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Final Exam--Answer Key for Practice Exam #1

Multiple choice answers

 1.c  6.b 11.c 16.d 21.b 26.a 31.d 36.e
 2.b  7.d 12.a 17.e 22.d 27.d 32.d 37.a
 3.d  8.d 13.c 18.c 23.b 28.b 33.e 38.d
 4.e  9.d 14.e 19.d 24.b 29.b 34.d 39.e
 5.b 10.e 15.c 20.b 25.a 30.a 35.a 40.a

Problem section

a.)  See the figure.

Image26.gif (14084 bytes)

    (i.)  x = 4; y = 3

    (ii.) x = 5; y = 6
          good x is "normal" and "necessary"
          good y is "normal" and "luxury"

    (iii.) x = 8; y = 3
           own-price elasticity of demand for x = -1
           cross elasticity of demand for y with respect to price of x = 0

b.)

Image27.gif (10708 bytes)

    (i.) when price of x is 6, market demand for x = 40
         when price of x is 3, market demand for x = 80
         See the figure.

    (ii.) See the figure.
           Competitive:     price = 3
                                    output = 80
                                    consumer surplus = 240
                                    profit = 0
                                    welfare = 240
           Monopoly:         price = 6
                                    output = 40
                                    consumer surplus = 60
                                    profit = 120
                                    welfare = 180
                                    deadweight loss = 60