $20
C) 10; $30
D) 10; $10
E) 25; $20
2) The figure above shows the demand and cost curves for a single-price monopolist.
The firms total revenue equals _____ and its total cost equals _____.
A) $300; $300
B) $200; $200
C) $100; $200
D) $300; an amount less than $200
E) $300; $200
3) A firm in which of the following market structures can make an economic profit in
the short run?
i. Perfect competition
ii. Monopolistic competition
iii. Monopoly
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii
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4) A firm in which of the following market structures can make an economic profit in
the long run?
i. Perfect competition
ii. Monopolistic competition
iii. Monopoly
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii
5) The farther a Lorenz curve is from the 45 line, the
A) larger is the nations income.
B) smaller is the nations income.
C) more equally distributed is the nations income.
D) less equally distributed is the nations income.
6) Which of the following is the best evidence that inter-city bus travel is an inferior
good?
A) The fact that most college students from Mississippi take the bus to Florida for spring
break whereas most business executives from Mississippi fly to Florida on business trips.
B) The fact that buses lose passengers every time airline fares are reduced.
C) The fact that passenger fatalities from inter-city bus travel exceed the number of
passenger fatalities from train or airline travel.
D) The fact that the bus ride from J ackson, Mississippi to Miami, Florida takes twice as
long as the train ride and four times as long as flying.
7) At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another
point along the same PPF, 9 pizzas and 10 sandwiches can be produced. The
opportunity cost of a pizza between these points is
A) 7/10 of a sandwich.
B) 10/7 of a sandwich.
C) 1/3 of a sandwich.
D) 7 sandwiches
E) 3 sandwiches.
8) When compared to a purely competitive market, a single-price monopolist
produces a ____ output and charges a ____ price.
A) more; lower
B) less; lower
C) more; higher
D) less; higher
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9) The government decides to impose a sales tax on blouses. The amount of the tax
paid by buyers would be larger when the demand is ____ and the supply is ____.
A) elastic; elastic
B) elastic; inelastic
C) inelastic; inelastic
D) inelastic; elastic
E) None of the above answers are correct because the amount of the tax paid by buyers is
the same regardless of the elasticity of demand or elasticity of supply.
10) In order for a tax to eliminate the deadweight loss from pollution, the tax must be
set equal to the
A) marginal private cost.
B) marginal external cost.
C) marginal social cost.
D) marginal private benefit.
E) marginal social benefit.
11) When will a natural monopoly make the largest economic profit?
i. When it is regulated using a marginal cost pricing rule
ii. When it is regulated using an average cost pricing rule
iii. When it is not regulated
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii
12) Suppose that severe earthquakes in Taiwan destroy many factories used to make
computer memory chips. The equilibrium price of a computer memory chip ____
and the equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) falls; decreases
D) falls; increases
13) Marginal social cost equals the
A) difference between the marginal social benefit and the marginal private cost.
B) sum of the marginal private benefit and the marginal private cost.
C) difference between the marginal external cost and the marginal private cost.
D) sum of the marginal external cost and the marginal private cost.
14) The demand curve for high-skilled workers lies ____ the demand curve for low-
skilled workers because
A) above; there is a cost of acquiring skills
B) above; high-skilled workers must signal their skills
C) above; the marginal product of high-skilled labor exceeds that of low-skilled labor
D) below; low-skilled workers are less desirable to hire
E) on top of; the difference between the market for high-skilled labor and low-skilled labor
results from a difference in the supply curves only
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15) If a firm has a very large market share, the Sherman Act and/or the Clayton Act
A) makes it per se illegal for the firm to raise its price.
B) makes it per se illegal for the firm to lower its price.
C) uses a rule of reason approach to determine if it is illegal for the firm to raise its price.
D) uses a rule of reason approach to determine if it is illegal for the firm to lower its price.
E) None of the above answers are correct.
16) Suppose that the price of the sweetener used to produce sodas falls. The
equilibrium price of a soda ____ and the equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
17) Janes Garage Cleaning is a monopolistically competitive firm that currently cleans
40 garages a week. Janes marginal cost is $35, her price is $40, and her average total
cost is $25. Jane is
A) maximizing her profit and is making an economic profit.
B) not maximizing her profit but is making an economic profit anyway.
C) maximizing her profit and is incurring an economic loss.
D) might be maximizing her profit and is making an economic profit.
E) might be maximizing her profit and is incurring an economic loss.

