Version 1 Page 1 Name: __________________________ Date: _____________ Econ 2010 sec. 50 Final: Version A Fall 2011 1. Consider the statement, "The slope of an indifference curve (budget line) for goods A and B indicates the rate at which the individual (the market) substitutes good A for Good B." This statement is A) not enough information to determine whether it is true or false. B) true C) false 2. In lecture, we looked at an example where Professor Morey's daughter, Fred, was paid $1 per mile skied. Fred's only cost was the value of her time, $3 an hour. In order to maximize profit, Fred will ski up the point where it cost her $3 to ski her last mile. A) True B) False 3. Assume that Brooke is maximizing her utility and consuming a positive amount of Bud Lite. Then the market price of Bud Lite decreases, Brooke's downward-sloping demand curve for the Bud Lite remaining the same, her consumer's surplus associated with Bud Lite increases. A) No B) Maybe C) Yes 4. An individual is more likely to free ride when a good is: A) artificially scarce. B) private. C) nonexcludable. D) nonrival.Version 1 Page 2 Use the following to answer question 5: Figure: Three Firms 5. (Figure: Three Firms) Three firms in a small city are responsible for emitting pollution, and the marginal benefit of the individual polluters is shown in the figure. If the city imposes a tax of $400 per ton of pollution, Firm B will produce ________ while Firm A will produce ________ of mercury and Firm C will produce ________ A) 600 tons; 400 tons; 900 tons B) 300 tons; 500 tons; zero tons 6. A move to Commerce City from Boulder would make you worse off. Your WTA the move is bounded from above by your income/wealth. A) True B) False 7. Let d denote Diet Cokes and c chocolate bars. At my current consumption level my MRSdc=3. So, my wtp for an additional Diet Coke is 3 chocolate bars. A) True B) False 8. Marginal social cost of an action is the cost of the action that the producer of the action does not pay A) True B) FalseVersion 1 Page 3 9. In a society that consists of one individual, which statement best describes the allocation of resources that is socially optimal A) The allocation is efficient B) It is an equilibrium C) The individual is doing well D) The individual is doing the best they can given their constraints 10. George steals your wallet, making himself better off, and you worse off. Before the theft took place the allocation of resources was necessarily efficient. A) True B) False 11. Ice cream is congestible. A) True B) False 12. A private good is: A) nonexcludable and rival in consumption. B) excludable and nonrival in consumption. C) excludable and rival in consumption. D) nonexcludable and nonrival in consumption. 13. In our story about taming the Wild West, the arrival of John Wayne decreased the farmer's cost of protecting his property rights. A) True B) False 14. My demand for cigars is C=12-3P where P is the price of cigars and C is the number of cigars I purchase and smoke. Assume the current price of cigars is $2/cigar. Given my demand curve, I choose to consume 6 cigars. My total willingness-to-pay for these 6 cigars is A) $12 B) $6 C) $18 D) Not enough information to tell.Version 1 Page 4 15. Consider Carpenter Bill's supply curve (price on the vertical axis) for rocking chairs. The market price for rocking chairs doubles from $20 to $40. This will_____ A) cause Bill's supply curve for rocking chairs to shift to the right B) cause Bill's supply curve for rocking chairs to shift to the left. C) not shift Bill's supply curve for rocking chairs 16. Assume there cigarette smoking produces a negative external effect (second-hand smoke). The government reacts to this situation by setting a tax on cigarette smoking such that with the tax included the marginal cost of smoking for the smoker is greater than the marginal cost to society from his smoking. In this case, the smoker will smoke too little from society's perspective. A) True B) False 17. If government officials set an emissions tax too high: A) the amount of pollution will necessarily be less efficient than if there was no emissions tax B) there will be too little pollution from a social efficiency perspective C) there will be too much pollution from a social efficiency perspective D) the marginal social cost of pollution will exceed the marginal social benefit of pollution. 18. Wilma, a rational economic agent, consumes only two goods: torrid romance novels and beer. She had just achieved the utility-maximizing solution in her consumption of the two goods, then the price of torrid novels rises. Adjusting to this event, she will consume: A) not sure B) less novels and more beer. C) more novels and less beer. D) less beer and less novels 19. You come home to find that your dog, Killer, is missing. Where he once sat is a ransom note: "$500.00 or Killer dies." You have $500.00 in savings earmarked for a new bike. You pay the ransom with that $500. What is the opportunity cost of your decision? A) the bike and a dead Killer B) the bike C) the bike and a live Killer D) a dead KillerVersion 1 Page 5 20. Consider the statement, "Pandas are valuable and should be saved from extinction, even though people do not care one way or the other about pandas." This notion of "value" is consistent with how economists define value. A) True B) False 21. The model/theory generated the prediction that George knows calculus but not algebra. Which set of the following assumptions mostly likely generated this prediction. A) Assume George is alive. Assume no living person knows algebra. B) Assume only God knows algebra. Assume George is not God. Assume everyone who's name starts with "G" knows calculus C) Assume everyone know calculus. Assume God does not go by the name of George. Assume God knows algebra D) Assume George never took an algebra course. Assume it is impossible to know algebra unless you have taken an algebra course. 22. If society's allocation of resources and distribution of goods is efficient, it still might be possible to increase the production of good X without decreasing the production of any other good. A) True B) False 23. The benefit to society of an additional unit of a public good is the net benefits to all members of society from that additional unit. A) True B) False 24. Assume, for example, the following demand function for Steven's ski days at