ECON1210 Introductory Microeconomics Final Examination December 17, 2021
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ECON1210 Introductory Microeconomics
Final Examination
Date: December 17, 2021, 14:30-16:30 (+ 15 minutes of grace period)
1. My university ID number is [ Answer01 ].
2. Veronica has a budget of 90 dollars for dinner. She can spend the money on two items: salmon or oyster. Assume that salmon and oyster are perfectly divisible and can be consumed in any arbitrary quantity. Veronica’s marginal benefits from these two items are:
Marginal benefit from salmon: MB(n) = 2720 − 19n
Marginal benefit from oyster: MB(m) = 982 − 8m
where n and m are the money spent on salmon and oyster respectively. Veronica would allocate [ Answer02A ] dollars on salmon and [ Answer02B ] dollars on oyster.
3. You are considering to attend a three-hour guided tour in Hong Kong Park. Your benefit from the guided tour is 655 dollars. The price of the ticket for the guided tour is X dollars. If you do not attend the guided tour, you can teach three hours of economics class with an hourly wage of 135 dollars per hour. Or spend time with your family, for three hours with a total of 280 dollars of enjoyment. Assume there are no extra costs for the above events. You should attend the guided tour if X is [ Answer03A ] (A. at most; B. at least) [ Answer03B ] dollars.
4. Adolph, Ben, Clara, Desmond, Eric can produce hats and ties. The table below shows their time required to produce a hat and their time required to produce a tie (in minutes).
|
Minutes per hat |
Minutes per tie |
|
|
Adolph |
7.00 |
3.04 |
|
Ben |
11 00 |
10 00 |
|
Clara |
12.00 |
24.00 |
|
Desmond |
10 00 |
7 69 |
|
Eric |
19.00 |
27.14 |
Assume each of them works ten hours per day. If we let the two people with the lowest opportunity cost in producing hats to specialize in the production of hats, and the rest to produce ties, we will have a total of [ Answer04A ] hats in a day and [ Answer04B ] ties in a day.
Consider the following individual production possibilities curves (not drawn to scale), where a = 60, b = 162,
c = 162, d = 60.
5. If one standard maintenance service includes one clutch replacement and two brake replacement, if they work separately, they can perform in total [ Answer05 ] standard maintenance services (can be non-integer).
6. Continue with the previous question, if they work together, they perform in total [ Answer06 ] PERCENT MORE standard maintenance services than working separately.
7. Consider the market for lobsters in Maine. Two events happened recently.
Event 1: The water quality in Maine improves, which makes lobsters healthier and tastier.
Event 2: The price of diesel fuel increases.
We can predict [ Answer07A ] in the equilibrium price and [ Answer07B ] in the equilibrium quantity.
A) an increase B) a decrease C) an uncertain change
8. Consider the markets of X and Y. X and Y are known to be substitutes of each other to consumers. Both markets are unregulated. Which of the following sequence of events will likely be seen after a decrease in the cost of producing X?
X1 An increase in the price of X.
X2 A decrease in the price of X.
X3 An increase in the demand for X.
X4 A decrease in the demand for X.
X5 An increase in the supply of X.
X6 A decrease in the supply of X.
Y1 An increase in the price of Y.
Y2 A decrease in the price of Y.
Y3 An increase in the demand of Y.
Y4 A decrease in the demand of Y.
Y5 An increase in the supply of Y.
Y6 A decrease in the supply of Y.
Sequence: [ Answer08A ] −→ [ Answer08B ] −→ [ Answer08C ] −→ [ Answer08D ]
9. Consider downward-sloping demand curve and upward-sloping supply curve and initial positive equilibrium quantity. How many of the following statements is(are) correct?
|
(i) |
A leftward shift in |
demand reduces total producer surplus. |
|
(ii) |
A leftward shift in |
demand reduces total gains from trade. |
|
(iii) |
A leftward shift in |
supply reduces total gains from trade. |
|
(iv) |
A leftward shift in |
supply reduces total producer surplus. |
A) 0
B) 1
C) 2
D) 3
E) 4
[ Answer09 ]
The demand curve for product A takes the form of
QA = 110000 − 3.7PA + cPB
where PA is the price of product A, and PB is the price of product B. At one equilibrium, QA = 966.3, PB = 20, and the cross-price elasticity between product A and product B is −2.1.
10. Then we can infer that c = [ Answer10 ] at the equilibrium.
11. We can further compute that PA = [ Answer11 ] at the equilibrium.
12. Consider downward-sloping demand curve and upward-sloping supply curve and initial positive equilibrium quantity. How many of the following statements is(are) correct?
|
(i) (ii) (iii) (iv) |
When a per-unit tax is imposed, the decrease in total economic surplus received by consumers and producers is always more than the gain in tax revenue received by the government. For the same amount of tax per unit imposed, deadweight loss is higher when the demand and/or supply is less price elastic. If the government levies a tax of 1 dollar for each gallon of gas, at equilibrium, the price of gas paid by the buyers in the market increases by less than 1 dollar. Consider a per-unit tax, if sellers are less price elastic than buyers, sellers will bear less burden of the tax. |
A) 0
B) 1
C) 2
D) 3
E) 4
[ Answer12 ]
Suppose a per-unit tax is levied on a product which is characterized by linear downward-sloping demand curve and linear upward-sloping supply curve. The tax lowers the consumer surplus by $8502 and lowers the producer surplus by $3805. The deadweight loss is $2357.
13. The government tax revenue is $[ Answer13 ] at the equilibrium.
14. Suppose we also know that the tax rate is $25 per unit. We can conclude that the tax lowers the quantity transacted from [ Answer14A ] units to [ Answer14B ] units.
