SECOND HOURLY EXAMINATION ECON 200 Spring 2009 Version A STUDENT S NAME STUDENT S IDENTIFICATION NUMBER DAY AND TIME YOUR SECTION MEETS ENTER THE NUMBER 155577 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 40 MULTIPLE CHOICE QUESTIONS THE EXAM HAS 11 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 IDENTIFICATION 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 Page 1 of 11 Multiple Choice Each question is worth 2 5 points Please select THE BEST answer Figure 1 This diagram shows the domestic market for oil for a small country that has access to international trade The world price of oil is 50 per barrel Price of Oil Domestic Supply A 75 B 60 50 C D E F Tariff G Domestic Demand 250 350 500 650 750 Quantity of Oil million barrels 1 Refer to Figure 1 If the government has a policy of completely free trade domestic consumers will purchase a total of million barrels of oil at a price of a 250 50 b 500 50 c 500 75 d 750 50 2 Refer to Figure 1 How much oil is imported to the country if the government introduces an import tariff of 20 percent 10 per barrel of oil a 150 million barrels b 300 million barrels c 500 million barrels d 650 million barrels 3 Refer to Figure 1 If the government introduces an import tariff of 20 percent 10 per barrel of oil what is the deadweight loss due to the tax a 2 25 billion B b 1 0 billion D F c 3 0 billion E d 6 25 billion B D E F Page 2 of 11 4 Refer to Figure 1 Suppose a war breaks out and a foreign navy prevents the import and export of all oil into this country In this scenario the country s total surplus would be than if the country had completely free trade a 2 25 billion B lower b 3 0 billion C higher c 3 0 billion E lower d 6 25 billion B D E F lower Figure 2 Some observers have noted that the production of honey provides a positive externality A beekeeper keeps the bees for their honey A side effect associated with his activity is the pollination of surrounding crops by the bees assisting nearby farmers This diagram depicts the market for honey and this positive externality Price of Honey 10 7 Supply private cost Supply social cost private cost and externalities A B C D Demand private value 400 500 Jars of Honey 5 Refer to Figure 2 At the private market outcome jars of honey will be produced and sold at a price of a 400 7 b 400 10 c 500 7 d 500 10 6 Refer to Figure 2 What price and quantity combination best represents the price and quantity of honey production that maximizes total surplus a 400 7 b 400 10 c 500 7 d 500 10 Page 3 of 11 7 Refer to Figure 2 Suppose there is a local farmers association that can i collect dues and ii efficiently bargain with the local beekeeper The two parties would likely reach an agreement where a the beekeeper pays a fee of 3 per jar of honey to the farmers b the farmers pay a subsidy to the beekeeper that is less than 3 per jar of honey c the farmers pay a subsidy to the beekeeper that is equal to 3 per jar of honey d the farmers pay a subsidy to the beekeeper that is more than 3 per jar of honey 8 When marginal cost is less than average total cost a marginal cost must be falling b average variable cost must be falling c average total cost must be falling d average total cost must be rising Scenario 1 Suppose Argentina is an exporter of wheat but is a small country it takes the world price of wheat as fixed The Argentine government is concerned that wheat exports were driving up wheat prices for domestic consumers so the government imposed a tax on wheat exports 9 Refer to Scenario 1 How does an export tax affect wheat prices in Argentina a The domestic wheat prices decrease by the amount of an export tax b The domestic wheat prices decrease but less than the amount of an export tax c The domestic wheat prices increase by the amount of an export tax d No effect on the domestic wheat prices The domestic wheat prices are the same as the prices before an export tax 10 Refer to Scenario 1 What happens to total welfare in Argentina when the export tax is imposed a Total welfare increases b Total welfare decreases c The effect on total welfare is ambiguous total welfare can either increase or decrease d Total welfare is unchanged Page 4 of 11 Table 1 The numbers in table below reveal the maximum willingness to pay for a ticket to Chicago Cubs vs St Louis Cardinal s baseball game at Wrigley Field Buyer Willingness to Pay Jennifer 10 Bryce 15 Dan 20 David 25 Ken 50 Lisa 60 11 Refer to Table 1 If tickets sell for 19 each then how many tickets would be sold in the market a 6 b 3 c 4 d 2 12 Refer to Table 1 If tickets sell for 20 each then what is the total consumer surplus in the market a 5 b 30 c 40 d 75 Table 2 There are three firms The government wants to reduce pollution to 90 units in total so each firm is given 30 pollution permits The table lists the per unit cost of reducing pollution for each firm The associated per unit cost applies no matter how many units it reduces so for Firm A for example it costs 30 to reduce one unit 60 to reduce two units etc Firm Initial Pollution Level Cost of Reducing Pollution by 1 Unit A 70 units 30 B 50 units 20 C 40 units 10 13 Refer to Table 2 If the permits could not be traded what is the total cost of pollution reduction a 2 100 b 1 800 c 1 700 d 1 400 Page 5 of 11 14 Refer …
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