FINAL EXAMINATION ECON 200 Spring 2008 Version A STUDENT S NAME STUDENT S IDENTIFICATION NUMBER DAY AND TIME YOUR SECTION MEETS ENTER THE NUMBER 135246 UNDER SPECIAL CODES ON THE SCANTRON SHEET BEFORE YOU BEGIN PLEASE MAKE SURE THAT YOUR EXAMINATION HAS BEEN DUPLICATED AND COLLATED CORRECTLY THERE SHOULD BE 56 MULTIPLE CHOICE QUESTIONS THE EXAM HAS 20 PAGES INCLUDING THIS COVER SHEET ANSWER ALL THE PROBLEMS ON THE SCANTRON SHEET BE SURE TO FILL IN YOUR NAME LAST NAME FIRST AT THE TOP OF THE SCANTRON SHEET FILL IN YOUR STUDENT IDENTIFICATION NUMBER UNDER INDENTIFICATION NUMBER ON THE SCANTRON SHEET WRITE YOUR TA S NAME IN THE UPPER RIGHT HAND CORNER OF YOUR SCANTRON SHEET University of Maryland Honor Pledge The University is committed to Academic Integrity and has a nationally recognized Honor Code administered by the Student Honor Council In an effort to affirm a community of trust the Student Honor Council proposed and the University Senate approved Honor Pledge The University of Maryland Honor Pledge reads I pledge on my honor that I have not given or received any unauthorized assistance on this examination or assignment Please rewrite the exact wording of the pledge followed by your signature in the space below Pledge Your Signature 1 Multiple Choice Each question is worth 2 5 points Please select THE BEST answer 1 Suppose that a decrease in the price of good X results in fewer units of good Y being sold This implies that X and Y are a complementary goods b normal goods c inferior goods d substitute goods Figure 1 2 2 Refer to Figure 1 In which market will the majority of the tax burden fall on the seller a market a b market b c market c d All of the above are correct 3 Which of the following illustrates the concept of a negative externality a A college professor plays a vigorous game of racquet ball with the racquet he recently purchased b A flood wipes out a farmer s corn crop c A college student plays loud music on his new stereo system at 2 00 a m d A janitor eats a hamburger during his lunch break 4 Suppose that Martin owns a lighthouse and Lewis owns a nearby port Martin s lighthouse benefits only those ships that enter Lewis s port Which of the following statements is NOT correct a Martin s lighthouse may be considered a private good b Martin can reduce the free rider problem by charging Lewis a usage fee c Martin can exclude Lewis s port from benefiting from the lighthouse by simply turning the power off d Martin s lighthouse would be considered a common resource 3 Teacher s Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts The owner rents several small rooms in an office building in the suburbs for 600 a month and has leased computer equipment that costs 480 a month Table 1 5 Refer to Table 1 What is the marginal cost of creating the tenth instructional module in a given month a 900 b 1 250 c 2 500 d 3 060 6 Refer to Table 1 What is the average variable cost for the month if six instructional modules are produced a 180 00 b 533 33 c 700 00 d 713 33 7 Refer to Table 1 What is the average fixed cost for the month if nine instructional modules are produced a 108 00 b 120 00 c 150 00 d 811 11 4 Figure 2 8 Refer to Figure 2 The elasticity of demand between point B and point C using the midpoint method is a 0 5 b 0 75 c 1 0 d 1 3 9 Refer to Figure 2 If the price decreased from 18 to 6 a total revenue would increase by 1 200 and demand is elastic between points A and C b total revenue would increase by 800 and demand is elastic between points A and C c total revenue would decrease by 1 200 and demand is inelastic between points A and C d total revenue would decrease by 800 and demand is inelastic between points A and C 5 Two firms play a simultaneous advertising game described below For COKE each column represents a different advertising campaign and for PEPSI each row represents a different advertising campaign In the cells PEPSI s profits are listed first then COKE s COKE S1 PEPSI S2 S3 S4 C1 26 35 36 70 65 65 0 30 C2 30 55 50 50 70 36 16 19 C3 25 25 55 30 35 26 15 18 C4 18 15 19 16 30 0 14 14 Advertising Game 10 Which statement is correct i S1 is a dominated strategy for COKE ii S4 is a dominated strategy for COKE iii There are no dominated strategies for COKE a i and ii b iii c i only d ii only 11 Which statement is correct a C2 S1 and C3 S2 are both Nash equilibria of the game b C1 S2 is the ONLY Nash Equilibrium of the game c C2 S1 is the ONLY Nash equilibrium of the game d C3 S3 is the ONLY Nash Equilibrium of the game 6 12 For maximum profit a firm hires labor up to the point at which the wage equals i the value of the marginal product of labor ii the marginal cost of an additional unit of output iii output price multiplied by the marginal product of labor a i and ii b i and iii c ii and iii d All of the above are correct Figure 3 13 Refer to Figure 3 If the government imposes a minimum wage above Wo it is likely to a increase employment to a level above Qo b reduce employment to a level below Qo c create a condition of excess demand d have no effect on employment 7 14 The following chart shows the number of calculators that can be assembled per week by various numbers of workers Quantity of Number of Calculators Labor Per Week 0 0 1 60 2 160 3 240 4 280 5 300 If the price per calculator in a perfectly competitive product market is 20 how many workers would the firm employ if the weekly wage rate is 1000 a 1 b 2 c 3 d 4 15 If excess demand exists in a market we know that the actual price is a below equilibrium price and quantity demanded is greater than quantity supplied b above equilibrium price and quantity demanded is greater than quantity supplied c above equilibrium price and quantity supplied is greater than quantity demanded d below equilibrium price and quantity supplied is greater than quantity demanded 16 Suppose the U S has an absolute advantage in wheat and Japan has an absolute advantage in computers Then we can conclude a The U S has a comparative advantage in both wheat and computers b The U S has a comparative advantage in wheat and Japan has a comparative advantage in computers c The U …
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