18) The figure above shows the costs and benefits associated with producing paper.
The equilibrium quantity with no government intervention in the market is ____
tons per day and the efficient quantity is ____ tons per day.
A) 4; 4
B) 4; 6
C) 6; 4
D) 6; 6
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19) Two students, Todd and Ingle, decide to open a company to help tutor economics
students. Their company is a partnership. Hence it has ____ liability and its profits
are taxed ____.
A) limited; once
B) limited; twice
C) unlimited; once
D) unlimited; twice
20) New cars are a normal good and peoples incomes decrease. As a result, the
equilibrium price of a new car ____ and the equilibrium quantity of new cars ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
21) Free riding is a problem associated with
A) public goods.
B) monopolies.
C) dominant strategies.
D) fixed costs.
22) Cartels are most likely to arise in
A) competitive industries.
B) monopolistically competitive industries.
C) oligopolistic industries.
D) monopolies.
23) In the long-run equilibrium for a monopolistically competitive firm, the firms
A) price exceeds its average total cost.
B) price exceeds its marginal cost.
C) average total cost exceeds its price.
D) marginal cost exceeds its price.
24) Since 1979, 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
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Sears
Set a low price Set a high price

Walmart
Set a low
price
S: $6 million
W: $8 million
S: $10 million
W: $3 million
Set a high
price
S: $9 million
W: $11 million
S: $15 million
W: $8 million
25) Sears and Wal-Mart must decide whether to set a high price or a low price, 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.

26) The figures above show the market for beef. If more farmers decide to raise cattle,
which figure most shows the consequence?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
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27) If the price of a movie ticket increases by 4 percent and the quantity of movies
demanded falls by 2 percent, the price elasticity of demand is
A) 2.0.
B) 4.0.
C) 0.5.
D) 8.0.
E) some amount that cannot be determined without more information
28) Assume that beef and pork are substitutes for consumers. There is a drought in the
cattle grazing areas. Keeping in mind the effect of the drought on the price of beef,
the drought ____ the equilibrium price of pork and ____ quantity of pork.
A) lowers; decreases
B) raises; increases
C) raises; does not change
D) does not change; decreases
E) raises; decreases
29) The Coase Theorem is the proposition that if property rights ____, then the private,
unregulated market is efficient.
A) are nonexistent and transactions costs are low
B) exist and transactions costs are high
C) are nonexistent and transactions costs are high
D) exist and transactions costs are low
30) If a single-price monopoly is producing where its MR=MC, then there
A) is a deadweight loss.
B) is not a deadweight loss.
C) might be a deadweight loss.
Sears
Set a low price Set a high price

Walmart
Set a low
price
S: $5 million
W: $5 million
S: $1 million
W: $30 million
Set a high
price
S: $19 million
W: $1 million
S: $20 million
W: $10 million
31) Sears and Wal-Mart must decide whether to set a high price or a low price, 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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32) Bicycles are made out of steel. If the price of steel increases, then the equilibrium
price of a bicycle ____ and the quantity ____.
A) falls; decreases
B) rises; increases
C) rises; does not change
D) does not change; decreases
E) rises; decreases
33) Keeping in mind that you are to email the grader at ECO2023.grader@cba.ufl.edu
(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 stupid that
A) he was fired from the M&M factory because he was throwing away all the W&Ws.
B) when he heard it was chilly outside, he ran to get his bowl.
C) he was stranded on a broken escalator for 3 hours.