ECON 2106 FINAL REVIEW

SI date: Thursday 12/2

*This is not a guarantee of all the material that can show up on the final. Theres tons more! Remember, YOU make
the final so make it good! ind a stud! budd! "someone whos been to #$%&, take practice tests and rela'''''''. ()
* $f we dont finish this worksheet in the time permitted for toda!, we will continue on *onda!s #$ or !ou can
email me !our +uestions!
,. - decrease in demand and a decrease in suppl! will lead to a"n& ........ in e+uilibrium
+uantit! and a"n& ........ in e+uilibrium price.
-& decrease/ indeterminate change
0& indeterminate change/ increase
1& indeterminate change/ decrease
2& increase/ indeterminate change
Use the following to answer +uestion 34
Figure: City with Two Polluters
3. "igure4 1it! with Two 5olluters& $f the go6ernment imposed an emissions ta' of 7899, irm -
would produce ........ tons of emissions and irm 0 would produce ........ tons of
emissions.
-& 399/ 899
0& 899/ ,,399
1& :99/ ,,899
2& ,,399/ ,,;99
). #uppose apartments rent for 7,,;99 in 0oston. $f the cit! of 0oston forces each landlord to
charge 7,,399, there will be4
-& an increase in producer surplus for each landlord.
0& a surplus of new apartments in 0oston.
1& an increase in consumer surplus for 0ostonians who can find apartments for 7,,399.
2& an increase in total surplus.
5age ,
Use the following to answer +uestion 84
Figure: Market for Blue Jeans
8. "igure4 *arket for 0lue <eans& The go6ernment recentl! le6ied a 7,9 ta' on the producers of
blue =eans. Using the graph, calculate the deadweight loss.
-& 7,,999
0& 7>99
1& 73>9
2& 7,,3>9
>. ?hich of the following is an e'ample of a normati6e statement%
-& The rate of unemplo!ment is 8@.
0& - high rate of economic growth creates more =obs for the countr!.
1& The federal go6ernment spends half of its budget on national defense.
2& A6er!one in -merica deser6es to be co6ered b! national health insurance.
;. #uppose a local hardware store has e'plicit costs of 73 million per !ear and implicit costs of
788,999 per !ear. $f the store earned an economic profit of 7>9,999 last !ear, this means that
the storeBs accounting profit e+ualed4
-& 7C8,999.
0& 7;,999.
1& 73,9>9,999.
2& 73,988,999.
5age 3
Use the following to answer +uestion D4
Figure: Gain in Consumer Surplus
D. "igure4 Eain in 1onsumer #urplus& $dentif! the area"s& that represent the change in consumer
surplus when the price falls from P, to P3. ?hich of the following is correct%
-& - and 0
0& 0 and 1
1& 2 and A
2& -, 0, and 1
:. 5a!ing a fee e6er! time !ou use the municipal golf course is an e'ample of the4
-& benefits principle.
0& abilit!FtoFpa! principle.
1& progressi6e ta' principle.
2& regressi6e ta' principle.
C. Ei6en an interest rate of )@, the present 6alue of a future pa!ment of 73,9:9 to be paid in one
!ear is4
-& 7,,C98.D;.
0& 73,999.99.
1& 73,9,C.83.
2& 73,9:9.99.
Use the following to answer +uestion ,94
Figure: Average Total Cost Curve
5age )
,9. "igure4 -6erage Total 1ost 1ur6e& $n the figure, the total cost of producing fi6e pairs of boots
is appro'imatel!4
-& 789:.
0& 7:3.
1& 7,9:.
2& 7,D.
,,. -lthough water is 6er! abundant in most places, it is scarce because4
-& it has no alternati6e uses.
0& there is not enough of it to meet all needs.
1& it is a free good.
2& scarce goods in general are not all that costl!.
Use the following to answer +uestion ,34
Figure: Toms Pro!u"tion Possi#ilities
,3. "igure4 TomBs 5roduction 5ossibilities& $n the figure, the opportunit! cost for Tom to mo6e
from point C on the cur6e to point A is4
-& ,9 coconuts.
0& )9 fish.
1& > coconuts.
2& There is no opportunit! cost in terms of fish.
,). Gational defense and electronics books are similar in that both are ........, but the! differ in
that national defense is ........ while electronics books are not.
-& ri6al in consumption/ e'cludable
0& nonri6al in consumption/ none'cludable
1& e'cludable/ ri6al in consumption
2& none'cludable/ nonri6al in consumption
5age 8
Use the following to answer +uestion ,84
Figure: Shifts in $eman! an! Supply
,8. "igure4 #hifts in 2emand and #uppl!& The figure shows how suppl! and demand might shift
in response to specific e6ents. #uppose consumer incomes increase. ?hich panel best describes
how this will affect the market for used furniture, an inferior good%
-& 5anel -
0& 5anel 0
1& 5anel 1
2& 5anel 2
,>. #uppose that the crossFprice elasticit! of demand for *ountain 2ew with respect to the price of
1oke is 9.D. This implies that the two goods are4
-& substitutes.
0& complements.
1& inferior.
2& normal.
