Professor: M.

Rush
ECO 2023
FALL 2013
MIDTERM 1
Read all instructions on this page
This test is governed by UFs academic honesty code. It is intended to have 30
multiple choice questions. Please check to be sure your copy has all 30. MAKE
CERTAIN THAT YOU LOOK AT BOTH SIDES OF THE LAST PAGE!! Choose
the best answer for each question.
The next is important: Unless you are specifically told otherwise, on this test do
not assume that demand or supply is either perfectly elastic or perfectly inelastic.
On the bubble sheet, please enter:
1. Your name and initials
2. Your UF ID number
3. Form code: A
4. Sign your name on the bubble sheet.
Check that the form code and UF ID number you bubbled-in are correct now. Also check
to be sure your name is correctdo it now. I have heard a rumor that the ability to
correctly record these had been mastered by a few students at FSU as well as a couple of
accounting and journalism students. I will investigate these rumors but in the
meanwhile,
CHECK YOUR FORM CODE AND UF ID NUMBER. IF YOU GET EITHER OF
THESE WRONG, YOUR TEST MIGHT NOT BE GRADED AND IF IT IS GRADED,
YOU WILL LOSE 3 POINTS!

TURN OFF ALL CELL PHONES AND OTHER
COMMUNICATION DEVICES
You may not use a cell phone or any other sort of device that allows for communication
as your calculator.
I have become increasingly concerned that some students are at a real disadvantage
because they are unwilling to ask questions during the exam while others ask a lot of
questions. Hence, to level the playing field, I have decided to eliminate all questions
during the test. I dont like this policy, but it seems the fairest policy.
Do not ask questions of me or the TAs; in the interest of fairness I
have instructed them not to answer any questions during the exam.
You will have one hour (60 minutes) to complete the exam and bubble in all your
answers. When the TAs say that time is up, you must hand in your exam. We will not
give extra time to finish bubbling in the answers, so be sure you are done when the 60
minutes are up. Of course, you may hand in your test at any time before the 60 minutes
are up.
E CO 2023 MI DTE R M 1 F AL L 2013
An answer key will be posted on the class web page after 10 PM.
The test scores will be on class web page within a few days.
Once you see the answer key, you might have a question about why one answer
is right and another is wrong. For these questions, email me at
mark.rush@warrington.ufl.edu Do NOT email the grader about these questions!
After the scores are posted, if you think your posted score is incorrect, then email
the grader at eco2023.grader@warrington.ufl.edu If you email me about your test
score, I will not forward the email nor respond to youyou MUST email the
grader. You have one week after the curved score is posted to request a grade
check. After a week, the score will not be changed. If the web reports what you
bubbled in for each question and you ask the grader to check an answer because
you believe you bubbled in something other than what is reported and the
reported answer on the web is correct, you will lose 1 additional question.

2
E CO 2023 MI DTE R M 1 F AL L 2013
1) When the price of a pizza is $11, 39 million pizzas per day are demanded. When the
price of a pizza is $9, 41 million pizzas per day are demanded. The price elasticity of
demand equals
A) 0.25.
B) 4.00.
C) 1.73.
D) 1.00.
E) None of the above are correct.
2) The number of firms producing tablets decreases. As a result, the equilibrium price
of a tablet ____ and the equilibrium quantity ____.
A) probably changes but more information is needed to determine if the price rises, falls,
or does not change; increases
B) falls; decreases
C) falls; increases
D) rises; decreases
E) rises; increases
3) At the quantity of 20 million bushels of apples, the marginal social benefit of a
bushel of apples is $10 and the marginal social cost is $10. To produce the
allocatively efficient quantity of apples, then
A) more apples should be produced.
B) fewer apples should be produced.
C) more information on the willingness of consumers to purchase apples is needed.
D) no changes needs to be made because the allocatively efficient quantity of apples is 20
million bushels.
4) Suppose the minimum wage is increased. Fast food restaurants employ many
workers who are paid the minimum wage. As a result of the hike in the wage paid
these workers, the equilibrium price of fast food ____ and the equilibrium quantity
____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
5) Soda and pizza are complements for consumers and pizza falls in price.
Consequently, the equilibrium price of soda ____ and the equilibrium quantity ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
3
E CO 2023 MI DTE R M 1 F AL L 2013

