Download Introduction to Economics Simulation - Test I | ECON 113 and more Exams Economics in PDF only on Docsity!
Econ 113, Spring 2007 Neatly print your name.............................. March 7, 2007 Exam 1a, 100 points Neatly print your ID number...................
The exam ends at 9:50 a.m.; there are 10 problems. Points for each problem are given in parentheses with the problem number. Write or print neatly and legibly: If I can’t read it, it can’t be correct. Make straight lines straight; points will be deducted for lines that are not straight.
- (3 points) Suppose that the following Supply Table applies for a given market.
Supply Table
Price Amount
Range Supplied
P < $5 0
$5 < P < $11 9
P > $11 26
Use Figure 1 below to graph the supply curve. Note: Use the tick marks and make straight lines straight!
Quantity
5 10 15 20 25 30 35
Price
$ 4
$ 8
$
$
Figure 1: Competitive Supply
- (25 points) Let the demand and supply for an apple market be given by the demand and supply curves in figure 2 below.
Supply
N
Demand
N
I
3 6 9 12 15 18 21 24 27 30 Bushels of Apples
$ 3
$ 6
$ 9
$
$
$
$
$
$
$
$
Price
Figure 2: Supply and Demand Before a Tax on Apples
Use figure 2 for problem 2, continuing to the next page...
- (7 points) Suppose that the following table gives the experimental outcome for a particular market.
Transaction Data
Price Seller Cost Buyer Value
(a) From the above data, complete the following table. Note: Don’t forget to use the “$” when appropriate.
Average (Mean) Price
Number of Transactions
Total Profits of Buyers
Total Profits of Sellers
Total Profits of All Buyers and Sellers
(b) In the Transaction Data table at the top, circle the Buyer Value of any buyer whose profit was negative. If no buyers had a negative profit, circle this: [ None ]
(c) In the Transaction Data table at the top, circle the Seller Cost of any seller whose profit was negative. If no sellers had a negative profit, circle this: [ None ]
- (5 points) Suppose that the following data for the Experimental Outcome and Competitive Prediction apply for a particular market.
Experimental Competitive
Outcome Prediction
Average Price $32.00 $24.
Number of Transactions 15 20
Total Profits of All Buyers $ 75 $
Total Profits of All Sellers $100 $
Determine the “market efficiency” for the Experimental Outcome and enter the result in the box below.
Market efficiency of the Experimental Outcome is %.
- (20 points) Suppose in an apple market there are two different types of sellers: one type of seller has sunk costs of $ 5 and there are 20 such sellers; the other type of seller has sunk costs of $20 and there are 5 of these sellers. The sellers have no other costs. Suppliers will supply only zero or one bushel of apples. In figure 3 below, draw the competitive supply curve for this market.
Distribution of Types of Sellers Sunk Cost Number in Market $ 5 20 $20 5
Bushels of Apples
5 10 15 20 25 30 35 40
Price
$ 5
$
$
$
$
Figure 3: Competitive Supply
- (12 points) Suppose that the suppliers of an illegal drug have a Seller Cost of $ for each unit of drugs that they produce. Suppliers can produce up to five (5) units of drugs. When there is police intervention in the market, the suppliers must pay a $11 fine for each unit of drugs that is intercepted or seized.
(a) If the police intercept one-fifth of a supplier’s transactions, what is the mini- mum price that a supplier must charge on any successful sales in order to avoid a negative profit?
(b) If the police intercept three-fifths of a supplier’s transactions, what is the min- imum price that a supplier must charge on any successful sales in order to avoid a negative profit?
- (12 points) In the “Prohibition” experiment, police intervention differs in Sessions 2 and 3. In Session 2, the intercepted drugs are destroyed; in Session 3, the intercepted drugs are resold by the police to the original buyer found by the supplier. According to competitive equilibrium theory, in comparison to the Session 2 conditions (confiscation and destruction), the effect of police reselling in Session 3 is to cause the competitive equilibrium:
(a) price paid by buyers to: [ fall / rise / remain the same ]; (b) number of transactions to: [ fall / rise / remain the same ]; (c) total amount of money spent on drugs to: [ fall / rise / remain the same ]; (d) total profits of suppliers to: [ fall / rise / remain the same ].
Circle one — but only one — choice for each part.
- (6 points) Suppose in a market there are 2 different types of buyers, as given in the following table:
Distribution of Demanders Buyer Number Value in Market $30 9 $ 5 23
Complete the following Demand Table using the same conventions and format used in the textbook and in class.
Demand Table Price Amount Range Demanded
- (6 points) Suppose in a market there are 2 different types of sellers, as given in the following table:
Distribution of Suppliers
Seller Number Cost in Market $ 5 4 $20 26
Complete the following Supply Table using the same conventions and format used in the textbook and in class.
Supply Table Price Amount Range Supplied
