TEAR THE FIRST TWO SHEETS FROM YOUR BOOKLET WRITE YOUR NAME ON EACH OF THEM AND TURN THEM IN WITH YOUR SCANTRON YOU CAN KEEP THE REST OF THE BOOKLET Econ 202 Principles of Microeconomics Section 1 University of Mississippi Prof David Fragoso Gonzalez Last Name First Name ID Instructions Midterm 2 Practice TIME You have 50 minutes to complete the test No extra time will be allowed FORMAT o There are 3 fill in the blanks questions They are labeled A B and C If you clearly identify your calculations and explain your steps you can get partial credit even if your answers are wrong These questions are worth a combined 30 points o There is one short essay question This question is labeled D and is worth 7 5 points o There are 25 multiple choice questions numbered 1 25 and they are worth a combined 62 5 points o There are no extra credit questions SCANTRON Please place your answers to the multiple choice questions on a scantron form no 16485 the Purple form which you provide Be sure to fill in your name and ID number No further information is necessary CALCULATOR You may use a simple calculator with no storage function You may not use your SCRAP PAPER Do not use your own scrap paper If you need some raise your hand and wait in phone as a calculator your seat APPEALS If you believe that a question is ambiguous that there are no correct answers for some question or that more than one answer is correct briefly state so in the lines provided below these instructions FINISH When you finish the test please return the first two sheets and your scantron to me CONDUCT Please abide by the University s policy on Academic Conduct and Discipline Cheating will be severely punished GOOD LUCK Appeals A 10 pts Consider the diagram below representing the market for some good and then fill in the blanks in the paragraphs that follow Without a tax the equilibrium quantity in this market is while the price paid by consumers is Consumer surplus is and producer surplus is If a 500 tax is levied in this market the equilibrium quantity drops to Consumers pay a price of and the burden imposed on them by the tax is The burden of the tax on sellers is Consumer surplus is producer surplus is and the welfare loss sustained by society due to the tax is Government revenue from the tax is DemandSupplyDACB102030405060708090100110Quantity1002003004005006007008009001000Price B 10 pts Consider the following diagram representing the market for tuna in Genovia with Q measured in tons Then fill in the blanks NOTE To earn full credit you should answer the questions numerically Alternatively you can choose to answer the questions by using the letter labels A to G to earn up to 75 of the full credit Let the equilibrium quantity without trade be 5 tons Without trade the total surplus generated in this society is Now suppose that Genovia opens its tuna market to trade without restrictions Then Genovia imports exports a total of tons of tuna Consumer surplus is then while producer surplus is The country experiences a gain from trade of A few months after opening itself to trade and under pressure from some lobbies Genovia passes a 1 5 tariff per ton of tuna As a consequence quantity demanded decreases increases by while quantity supplied decreases increases by Government revenue from the tariff is equal to The tariff creates a DWL of C 10 pts The diagram below represents the market for concerts in Genovia There is an externality in this market as the people living close to venues where concerts are hosted have to live with the noise created by the concerts Fill in the blanks into account Left alone the market will produce concerts at a price of The market s decision does not take the external cost of mathematical expression created by each concert Consumer surplus with the market equilibrium corresponds to the area while producer surplus corresponds to area The total external cost supported by the neighbors of the venues is mathematical expression The socially optimal quantity of concerts is The price at which quantity demanded would be equal to that optimal amount is If the government limited by law the quantity of concerts to its optimal amount consumer surplus would be given by area and producer surplus would be given by area The total external cost supported by the neighbors would be mathematical expression D 7 5 pts Domestic producers sometimes lobby the authorities and produce public campaings against trade what is the flow of trade that they oppose to Why Which arguments are used 1 2 5 pts The price of electricity in Genovia has suffered a strong increase in the last few months With the purpose of recovering some lost popularity the government of Genovia passes a binding price ceiling on electricity Which of the following is a likely consequence of the government s action A There is a surplus in the market for electricity and the quality of the electrical service increases B There is a surplus in the market for electricity and the quality of the electrical service decreases C There is a shortage in the market for electricity and the quality of the electrical service increases D There is a shortage in the market for electricity and the quality of the electrical service decreases 2 2 5 pts Genovia also has a binding minimum wage and is considering increasing it Which of the following is not a likely consequence of that increase A The deadweight loss in the labor market will increase B Unemployment will rise C The supply of labor will shift to the right D More unskilled workers will be willing to work 3 2 5 pts The government of Genovia decides to pass a special 10 tax on travelers for every train ticket they purchase As a consequence of the tax the price per ticket received by Genovia s train company A increases by 10 B decreases by 10 C decreases by less than 10 D increases by less than 10 4 2 5 pts Genovian cigarettes are so addictive that the smokers in Genovia have a perfectly inelastic demand for them Enraged by the fact that tobacco companies are profiting from the addiction of its buyers the prime minister of Genovia has levied a 5 tax per pack of cigarettes sold by tobacco companies As a consequence of the tax the tobacco industry sells A the same amount of cigarettes and receives the same price as before the tax B the same amount of cigarettes and receives a smaller price than before the tax C fewer cigarettes and receives the same price as before the tax D fewer cigarettes and receives a smaller price than before