Point
Production
chocolate bars
Production
cans of cola
A 0 100
B 10 90
C 20 70
D 30 40
E 40 0
6) The above table shows production points on a nations production possibilities
frontier. What is the opportunity cost of one chocolate bar if production moves from
point C to point D?
A) 40 cans of cola
B) 1 chocolate bar
C) 3 cans of cola
D) 70 cans of cola
E) 0 cans of cola
7) A 1 percent fall in the price of a pound of oranges results in a 3 percent increase in
the quantity of oranges demanded and a 1 percent fall in the price of gasoline
results in a 0.2 percent increase in the quantity of gasoline demanded. The price
elasticity of demand of oranges is ____ the price elasticity of demand for gasoline so
that it is likely there are ____.
A) larger than; more substitutes for oranges than for gasoline
B) larger than; fewer substitutes for oranges than for gasoline
C) equal to; the same number of substitutes for oranges and gasoline
D) equal to; more substitutes for oranges than for gasoline
E) smaller than; more substitutes for oranges than for gasoline.
8) The equilibrium rent for an apartment is $600 per month and the government
imposes a rent ceiling of $500 per month. The producer surplus from apartments
____ and a deadweight loss ____ created.
A) decreases; is not
B) decreases; is
C) increases; is
D) does not change; is not
E) More information is needed about the demand and supply of apartments to answer this
question.
9) When more of a good is consumed, the total utility from the good ____ and the
marginal utility from the good ____.
A) increases; decreases
B) decreases; increases
C) increases; increases
D) decreases; decreases
E) None of the above answers are correct.
4
E CO 2023 MI DTE R M 1 F AL L 2013
Income Total utility
0 0
$1,000 500
$2,000 900
$3,000 1,100
$4,000 1,200
10) The above table shows Shaniqs total utility from different amounts of income. If she
is disabled, her income is $0; if she is not disabled her income is $4,000. Shaniq can
buy an insurance policy that will pay her $4,000 if she is disabled and $0 if she is
not. The policy costs $2,000. Will Shaniq buy this insurance policy?
A) Yes, she definitely buys the policy.
B) No, she definitely does not buy the policy.
C) She might or might not buy the policy.
D) More information is needed to answer the question.
11) Macaroni and cheese is an inferior good and peoples incomes rise. As a result, the
equilibrium price of macaroni and cheese ____ and the equilibrium quantity ____.
A) probably changes but more information is needed to determine if the price rises, falls,
or does not change; increases
B) falls; decreases
C) falls; increases
D) rises; decreases
E) rises; increases
12) Because of a hurricane, both buyers and sellers of oil come to expect that the price of
oil will be higher in the future. Consequently, today the equilibrium price of oil ____
and the equilibrium quantity ____.
A) rises; decreases
B) does not change; might increase, decrease, or not change but more information is
needed to determine which
C) rises; might increase, decrease, or not change but more information is needed to
determine which
D) rises; increases
E) might rise, fall, or not change but more information is needed to determine which;
decreases
13) Bobby eats hamburgers and hot dogs. He is at his consumer equilibrium. The price
of a hot dog equals the price of a hamburger. Therefore
A) his total utility from all the hot dogs he eats must be the same as his total utility from
all the hamburgers he eats.
B) his marginal utility from the last hot dog he eats must be the same as his marginal
utility from the last hamburger he eats.
C) he must be eating the same number of hot dogs and hamburgers.
D) None of the above are correct.
5
E CO 2023 MI DTE R M 1 F AL L 2013
14) Suppose the price of jet fuel rises. As a result, the demand curve for airline travel
____ and the supply curve of airline travel ____ so that the equilibrium price of
airline travel ____
A) shifts leftward; shifts leftward; definitely falls
B) shifts leftward; shifts leftward; might fall
C) shifts leftward; shifts leftward; definitely rises
D) does not shift; shifts leftward; rises
E) None of the above answers are correct.
15) A production point inside the production possibilities frontier
A) could indicate that some resources are unemployed.
B) is unattainable.
C) is more efficient than points on the production possibilities frontier.
D) occurs when too much capital and not enough labor is being used.
E) occurs when too much labor and not enough capital is being used
16) If the elasticity of demand for salt ____ than the elasticity of supply of salt, then ____
pay most of any tax levied on salt.
A) larger; sellers
B) smaller; sellers
C) larger; buyers
D) None of the above answers are correct.
17) A price ____ makes it illegal to pay a lower price than the specified level. One
example is ____.
A) floor; the minimum wage
B) floor; a rent control
C) ceiling; the minimum wage
D) ceiling; a rent control
18) The number of people demanding gluten free food increases while simultaneously
the number of producers of gluten free food increases. The effect from the increase
in the number of producers is less than the effect from the number of demanders.
As a result, the equilibrium price of gluten free food ____ and the equilibrium
quantity ____.
A) rises; increases
B) falls; increases
C) probably changes, but more information is needed to determine if the price rises, falls,
or stays the same; increases
D) rises; probably changes, but more information is needed to determine if the quantity
increases, decreases, or stays the same
E) None of the above answers are correct.
6
E CO 2023 MI DTE R M 1 F AL L 2013

