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.
[47] 1.
Consider the fifth market experiment concerning perfect
competition. Suppose that in round 2 of
the experiment, buyers were told that the experimenter would help them make
purchases. If they paid a price for a
unit greater than $.33, then the experimenter would pay $.33 and the buyer
would be responsible to pay the rest of the price of the unit. Buyers could buy a unit as long as their
share of the purchase price was less than or equal to the redemption value of
the unit. All other aspects of the second round of the experiment would have
been the same, including buyers and sellers receiving a commission of $.05 per
unit beginning with the fourth unit transacted.
Assume there were 40 sellers and 24 buyers. Which of
the following correctly describe round
two of the experiment under these circumstances according to the model
of perfect competition? Mark true if
a statement correctly predicts an outcome in the second round and false
otherwise.
_____1. The demand curve of
buyers would have been the same as in round 2 of the version of the experiment
conducted in class.
_____2. The price of
transactions would have equaled $.69.
_____3. The total quantity transacted
would have been 50% greater than in round 2 of the version of the experiment
conducted in class.
_____4. Less sellers would
have exited the market between rounds 1 and 2 than in the version of the
experiment conducted in class.
_____5. Each seller that
remained in the market (i.e., sold output in round 2) would have sold the same
number of units of output as in round 2 of the version of the experiment
conducted in class.
_____6. Each buyer would
have purchased 50% more units of output than in round 2 of the version of the
experiment conducted in class
_____7. Ignoring the
commission, sellers would have earned the same amount of profit as they earned
in round 2 of the version of the experiment conducted in class.
_____8. Including the
commission, buyers would have earned $1.32 more profit than in round 2 of the
version of the experiment conducted in class
_____9. The percentage of
sellers exiting the market from round one to two would have been 10%.
[34] 2. Congress has been striving to make new homes
more affordable to
_____10.
The market demand for new homes will increase by 1 million at every price.
_____11.
In the short run, the market supply of new homes will increase by 1 million at
every price.
_____12.
In the short run, the number of new homes sold will rise, but by less than 1
million.
_____13.
In the short run new home producers
will earn negative economic profits.
_____14.
In the long run the quantity of new homes purchased will increase by 1 million.
_____15.
In the long run the price of new homes will be unchanged.
_____16.
In the long run some producers of new homes will exit the market.
[19] 3. The recent recession has hit especially hard individuals that
did not have a job when the recession began in 2008. Included in this group are new graduates from
high school and college that entered the job market in the last two years. It
is predicted that the effects of the recession on these recent graduates will
persist for ten years in total, causing new graduates from 2008 through 2019 to
earn significantly less than they otherwise would have were it not for the recession. Assume that all other individuals that had
jobs prior to the recession were not affected by the recession and have
continued to earn the same amount they would have if the recession had not
occurred. Assume also that on average
new graduates from high school and college are 20 years old and all individuals
that had jobs when the recession began were older than 20. Which of the following are predicable effects
of the recession? Mark true for a correct prediction and false for an incorrect
one.
_____17. The suicide rate of
men of all ages will be greater in the period 2008-2019 than it would have been
without the recession.
_____18. The fertility rate
in the decade 2028-2037 will be higher than it would have been without the
recession.
_____19. The participation
rate of women aged 18 to 25 in the decade 2008-2019 will be higher than it
would have been without the recession.
_____20. The suicide rate of men over 55 will be greater in the decade 2028-2037 than it would have been without the recession.