Econ 101-8 (Turchi) Practice Final Exam, Fall 2010Final Examination on Friday, December 17, 2010 at 8 a.m.****Review Session, Wednesday, December 15th at 7:00 p.m. (Carroll Hall Rm 111) For Exam: Students are responsible for all assigned text material, lecture material, and all handouts.Bring to Exam: (1) #2 pencil with functioning eraser, (2) calculator (for numerical calculations only)Remember: In addition to the following Practice Exam, three practice midterms and 3midterm exams are also available to you for review.Economics 101Fall 2010Professor TurchiPRACTICE F I N A L E X A M___________________________________________________________________________________________1. Economics is the science that deals primarily with1) the relationship between demand and supply 3) microeconomics and macroeconomics2) the problem of scarcity 4) how marginal changes affect the economy2. What do economists mean when they say resources are scarce?1) Resources are hard to find. 3) Nobody owns resources.2) Resources are limited relative to human wants. 4) Resources must be produced.3. Why do we suppose that production possibility frontiers are generally curved?1) because there are no specialized resources2) because resources are not perfectly transferable3) so relative opportunity cost can remain constant along the frontier4) production possibility frontiers are not generally curved4. If an economy is producing efficiently, it is producing 1) inside its production possibility frontier2) near, but inside its production possibilities frontier3) on its production possibility frontier4) outside its production possibility frontier5. What impact does economic growth have on the production possibility frontier?1) no impact, they are not related2) the production possibility frontier will move inward3) the production possibility frontier will move outward4) we will move along the production possibility frontierDIAGRAMThe following two questions refer to the diagram above.6. Assume that the economy is currently at point D. What is the opportunity cost of moving to B?1) 200 guns 2) 200 roses 3) 300 roses 4) zero7. The movement from B to C, implies that the opportunity cost of producing roses relative to guns is 1) increasing 2) decreasing 3) constant 4) cannot be determined8. The division of labor usually refers to1) splitting the three coordination decisions among different sets of planners2) splitting the parts of a complex task among different workers3) splitting the production of consumption goods and capital goods among different workers4) none of the above 9. A price ceiling -when it is below the equilibrium price level- will result in1) an excess demand for the good 3) shortages in the market2) a black market 4) all of the above10. The demand for boomerangs in Pago Pago is QD = 20,000 - 500P; the supply is QS = 5,000 + 1000P. What isthe equilibrium quantity and price level?1) P = 100; Q* = 105,000 3) P = 10; Q* = 15,0002) P = 100; Q* = 480,000 4) P = 10; Q* = 25,00011. Demand is likely to be more elastic for which of the following goods1) salt 2) bread 3) cigarettes 4) fur coats 12. How will a decrease in price affect demand?1) demand will increase 3) demand will not change2) demand will decrease 4) cannot be determined13. If, in some range of production, average cost is falling, the firm is experiencing1) increasing returns to scale 3) constant returns to scale2) decreasing returns to scale 4) it is impossible to say14. Production costs for a given output will be minimized when the isocost line1) and the isoquant meet in the vertical axis 3) bends back on itself2) crosses the isoquant 4) and the isoquant are tangent15. A firm’s average cost (AC) will eventually rise because1) bottlenecks may be reached for some inputs2) marginal fixed costs begins to rise near capacity3) the range of negative returns is reached4) production returns are variable over time (Boone’s law)16. Everything else equal, the AC curve will shift when1) the price of the product rises2) technical change raises the marginal physical product (MPP) of one input3) increasing returns are present4) decreasing returns are present17. Average cost at any output is lower in the long run than in the short run because1) prices often fall over time2) inputs can be combined more efficiently in the long run3) AFC falls with output over all ranges of output4) AVC falls with output over all ranges of output 18. When economists talk about the short run and the long run, they are referring to:1) how long it takes to make a product 3) the degree of flexibility in the choice of inputs2) how long it takes to sell a product 4) all of the above are correct19. A price cut will decrease the revenue of a firm if product demand is:1) elastic 2) inelastic 3) straight elastic 4) will always decrease revenuePractice Final Exam Page 2 of 1020. Due to increased imports of foreign wines, US wine makers allowed a larger number of grapes to dry on the vineand become raisins. The resulting fall in raisin prices caused sales of raisins to increase 26% to 300,000 tons.One can deduce from this that the demand for raisins 1) is inelastic in the relevant range 3) is unit elastic in the relevant range2) is elastic in the relevant range 4) cannot be determined21. After a million dollar ad campaign, Coca-Cola measured its effectiveness by calculating the cross-elasticity of demand between Coke and Pepsi. A successful campaign would be indicated if the cross-elasticity changedfrom:1) 0.9 to 0.5 2) 0.9 to 1.5 3) -0.9 to -0.5 4) -0.9 to -1.522. If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack from $1.10 to $1.26 shouldchange quantity demanded by about:1) 5% 2) 10% 3) 27% 4) 40%23. For a normal good, a price increase will result in a 1) positive substitution effect and more quantity demanded2) negative substitution effect and more quantity demanded3) higher real income and less quantity demanded4) lower real income and less quantity demanded24. The slope of an indifference curve at all points reflects1) the relative prices of the two goods2) the willingness of consumers to trade one good for another3) consumer income relative to the price of a good4) the relative quantities of the two goods25. For a budget line, when the prices of both goods rise by 10%, the budget line