,;. - menBs tie store sold an a6erage of )9 ties per da! when the price was 7> per tie but sold >9 of
the same ties per da! when the price was 7) per tie. The absolute 6alue of the price elasticit! of
demand, using the midpoint method, is4
-& greater than Hero but less than ,.
0& e+ual to ,.
1& greater than , but less than ).
2& greater than ).
5age >
Use the following to answer +uestions ,DF,:4
Figure: A Perfe"tly Competitive Firm in the Short %un
,D. "igure4 - 5erfectl! 1ompetiti6e irm in the #hort Run& The firm will shut down in the short
run if the price falls below4
-& G.
0& F.
1& E.
2& P.
,:. "igure4 - 5erfectl! 1ompetiti6e irm in the #hort Run& The firmBs total re6enue from the sale
of its most profitable le6el of output is4
-& 9GLD.
0& 9GHB.
1& BH.
2& DL.
,C. 2r. 1olgate is a dentist who emplo!s an assistant, *s. 1rest. $f 2r. 1olgate worked all da! at
the front desk, she could answer 89 phone calls. $f she worked all da! with patients, she could
clean the teeth of 89 patients. $f *s. 1rest worked all da! at the front desk, she could answer
;9 phone calls. $f she worked all da! with patients, she could clean the teeth of 39 patients.
?hich of the following is true%
-& 2r. 1olgate has an absolute ad6antage in answering phones.
0& *s. 1rest has a comparati6e ad6antage in answering phones.
1& *s. 1rest has an absolute ad6antage in cleaning patientsB teeth.
2& 2r. 1olgate has a comparati6e ad6antage in answering phones.
5age ;
Use the following to answer +uestion 394
39. "Table4 *arginal 0enefit, 1ost, and 1onsumer #urplus& The table shows si' consumersB
willingness to pa! "his or her indi6idual marginal benefit& for one iTunes download of a <ack
<ohnson song. $f the marginal social cost is constant at 79, then the efficient price is ........
and consumer surplus would be .........
-& 79/ 7)D
0& 7,/ 7);
1& 78/ 7))
2& 7>/ 7)3
Use the following to answer +uestion 3,4
Figure: Pri"e Control
3,. "igure4 5rice 1ontrol& $n the graph, an effecti6e price ceiling would be the price indicated at
........ and a ........ would e'ist as the difference between .........
-& point b; surplus/ points f and e
0& point b; shortage/ points f and e
1& point d; shortage/ points i and h
2& point d; surplus/ points e and h
5age D
Use the following to answer +uestion 334
33. "Table4 <ohnsonBs $ncome and A'penditures& <ohnsonBs income elasticit! of demand for piHHas
is4
-& I,.8.
0& appro'imatel! I9.D.
1& 9.
2& appro'imatel! 9.D.
3). <essica spends all her income on two goods, A and B. The price of A is 7>, and the price of B is
7D. -t the current consumption bundle, the marginal utilit! of A is ,9, and the marginal utilit!
of B is 3,. To ma'imiHe utilit! gi6en her income, <essica should4
-& increase her consumption of B and decrease her consumption of A.
0& increase her consumption of A and decrease her consumption of B.
1& continue to consume the current bundle.
2& consume e+ual amounts of A and B.
Use the following to answer +uestion 384
Figure: Computing Monopoly Profit
38. "igure4 1omputing *onopol! 5rofit& The profitFma'imiHing price is ........ and will
generate total economic profit of .........
-& P3/ EF
0& P)/ the rectangle P,P3FG
1& P)/ the rectangle P3P)EF
2& P)/ EF
5age :
Use the following to answer +uestion 3>4
Figure: The %estaurant Market
3>. "igure4 The Restaurant *arket& The figure shows cur6es facing a t!pical restaurant in a
communit!. -ssume that man! firms, differentiated products, and eas! entr! and eas! e'it
characteriHe the market. $f the restaurant shown here is t!pical of others in the communit!, then
in the long run, we would e'pect to obser6e4
-& restaurants lea6ing the market.
0& new restaurants entering the market.
1& neither entr! nor e'it.
2& Got enough information is gi6en to answer the +uestion.
3;. The kinked demand cur6e model assumes that4
-& ri6als will follow a price increase but not a price decrease.
0& ri6als will follow a price decrease but not a price increase.
1& the firm with the kinked demand cur6e will alwa!s beha6e noncooperati6el!.
2& the firm with the kinked demand cur6e will alwa!s adopt a titFforFtat strateg!.
2ont forget! There is &' #$ on Tuesda! ,3JD, but $ will hold a short one on *onda! ,3J; from
8F>,> in #parks 38>. You are alwa!s free to email me at =ulie.ngu!en3,Kgmail.com. Use the
discussion board on ULearn to ask !our classmates +uestions!
5age C
Answer (ey
,. -
3. 0
). 1
8. 0
>. 2
;. -
D. 0
:. -
C. 1
,9. -
,,. 0
,3. 2
,). 0
,8. 2
,>. -
,;. 0
,D. 2
,:. -
,C. 0
39. -
3,. 1
33. 0
3). -
38. 1
3>. 0
3;. 0
5age ,9