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CU-Boulder ECON 2010 - Final: Version 1

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Version 1 Page 1 Name: __________________________ Date: _____________ Econ 2010 sec. 100 Final: Version 1 Fall 2010 There are 88 questions on this exam spread over 20 pages. 1. Xavier is the only guy town selling "medical" marijuana--he is a monopolist and demand is strong. He can sell 3 tons at $10k a ton, but if he lowers his price from $10K a ton to $9K a ton he can sell 4 tons. For Xavier, the marginal revenue associated with the 4th ton is A) $8K B) $10K C) $9K D) $6K Use the following to answer questions 2-3: Figure: A Profit-Maximizing Monopoly Firm 2. (Figure: A Profit-Maximizing Monopoly Firm) The profit-maximizing firm in this figure will produce ________ units of output per week. A) 300 B) 160 C) 220 D) 250Version 1 Page 2 3. (Figure: A Profit-Maximizing Monopoly Firm) This profit-maximizing monopoly firm's price per unit is: A) $26. B) $35. C) $20. D) $29. 4. For a market commodity ____ is exogenous and quantity is ____. For a nonmarket commodity ____ is exogenous and ____ is endogenous. (choose the best fill-ins) A) price, endogenous, price, value B) price, endogenous, quantity, price C) price, exogenous, price, quantity D) price, endogenous, quantity, value 5. Both Fred and George can buy as many Cuban cigars as they want at $5 a cigar. George buys 8/day, Fred, 3/day. George's consumer's surplus from cigar consumption A) might be smaller than Fred's consumer's surplus from cigar consumption. B) is larger than Fred's consumer's surplus from cigar consumption. C) equals Fred's because they both pay $5/cigar. D) is smaller than Fred's consumer's surplus from cigar consumption. 6. Ingrid, when she is in Sweden, and not skiing for CU, consumes only pickled herring and Aquavit (a Swedish type of booze). She loves pickled herring: the more the better, but is indifferent to the amount of Aquavit she drinks. Consider her indifference curves with Aquavit on the vertical axis and herring on the horizontal axis A) Ingrid's indifference curves are upward sloping B) Ingrid's indifference curves are downward sloping C) Ingrid's indifference curves are flat (horizontal lines) D) Ingrid's indifference curves are vertical lines 7. Joe is a cocaine addict. For him, the marginal utility of consuming the first ounce of cocaine is 15 utils and the marginal utility of consuming the second ounce of cocaine is 20 utils. This behavior is possible, and contradicts the principle of diminishing marginal utility. A) True B) FalseVersion 1 Page 3 Use the following to answer questions 8-11: Figure: Efficiency and Pollution 8. (Figure: Efficiency and Pollution) In the absence of government intervention, the quantity of pollution will be: A) 30 tons. B) 45 tons. C) 20 tons. D) 40 tons. 9. (Figure: Efficiency and Pollution) A Pigouvian tax of $10 will result in a quantity of pollution for which the: A) resources are allocated efficiently. B) marginal social benefit equals the marginal social cost. C) marginal social benefit is less than the marginal social cost. D) marginal social benefit exceeds the marginal social cost. 10. (Figure: Efficiency and Pollution) In the absence of government intervention, the marginal social cost of pollution will exceed the marginal benefit of pollution by: A) $15. B) $25. C) $0. D) $16.67.Version 1 Page 4 11. (Figure: Efficiency and Pollution) The socially efficient quantity of pollution is: A) 20 tons. B) 45 tons. C) 0 tons. D) 30 tons. 12. In the theory of the firm, we use "isoquants". Breaking down the term we have "quant" as in "quantity," and "iso" as in "one," meaning every point on an isoquant corresponds to the same quantity. The analogous concept in regards to consumer theory is_______. A) Preferences B) A budget line C) An Indifference curve D) Utility 13. Choose the statement that is correct A) the income elasticity of weight is the percentage change in income divided by the percentage change in weight B) indifference curves and isoquants are contour lines C) the slope of an isoquant curve is called the marginal rate of substitution D) for an individual an indifference curve further from the origin is always preferred to an indifference curve closer to the origin. 14. Willy can only produce apples and carrots. Willy's production-possibilities frontier can be represented with the function C=20-2A where C is the number of carrots he produces and A is the number of apples he produces. For Willy, the opportunity cost of producing a carrot is ___ and the opportunity cost of producing an apple is ___ A) 1 carrot, 2 apples B) 2 apples, 2 carrots C) 2 apples, 1/2 carrot D) 1/2 apple, 2 carrots 15. My demand for cigars is C=12-2P where P is the price of cigars and C is the number of cigars I purchase and smoke. Assume the current price of cigars is $2/cigar. My total willingness-to-pay for cigars is A) $16 B) $36 C) $12 D) Not enough information to tell.Version 1 Page 5 16. Market failures are things that are inherent to the market that cause the market allocation to be inefficient A) True B) False 17. Because Americans eat a lot of meat, and because meat production uses more resources to produce than other types of food, food production in the U.S. is inefficient. A) True B) False 18. Property rights typically include the right to sell the ownership right to the highest bidder. A) True B) False 19. Marginal social cost of an action is the cost of the action that the producer of the action does not pay A) True B) False 20. George has many tattoos on his body that the public find offensive. George also likes walking around without much clothing on. This leads to a situation where George is displaying more tattoos than is socially efficient. Which of the following would be a Coasian solution to the problem? A) A law forbidding George from displaying tattoos. B) A law clarifying property rights, that says that George cannot have tattoos showing unless everyone is OK with it. In this case, society could end up with the socially optimal amount of tattoos on George because George has an incentive to bribe people so he can go naked. C) A tax on the number of tattoos that George displays. D) None of the above. 21. The presence of an external negative effect implies the market is failing. A) True B) FalseVersion 1 Page 6 22. You go to college. It costs money, precludes you from working, and is more stressful than not going to college. Given this, stress is part of the opportunity cost of going to


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