MIME-Version: 1.0 Content-Location: file:///C:/37409E32/PracticeQuiz1_F02.htm Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii" Quiz One

Quiz One  &n= bsp;            = ;            &n= bsp;            = ;            &n= bsp;            = ;            &n= bsp;    Name__________________

PPA 723, Fall 2002

Professor John McPeak

October 3, 2002

 

Total quiz is worth 20 points, each numbered question = is worth 2 points, and each sub question (the a / b= / c / d parts) are worth equal shares of the two points. 

 

 

1= )      Say we know that the price of chicken soup in the Maxwell cafeteria increased b= y 4% from last year and the quantity demanded decreased by 8%.

= a.      =  What is the implied elasticity?

 

 

 

= b.      Is this a supply elasticity, an own price demand elasticity, a cross price dem= and elasticity, or an income elasticity of demand?

 

 

 

= c.      = Is this elastic, unit elastic, or inelastic?

 

 

 

= d.      If I ask you whether this shift occurred due to an increase in the price of chicken or an increase the proportion of  vegetarian students enrolled in SU,= which story is more consistent with the facts and why?

 

 

 

 

 

 

2= )      If I know that the supply elasticity of vodka is 0.4, the demand elasticity is -0.25, and I am considering placing a tax on vodka to generate revenue

= a.      = Will consumers bear the entire brunt of the tax if I decide to impose it?  Why or why not?

 

 

 

 

= b.      If I know that the demand elasticity of gin is -0.9, the supply elasticity of = gin is 0.4, and the goal of my tax is to diminish alcohol consumption, should I= tax gin or vodka?

 

 

3= )      Is a price floor or a price ceiling more likely to lead to black market exchange? 

      Explain us= ing the concepts of excess supply and excess demand.

 

 

 

 

 

 

 

 

 

 

 

 

 

4= )      If we know Qd=3D16-2*p and Qs=3D4+2*p

 

= a.      = what is the equilibrium price quantity pair?

 

 

 

 

 

 

= b.      Draw the implied supply and demand curves.  Label all axes and curves.

 

 

 

 

 

 

 

= c.      = If the good in question is sport utility vehicles, and the price of fuel goes = up, which curve will shift in which direction?=   Show this on a graph.

 

 

 

 

 

 

5= )      Tell me the following about indifference curves.

= a.      = Is the shape of an indifference curve influenced by the underlying market pric= es?  Why or why not?

 

 

 

 

 

 

= b.      Explain why the following is not a valid set of indifference curves according to the properties of indifference curves.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6= )      If I know the price of coffee is $2.00 per unit and the price of Tylenol is $0= .50 per unit (for our graduate student consumer in question this is all they consume), the marginal utility of coffee at a bundle the consumer is considering buying is 3 and the marginal utility of Tylenol is 1

= a.      = Explain why this is not the optimal bundle the consumer can buy given their budget constraint.

 

 

 

 

 

= b.      Is the optimal bundle going to be composed of more coffee and less Tylenol or = less coffee and more Tylenol than the bundle under consideration?

 

 

7= )      If  you k= now that in 2000 the price of good A was $10, the price of good B was $20, the consu= mer consumed 4 units of good A and 3 units of good B.

= a.      = What was the consumer’s income in 2000 if they were consuming an optimal bundle, both goods are “goods”, and only goods A and B are cons= umed by the consumer? 

 

 

 

= b.      What is the consumers’ income in 2001 f they are compensated according the= CPI as defined in the book and in class if the price of good A has increased to= $12 and the price of good B to $24 all else equal to (a)?

 

 

= c.      = Is this cost of living adjustment overcompensating = the consumer for inflation?  Why o= r why not?

 

 

 

8= )      If p1 =3D  4,  p2=3D3, and Y=3D24

= a.      = Draw the budget constraint.

 

 

 

 

 

 

 

 

= b.      Show how to derive a demand curve for a given consumer’s preferences (draw= n as you like so long as they obey the properties of indifference curves discuss= ed in class) from the price consumption curve using the example of p1 =3D  2 all else constant, and = p1 =3D  6 all else constant.

 

 

 

 

9= )      Tell me whether the following will lead to a movement along a demand curve or a shift in the demand curve for rakes in the city of <= st1:City w:st=3D"on">Syracuse.

= a.      = Syracuse passes a = law saying homeowners will be fined $0.05 per leaf left in their yard for more = than two days.

 

 

 

 

= b.      A new contract is signed between the Congolese government and the rake manufacturers association of America that will regularize the supply of Kisanganimium, a metal that is less costly and more desirable in rake manufacturing than the currently used material of steel.

 

 

 

 

= c.      = The cooperative extension releases a report suggesting that overall lawn health= and soil fertility are increased in central New York by leaving leaves where they fall on the lawn over the winter and letting them decompose in place in the spring.

 

 

 

 

 

1= 0)  If I = tell you the following information, what type(s) of good are  we considering (circle the correct response(s) noting that more than one is possible)

 

= a)      The substitution effect is less than the total effect.

Giffe= n Good      &nb= sp;    Normal Good  &= nbsp;            Inferior Good

 

 

= b)      The total effect is negative.

Giffe= n Good      &nb= sp;    Normal Good  &= nbsp;            Inferior Good

 

 

= c)      The total effect is less than the substitution effect

Giffe= n Good      &nb= sp;    Normal Good  &= nbsp;            Inferior Good