Suppose the Financial Secretary of Utopia wants our help designing a per-hour wage subsidy to raise employment and worker’s pay. Given a wage P measured in Utopian dollars, the supply and demand for labor (per year) are given by the equations
|
Demand: Supply: |
Q = 55000 − 25P million hours Q = 110P − 20000 million hours |
15. Suppose the aim is to increase employment by 90 million hours. We should suggest a wage subsidy of [ Answer15 ] dollars per hour.
16. Suppose the Financial Secretary would like to use subsidy to increase employment but he does not want the deadweight loss to exceed 110 million Utopian dollars per year. Then, we should suggest a maximum subsidy of [ Answer16 ] dollars per hour.
The following equations show the rental market for apartments in a big city. Due to political pressure, the government decides to set a rent ceiling of C dollars.
|
Demand: Supply: |
Q = 1800 − 2P thousand apartments Q = 2P − 440 thousand apartments |
17. The government would like to limit the lost gains from trade due to the price ceiling to 1000 thousand dollars. The minimum value of C is [ Answer17 ] dollars.
(Assume all consumption are allocated to consumers with the highest valuation and all production are allcoated to producers with the lowest cost of production.)
18. Continue with the last question. At this price ceiling, there will be a shortage of [ Answer18 ] thousand apartments.
19. Continue with the last question. Consider two alternative ways of allocating the apartments when a shortage is present: bribery and waiting in line. Assume the per-unit cost of waiting time is same for all buyers, then waiting in line will cause a [ Answer19A ] (A. higher, B. lower) welfare loss to the society than bribery by the amount of [ Answer19B ] thousand dollars.
The residents of Utopia have complained to the government that the wage (dollars per hour) is too low. The administration promises to consider two policies proposed by the representatives of the residents: (1) a minimum wage, and (2) a wage subsidy. The market demand (by firms) and supply (by workers) curves of labor hours are given by the following equations:
|
Demand: Supply: |
Q = 1800 − 30P million hours per year Q = 20P − 440 million hours per year |
20. From the information, we can conclude that the unregulated market equilibrium wage is [ Answer20A ] dollars per hour and equilibrium labor hours are [ Answer20B ] million hours per year.
21. Consider a minimum wage of 49.4 dollars per hour. At this minimum wage, there will be a [ Answer21A ] (A. shortage; B. surplus) of labor of [ Answer21B ] million hours per year.
22. At the proposed minimum wage, economic surplus accrued to firms is expected to be [ Answer22A ] million dollars per year. And the maximum possible economic surplus accrued to workers will be [ Answer22B ] million dollars per year.
23. Consider a wage subsidy policy instead. In order to raise the effective wage workers get paid to the level of 49.4 dollars per hour, the government needs to impose a wage subsidy of [ Answer23A ] dollars per labor hour. The subsidy expenditure will be [ Answer23B ] million dollars per year.
24. At the wage subsidy considered in the previous question, economic surplus accrued to workers will be [ Answer24A ] million dollars per year. The total loss to the society when compared to unregulated market equilibrium is [ Answer24B ] million dollars per year.
The following figure shows the market for bread in a village, where a = 100, c = 44, d = 26, e = 9, f = 165. Suppose the government imposes a price ceiling at 26 dollars.
25. After the ceiling is imposed, there will be an [ Answer25A ] (A. excess demand; B. excess supply) of [ Answer25B ] units of bread.
26. If there is a competitive market for bribery to determine the allocation, the equilibrium bribe for the right to purchase one unit of bread is [ Answer26A ] dollars. Correspondingly, the sum of consumer surplus and producer surplus in the bread market is [ Answer26B ] dollars.
The demand for good x satisifes the following relation (where “ln” is natural logarithmic function): ln Q北 = 15 − 1.4 × ln P北 − 1.3 × ln Py + 2.4 × (income)−2 .
27. Based on the information above, x is a(n) good; x and y are .
A) normal; substitutes
B) normal; complements
C) inferior; substitutes
D) inferior; complements
[ Answer27 ]
28. The price elasticity of demand for good x is [ Answer28A ] and the cross-price elasticity of demand for good x with respect to the price of good y is [ Answer28B ].
Suppose the demand and supply of firearms in Utopia are given as follows:
Demand: P = 780 − 129Q
Supply: P = 330 + 2Q
in which Q is the quantity of firearms in million units and P is the price per each firearm in Utopian dollars.
29. The equilibrium price is [ Answer29A ] Utopian dollars and the equilibrium quantity is [ Answer29B ] million units.
30. Suppose the government purchases 10 million units of firearms back from the market. After the government enters the market, on the new demand curve, when the price is 555 Utopian dollars, the total quantity demanded is [ Answer30 ] million units of firearms.
31. Suppose the government wants to use such buyback program to reduce the quantity of firearms in the community to zero. The government will need to buy at least [ Answer31A ] million units of firearms from the market and spend at least [ Answer31B ] million dollars.
32. Suppose the government wants to use taxation to reduce the quantity of firearms in the community to zero. The government will need to impose a tax of at least [ Answer32 ] dollars per unit.
33. Suppose the government wants to use price floor to reduce the quantity of firearms in the community to zero. The government will need to implement a price floor of [ Answer33A ] (A. at most; B. at least) [ Answer33B ] dollars per unit.
34. Knowing that the government is determined to reduce the quantity of firearms in the community to zero through either buyback, taxation, or price floor policy, the firearms suppliers are actively thinking of lobbying the government for a policy they favor. The firearms suppliers as a group are willing to spend up to [ Answer34 ] million dollars to lobby the government to adopt the policy they favor.
Two powerplants, X and Y, have access to seven different production processes to supply electricity to Utopia, each one of which has&nbs
2023-07-10