1 Economics 102 Student Name : _______ Feb. 24, 2010 Section # : _______ First Midterm TA Name : ______ Student ID # : ______ Version 1 DO NOT BEGIN WORKING UNTIL THE INSTRUCTOR TELLS YOU TO DO SO. READ THESE INSTRUCTIONS FIRST. You have 50 minutes to complete the exam. The exam consists of 10 binary choice and 20 multiple choice questions. Each binary choice question is worth 2 points and each multiple choice question is worth 4 points for a total of 100 points. Please 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 and other information: 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. 5. 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. 6. 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: Han.Han Pedro.Hancevic Haixi.Li George.Loginov 353 2:25PM W SS6322 355 9:55AM F ING 122 350 3:30PM W SS5322 351 3:30PM M SS6314 356 9:55AM F 214 ING 358 12:05PM F BASCOM 58 361 1:20PM F IMGRAHAM 23 352 2:25PM W SS6314 359 12:05PM F SS 5231 362 1:20PM F BASCOM 55 354 8:50AM F Bascom 552 Work Sheet3 I, __________________________________, 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 ____________________________________ Binary Choice (2 points for each question) 1. Lucy is a US citizen, but she teaches English in China. Is Lucy’s salary part of the United States GDP? a. Yes b. No Answer: b 2. Consider the market for computers in Madison. Suppose that factory workers who produce computers are on strike so fewer computers are provided. At the same time lots of international students come to UW Madison and they need computers. Which statement is true? a. Based on the above description, there will be a shift of both the demand and supply curves and the equilibrium price of computers will increase. b. Based on the above description, there will be a shift of both the demand and supply curves and the equilibrium quantity of computers will increase. Answer: a 3. When a price floor is imposed in a market and the price floor is set above the equilibrium price of the good, then a. there will be a shortage of the good. b. there will be a surplus of the good. answer: b 4. Suppose consumers believe strawberries and blueberries are substitutes. There is a hurricane in Florida that destroyed this year’s crop of Florida strawberries. Holding everything else constant, we know that this change will result in a movement along the demand curve for blueberries. a.True b.False Answer: b 5. Real GDP is always smaller than nominal GDP. a. True b. False answer: b4 6. Suppose Japan only produces cars and computers and the opportunity cost of producing these two goods is constant. Suppose the technology for producing cars improves. Given this change, the PPF of Japan will shift outwards from the origin but be parallel to the initial PPF. a. True b. False answer: b 7. “The national debt is too large, the government must stop spending so much money.” This statement is a. a normative statement b. a positive statement answer: a 8. A quota is a policy implemented by the government to set a maximum amount of the good or service that can be sold (bought) in the market. As a result, the quota has no effect if it is set at a level greater than the equilibrium quantity. a. True b. False Answer: a 9. Consider an Economy which produces only two goods, good X and good Y. Suppose the PPF for these two goods can be described by the equation Y = 27 – 3X. Then, the points (X,Y)={(4,13);(9,0);(27,0)} are all efficient production possibilities. a. True b. False Answer: b 10. Should the value of a used car, at its sale price, be included in this year’s GDP? a. Yes b. No answer: b5 Multiple Choice (4 points for each question) 11. To avoid double counting when computing GDP for an economy, it is important to a) count the total value of each producer’s sales in an economy. b) only count each producer’s value added in the calculation. c) include the value of the sales at each stage of production. d) exclude the cost of all inputs at each stage of production. Answer: b Answer the next two questions using the following information: Consider the market for peppers in a closed economy that has domestic demand and domestic supply given by P = 30 - Q and P = 2Q, respectively, where P is the price per unit of peppers and Q is the quantity of peppers. 12. Then the domestic equilibrium price is a) $10 per unit. b) $15 per unit. c) $25 per unit. d) $20 per unit. Answer: d 13. Now assume that trade is allowed and that the international price of peppers is $10 per unit. Also assume that the government creates a tariff that effectively raises the market price for peppers to $15 per unit in the domestic market. What is the tariff revenue the government earns with this tariff? a) $18.75 b) $56.25 c) $37.50 d) $112.5 Answer: c 14. Consider two goods, good X and good Y. Suppose the price of good Y decreases. Holding everything else constant, the demand for good X decreases. Goods X and Y are a) substitutes. b) complements. c) inferior goods since as the price decreases people choose to consume less of the good. d) not related to one another. Answer: a6 15. Suppose the demand for tea in India is P = 1200 – 2Q while the supply is P =
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