Economics 102 Name _______________Ms. Elizabeth Kelly ID Number _______________Midterm #1 Section Number _______________October 8, 1996 TA Name _______________Version 3DO NOT BEGIN WORKING UNTIL THE INSTRUCTOR TELLS YOU TO DO SO.READ THESE INSTRUCTIONS FIRSTYou have 75 minutes to complete the exam, which consists of 4 problems ( Part I ) and 20 multiple-choice questions (Part II). Each problem is worth 10 points for a total of 40 points, and each multiple-choice question is worth 3 points for a total of 60 points. This exam has 10 pages.Please answer Part I on this test booklet making sure that your answers are legible, and that you are using complete sentences. Show all work and formulas used. Your explanations will determine the grade.Please answer Part II on your coding sheet with a #2 pencil. Choose the best answer from the five alternatives offered. Be sure to fill in the coding sheet carefully and accurately.How to fill in the coding sheet:1. Print your last name, first name and middle initial in the spaces marked “Last Name,” “First name,” and “MI.” Fill in the corresponding bubbles below.2. Print your student ID number in the spaces marked “ Identification Number.” Fill in the corresponding bubbles below.3. Write your discussion section number under “Special Codes” spaces ABC, and fill in the bubbles.4. Write your version number under “Special Codes” space D and fill in the corresponding bubble.Discussion sections are as follows:Deena Ackerman 301 11.00 R Charles Wassell, jr. 302 11.00 R305 1.20 R 311 9.55 F310 9.55 F 341 12.05 R313 11.00 F 346 8.50 F314 12.05 F 349 11.00 FJaeho Cheung 306 1.20 R Badal Malick 304 12.05 R307 11.00 R 308 8.50 F345 2.25 R 344 2.25 R350 11.00 F 347 9.55 F351 12.05 F 354 1.20 FCostin Borc 340 12.05 R342 1.20 R352 12.05 FIf you have any questions during the exam, stay seated and raise your hand.When you are finished, please get up quietly and bring your code sheet and this exam booklet to the place indicated by the instructors.Stop, take a deep breath, and think carefully before you answer any questions. There are no intentional “tricks“; however, not all answers are intended to be obvious. Good luck!Part I. Problem Type Questions (4 problems at 10 points each for a total of 40 points)1. Suppose Steve and Jared share an apartment where they like good food and clean rooms. Assume that each has plenty of time to devote to household chores, and that the units of 1measurement are cleanliness and quality of food (thus an apartment with 4 units of "clean" is cleaner than one with only three units of "clean").Here are the production possibilities frontiers for each:Steve: Clean = (-4/5)cook + 6Jared: Clean = (-2)cook + 10Please answer the following questions showing all work.a) What is the opportunity cost for Steve of increasing the quality of food he makes by three units?b) What is the opportunity cost for Jared of increasing the quality of food he makes by three units?c) Who has the comparative advantage in cleaning?d) Who has the absolute advantage in cleaning?e) Should the roommates specialize?22. The demand and supply for alcohol in Macroland is given by Qs = 4P- 8 Qd = 100 - 5Pa) Find the market equilibrium. What is Pe _____? What is Qe _____?b) Suppose the government wanted to restrict the quantity bought and sold to 20 units. How largean excise tax per unit should be imposed on suppliers to reach this goal?c) Calculate the loss in consumer surplus due to the imposition of this tax.d) What is the collected tax revenue from this tax?e) What is the dead weight loss due to the tax?3. Use the data below to answer this question.Transfer Payments 20Receipts of factor incomes from the rest of the world 15Payments of factor incomes to the rest of the world 5Personal taxes 12Government purchases 35Indirect Taxes minus Subsidies 10Dividends 12Corporate profits 20Depreciation 7Imports 15Exports 25Gross investment 30Personal consumption expenditures 80a) What is the value of Net Exports?b) What is the value of GDP?c) What is the value of GNP?d) What is the value of Net National Product?e) What is the value of Disposable Personal Income?4. State and briefly discuss in the space provided below three limitations of Gross Domestic Product. (10 points: 1 point for each limitation and 7 points total for the explanations.)Part II. Multiple choice questions (20 questions at 3 points each, for a total of 60 points)1. United States GDP includes which of the following:a) An increase in a Ford dealership's inventory.b) Coca-Cola made and sold in China.c) Sale of 100 shares of IBM stock.d) A social security payment to a retiree.e) (a) and (b).2. Which of the following best characterizes product markets in a simple 2 sector circular flow model ?a) firms supply goods and services while households supply factors of productionb) firms demand goods and services while households demand factors of productionc) firms supply factors of production while households demand goods and servicesd) firms demand goods and services while households supply goods and servicese) firms supply goods and sevices while households demand goods and services3. The price of a good cup of coffee has gone up dramatically in the last few years. The amount of coffee consumed annually has also gone up. Which of the following could best explain thesefacts?a) Coffee is an inferior good.b) The coffee harvest was better than ever due to global warming.c) The law of demand does not hold in this instance.d) American preferences for coffee have changed.e) (a) and (b).4. Which of the following are all components of factor income ?a) personal consumption, gross private investment, government expendituresb) direct taxes, net wages, net investmentc) rental income, net interest payments, proprietors’ incomed) personal consumption, net private investment, net exportse) rental income, depreciation, proprietors’ income5. The defining characteristic of a mixed economy is that it combines:a) monetary and fiscal policy.b) factor markets and product markets.c) closed and open economies.d) command and market economies.e) positive and normative policies.Answer questions 6 and 7 using the following supply-demand model:Qs = 2P + 20Qd = 100 - 3P6. The equilibrium price and quantity area) p=24, q=68b) p=80, q=180c) p=16, q=52d) p=10, q=40e) p=24, q=287. Assume the government sets a price ceiling in the above market equal to $20. What is the effectof this action on market
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