19) The figure above shows the market for blouses when the government imposes a tax.
The amount of the tax is ____ per blouse and once the tax is imposed buyers pay
____ per blouse and sellers pay ____ per blouse.
A) $20; $0; $20
B) $30; $20; $10
C) $30; $10; $20
D) $20; $30; $10
E) $20; $10; $10
20) The figure above shows the market for blouses when the government imposes a tax.
The deadweight loss from the tax is
A) $6 million.
B) $2 million.
C) $4 million.
D) $0.
E) $1 million.
21) If the income elasticity of demand for candy bars is positive, then
A) the demand for candy bars is price elastic.
B) the demand for candy bars is price inelastic.
C) candy bars are an inferior good.
D) candy bars are a normal good.
22) When the United States imports a good, U.S. consumer surplus ____ and U.S. total
surplus ____.
A) decreases; decreases
B) increases; decreases
C) decreases; increases
D) increases; increases
E) None of the above answers are correct.
7
E CO 2023 MI DTE R M 1 F AL L 2013

23) The figure above shows the U.S. demand and the U.S. supply of shirts. If the world
price of shirts is $24 per shirt, ____ shirts are produced in the United States and the
United States ____ shirts per year.
A) 24 million; imports 40 million
B) 8 million; imports 24 million
C) 24 million; exports 8 million
D) 32 million; imports 8 million
E) None of the above.
24) (This question is an out-of-the-book question.) By imposing sanctions on buyers of
an illegal good, the government shifts the goods
A) demand curve rightward.
B) demand curve leftward.
C) supply curve leftward.
D) supply curve rightward
E) Both answers B and C are correct.
25) If the price elasticity of demand for gasoline is 0.4 and the price elasticity of demand
for movie tickets is 1.2 then an increase in the price of a gallon of gasoline ____ the
total revenue of gas stations and an increase in the price of a movie ticket ____ the
total revenue of theaters.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
26) The marginal benefit of a product is the
A) benefit that the product gives to someone other than the buyer.
B) maximum price someone is willing to pay for that unit of the product.
C) benefit of the product that exceeds the marginal cost of the product.
D) total benefit of the product divided by the total number of units consumed.
8
E CO 2023 MI DTE R M 1 F AL L 2013

27) The above figure shows the market for pizza. Which panel shows the effect of a fall
in the price of the cheese used to produce pizza?
A) Figure A.
B) Figure B.
C) Figure C.
D) Figure D
E) Either Figure A or Figure D depending on whether the effect on the demand or the
supply is larger.
28) Moving along a bowed-out PPF between milk and cotton, as more milk is produced
the marginal cost of an additional gallon of milk
A) rises.
B) does not change.
C) falls.
D) might rise, fall, or not change.
29) Who benefits from a tariff on a good?
A) Domestic consumers of the good
B) Domestic producers of the good
C) Foreign governments
D) Importers of the good
E) Both answers B and D are correct.
9
E CO 2023 MI DTE R M 1 F AL L 2013
30) After the scores are posted, if you have a question about your test score, email the
grader at ECO2023.Grader@warrington.ufl.edu and the director is so stupid (HINT:
Be SURE to answer this question because youll get credit for any answer.)
A) he thought Taco Bell was a Mexican phone company.
B) he thinks Delta airlines is a fraternity.
C) he thinks Tiger Woods is a forest.
D) he sent me an email with a stamp on it.
10