Econ 142 Principles of MicroeconomicsDr. StaihrEXAM 2March 7, 2011{ "'.!, y' . - ': (-1, ,' .r'. 1 4: .':-;;i .;','1t: :. I r{ ,' */ ;;?,! i,'-,,,1',rrtl', ie' !t,' "'" ,"'1' Ll,, ,/" . / , -/l:;1,-...-zt'n )-,",1/' -/'-- ---- -1"Multipte Choice. 26 Questions. Choose the letter next to the most correct answeror most appropriate response.use this graph however you want to in order to answer questions 1 through 4.Cars140130t20ll010090807060504030201010 20 30 40 50 60 70 80 90 100 ilo 120 130 140 150L1Computersln the course of a doy ltaly con produce 100 cors or 150 computers, or some of each.ln the course of a day Germany can produce 90 cars or 120 computers, or some ofeoch,1. What is the opportunity cost of producing 1 computer in Germany?a. 2/3rds of a carb. 1.5 carsp 3/4ths of a card. none of the above2. What is the opportunity cost of producing 1 car in ltaty?*al'2/3rds of a computer-"b. 1.5 computersc. 1.33 computersd. 3/4ths of a computer3. Based on the information in italics on the previous page which of the fottowing iscorrect?a. \ta!-s\l5irtd make and export cars because it has the comparative advantage in car-maki69b.. Germ,any shoutd make and export computers because it has the comparativeadvantdge in computer makingc. ltaty should export both since it has a comparative advantage in both cars andggmputers4Ji Germany shoutd make and export cars because it has the comparative advantage incar-maKlng4. An acceptable "terms of trade" for these two countries woutd be...a. 1 car for 213rds of a computerb.-1 car for l.l computers. Ql car for 112 of a computerd. 1 car for 1.4 computers5. lf the income etasticity of a good is a positive 1.95 we can reasonably conctudewhich of the following?a. The good is a normal good and most tikety a necessity@ fne good is a normal good and most tikety a luxuryc. The good is an inferior good and most tikety a necessityd. The good is an inferior good and most likety a tuxury6. As discussed in tecture, the primary factor that determines whether suppty witt beelastic or inetastic is...a. The number of supptiersb. The cost of inputs,gi The amount of time supptiers have@)Whetner the good is a necessity or a [uxuryUse the information in the following tabte to answer questions 7 and 8.7. Based on etasticity of demand, this good... -'n! , - -: . / ? c-1r'a. Probabty has very few or no substitutes $:{ - i i' //b. Probabtyisanecessity ",, - ,,..^ * - "" -.rcr4robabty is a luxury -1'd. Probabty is a very smatl part of the consumer's budget8. Assume a 510 tax is ptaced on this good. The portion of the tax that witt fatt on thebuver is...gf About 37-38%b. About 62-63%c. About 55-57Y"d. None of the aboveUse the fottowing information to answer questions 9 and 10:You hove two goods, Good X and Good Y. You have alreadv calculoted the elasticitiesof demand for these two goods and obtoined the following numbers (in absolutevalue):Elosticity of Demond for X: .76Elosticity of Demond for Y: 1.33The current quantity demanded of X is 200, and the current price of X is 54The current quontity demanded of Y is 300, and the current price of Y is 56.9. Choose the good, X or Y, whose price you woutd increase if you wanted to increaserevenues. Using the formuta we used in ctass, increase that price 10% and tetl mewhich of the fottowing comes closest to the new quantity demanded of that good?a.192,6 rasc.260d.282PcPa52 22045210482605527010. Based on your answer to the question above, which of the fottowing comes closestto the new toiat revenues you witi be generating after you have increased the price ofthe good, and the quantity demanded of the good has decreased?a.1856,trlago'\,yq'ii. rs:zUse the graph betow to answer questions 11,12 and 13'Assume this represents the suppty and demand of Good X in a country before thecountry opens up international trade'11. What is the vatue of consumer surptus in this country right now, beforeinternational trade oPens uP?a. 14,400b.16,855,{;13,225-d. None of the above;., .)'t 4' ':'{",, ,; ) i-'i,',t'."t;{.,t/ . .,"'' ,:," i.tNow assume free trade opens up, and the country begins importing this same good atan international price of 5120.12. After free trade has opened up, what is the new vatue of consumer surplus?a. 40,0006;32,400. e.24,200*d. None of the aboveNow assume the producers of this good convince the government to impose a S40 perunit tariff on this good.13. What witt be the new vatue of consumer surplus after the tariff has been imposed?j,26,400b, 25,600:ghe,+ood. none of the aboveComplete the fottowing tabte as you need to in order to answer questions 14 through17.The price of a taco is 53 and the price of a margarita is 56. You totat budget is 524.14.1f you are maximizing your utitity subject to your budget constraint, as we did inctass, your first purchase witt be and your second purchase witt be.Q A margarita; another margaritab.'A taco; a margaritac. A taco; another tacod.Amargarita; atacoTacosTacos TacosTacosMarqaritas Marqaritas MargaritasMarsaritasTUMU MU/PTUMU MU/P130 30156562 54z428837Z'!:. 31124 88/A4 174/'"/-'5 97q5 130{6103i6 1327104713015. lf you are maximizing your utitity subject to your budget constraint, as we did inctass, your third purchase witt be and your fourth purchase witt bea. A margarita; another margaritab.Ataco; amargarita$/Ataco; another tacod. Amargarita; ataco16. The MU/P of the 6th taco is - the MU/P of the 4th margarita.a. Greater thanb. Less than,g; tquat tod. We cannot know from the information given17. The total utility you witt end up with as you maximize your utitity, subject to yourbudget constraint (as we did in class) witt be,5;1541o. ttoc.190d. None of the above18. Based on our discussions in lecture, assume the etasticity of demand (in absolutevatue) is .80 and the elasticity of suppty (in absotute value) is 1.2. lf a 515 tax isimposed on a good, what witl be the portion of this tax that fatts on the supplier, indotlar terms?a.59b. s12, cl56' d. We cannot know from the information given19. Which of the fottowing is correct?a. Under both a tariff and a quota domestic producers witl receive a [ower price thanHnder free tradeb. Under both a tariff and a quota the quantity of imports is reduced compared with-free tradec. Under both a tariff and a quota deadweight loss is smatter than under free traded. Under both a tariff and a quota consumer surptus is [arger than it woutd be underfree tradeUse the fottowing information to answer the next 4 questions.You ore assistant manoger