Key:Economics 101 Name _____________________________Spring 2011 TA Name _________________________4/14/11 Discussion Section #_________________Third Midterm Student ID # _______________________Version 1DO NOT BEGIN WORKING UNTIL THE INSTRUCTOR TELLS YOU TO DO SOREAD THESE INSTRUCTIONS FIRST.You have 75 minutes to complete the exam. The exam consists of 3 0 multiple choice questions . Each question is worth 10/3 points for a total of 100 points. • We reserve the right to deduct four points for failing to fill out the scantron completely and accurately and the exam booklet completely and accurately!• Answer all questions on the scantron sheet with a #2 pencil NO CELL PHONES, CALCULATORS, OR FORMULA SHEETS ARE ALLOWED.PICK THE BEST ANSWER FOR EACH QUESTION.How to fill in the scantron 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 space marked "Identification Number." Fill in the bubbles. 3. Write the number of the discussion section you’ve been attending under "Special Codes" spaces ABC, and fill in the bubbles. You can find the discussion numbers below on this page. 4. Write the version number of your exam booklet under "Special Codes" space D, and fill in the bubble. The version number is on the top of this page. If there is an error on the exam or you do not understand something, make a note on your exam booklet and the issue will be addressed AFTER the examination is complete. No questions regarding the exam can be addressed while the exam is being administered. When you are finished, please get up quietly and bring your scantron sheet and this exam booklet to the place indicated by the instructors.Discussion sections are as follows: Irina Merkuryeva Patricia Abbott Ryan Veiga Yi LiDis 386 Th 16:35 Dis 382 Fr 07:45 Dis 384 Th 16:35 Dis 385 Fr 07:45Dis 388 Fr 11:00 Dis 383 Fr 09:55 Dis 389 Fr 11:00 Dis 387 Fr 08:50Dis 390 Fr 08:50 Dis 393 Fr 12:05 Dis 391 Fr 09:55Dis 392 Fr 12:05 Dis 394 Fr 13:20 1I, __________________________________, agree to neither give nor receive any help on this exam from other students. Furthermore, I understand that use of a calculator is an academic misconduct violation on this exam.Signed ____________________________________1. Which of the following industries is perfectly competitive?a. Chocolate industry (There are many companies in the industry and consumers of chocolate view each company's product as unique.)b. Rice industry (There are thousands of farmers producing rice and all the rice is the same from the consumers’ perspective.)c. Cellular telephone service (There are a few producers in the industry and each consumer must select one of them to be their provider of cell phone service.)d. University apartment service (There are limited apartments available at the university and consumers of these apartments have distinct preferences as to which apartments they prefer.)Use the statements below to answer the following two questions:Consider the following possible combinations of changes in CPI and prices:• (I) Increase in the CPI, increase in the nominal wage• (II) Increase in the CPI, decrease in the nominal wage• (III) Decrease in the CPI, increase in the nominal wage• (IV) Decrease in the CPI, decrease in the nominal wage2. Which of the above combinations of changes in the CPI and the nominal wage will always lead to an increase in the real wage?a. (II) onlyb. (III) onlyc. (I), (II), and (IV) onlyd. (I), (III), and (IV) only3. Which of the following combinations of changes in the CPI and the nominal wage could lead to a decrease in the real wage?a. (II) onlyb. (III) onlyc. (I), (II), and (IV) onlyd. (I), (III), and (IV) only 2Use the following information to answer the next four questions.This graph shows the cost functions of Moe's mushroom gathering business, which is a firm operating in a perfectly competitive market.4. Which of the following statements is true?a. If marginal cost increases as output increases, then average total cost must also be increasing. b. If average total cost increases as output increases, then marginal cost must also be increasing.c. If average total cost decreases as output increases, then average variable cost must also be decreasing.d. As output increases, average total cost is always increasing.e. None of the above statements is true.5. In the graph above, the average variable cost curve is labeled _____, the average total cost curve is labeled _____, and the marginal cost curve is labeled ______. a. A; B; Cb. C; B; Ac. B; C; Ad. C; A; Be. B; A; C6. The curve labeled A is upward sloping because a. there are high fixed costs.b. the first bushels of mushrooms are the easiest to find, but Moe has to really hunt to find additional mushroomsc. increased demand for mushrooms has increased the quantity supplied of mushrooms. d. supply has shifted to the left.e. Moe is operating in the long run. 7. What is the average fixed cost at quantity 20?a. $40 per unit of outputb. $30 per unit of outputc. $20 per unit of outputd. $10 per unit of output 3Use the following information to answer the next four questions.A phone company uses only equipment and workers to provide service. Labor Equipment Output (units)2 1 0.54 1 16 1 48 1 810 1 98. Suppose that equipment costs $10 per unit and each worker earns $5. Average Variable Cost is minimized when output is approximatelya. 1 unitb. 4 units c. 8 unitsd. 10 units e. more than 10 units9. Suppose that all companies in this industry have identical costs to this company and each company is producing 4 units of the service. Furthermore, suppose that the market price of the service is $12 per unit. Holding everything else constant, we can predict thata. the number of firms in the industry is stable.b. some of the firms in the industry will exit the industry.c. new firms will enter the industry.d. the market price customers pay for telephone service must increase.e. the wage of the workers employed in the telephone industry must increase. 10. If the price of equipment increased to $20 and nothing else changeda. Total Cost would increase by $10 per unit of
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