S.
Klepper, Economics 73-100, Fall 2009
There are a total of three major questions, each weighted according to the points listed to the left of the question. These are the points apportioned to each question. They sum to 100
Each
of the major questions has a series of subsidiary questions. Each of these subsidiary questions is a
true-false question. To answer the
question, indicate in your exam booklet whether the answer is true or false and
provide a brief explanation for your answer. Correct answers with insufficient
explanations will get no points. When
you finish, hand in only your exam booklet.
The
exam is open-book and open-notes. If you
have any questions at all, then ask the proctor to help you. Do not introduce any assumptions (beyond
those introduced in class) without consulting the proctor.
[42] 1. Consider a producer of oil that operates a plant extracting oil
from the ground. Due to anticipated
future increases in the price of oil, the producer is considering the opening
of a new plant in a region in which it is more difficult to extract oil because
it is deeper in the earth. Suppose the cost of building the new plant is the
same as the original plant but twice as much labor is required to produce any
level of output in the new plant than the original one. The price of oil at
which each of the plants can sell its output is the same.
Assuming that labor is the only variable input to production in the short run and the firm maximizes its profits, which of the following correctly describe the situation faced by the producer in the short run? Mark true for correct statements and false for incorrect ones.
_____1 At every level of output, the marginal cost of production will be half as great in the original plant as the new plant.
_____2. At every level of output, the average total cost of production will be twice as great in the new plant than the original plant.
_____3. If the producer did not open a new plant and wanted to double its output, it could do so by doubling the amount of labor it employed in its original plant.
_____4. If the price of oil were such that the producer produced a positive level of output in each plant, the producer would always produce more oil in its original plant than in the new plant.
_____5. If the price of oil started to fall, the producer would shut down the new plant before it shut down its original plant.
_____6. If the price of oil were such that the producer produced a positive level of output in each plant, the original plant would employ an amount of labor that was more than half the amount of labor employed in the new plant.
_____7. If the price of oil were such that the producer produced a positive level of output in each plant, the marginal cost of the marginal unit of output would be the same in the two plants.
_____8. If the price of oil were such that the producer produced a positive level of output in each plant, the amount of labor used to produce the marginal unit of output would be greater in the new plant than the original plant.
[33] 2. Consider experiment 3 concerning demand. Suppose that a technological breakthrough
occurred that greatly improved good Y.
Consequently, consumers needed only 60% as much of good Y as previously
to attain any particular level. For example,
if previously the combination of 1 unit of good X and 120 units of good Y
enabled them to attain level 1, then after the technological breakthrough 1
unit of good X and 72 units of good Y would enable them to attain level 1. Similarly, if previously 2 units of good X
and 90 units of good Y enabled them to attain level 1, then 2 units of good X
and 54 units of good Y would enable them to attain level 1 after the
technological breakthrough. Suppose all
other aspects of the experiment were the same, including the prices of good X
and Y and the budget in each round.
Which
of the following statements concerning this problem are correct? Mark true for
a correct statement and false for an incorrect one.
_____9. For the combinations
of good X and good Y defining level 1, the willingness to pay of consumers for
each unit of good X would be 60% as great as in the version of the experiment
conducted in class.
_____10. In every round the
consumer would choose a point on level 1 with seven or less units of good X.
_____11. In every round of the experiment, consumers would purchase a combination of good X and good Y from among the points defining level 1 with a greater number of units of good X than they purchased in the version of the experiment conducted in class.
_____12. In every round of the experiment, consumers would attain at least as high a level as they did in the version of the experiment conducted in class.
_____13. In every round, the willingness to pay for the marginal unit of good X purchased would be less than it was in the version of the experiment conducted in class.
_____14. In every round, the amount consumers had to pay for a unit of good X (in terms of the number of units of good Y they had to give up to get another unit of good X) would be 60% as much as on the version of the experiment conducted in class.
_____15. At every price of good X, the demand curve for good X at an income of $180 would lie to the left of the demand curve for good X at an income of $90.
[25] 3. In recent years both
Which
of the following statements concerning this situation are correct? Mark true for a correct statement and false
for an incorrect one.
_____16. The average annual
percentage growth in real GDP due to the growth in capital must have been
greater in
_____17. The average annual
percentage growth in real GDP due to technical change over the last ten years
was less than 1% in both
_____18. The average annual
percentage growth in real GDP due to technical change must have been greater in
_____19. The average annual
percentage growth in real GDP due to technical change was greater in the last
ten years in
_____20. The average annual
percentage growth in real GDP due to technical change was greater over the last
10 years in