1FINAL 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:_________________________________________2 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 132. 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.4 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. $811.115Figure 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.6Two 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 S2 S3 S4 C1 26,35 36,70 65,65 0,30 C2 30,55 50,50 70,36 16,19C3 25,25 55,30 35,26 15,18PEPSI 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.712. 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.814. 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
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