Econ 202 Exam 1
Fall 2010
ECON 202: Exam 1, Fall 2010
Write your name on the back of each page. Use graphs to illustrate your answers whenever
possible. Extra paper is available should you need it.
Section 1: (5 points each) For each question in this section indicate whether the stated
change impacts supply, demand, or both. Use a graph to demonstrate the impact. Make sure
to label your graphs for clarity and to clearly state any assumptions you make. For all
questions in this section consider the market for chicken sandwiches in Suli. Consider each of
these separately (i.e. do not build on your answer from #1 when answering #2).
1. The population of Suli grows.
2. New ways of butchering are discovered that yield twice as much meat per chicken killed.
Econ 202 Exam 1
Fall 2010
3. The AUI-S Voice publicizes news about a bird flu epidemic that is predicted to kill 50% of
chickens worldwide in a year.
4. The AUI-S Voice publicizes news that chicken improves students’ ability to absorb
economics concepts.
Econ 202 Exam 1
Fall 2010
True or False? Explain. (2 points for correct answer, 8 points for your explanation)
5. The demand for a good is elastic if, when its price rises, the demand falls.
6. The cost of owning and operating a soccer field in a large city will most likely rise when
the population grows.
7. Last month you decided that, given the rate at which Suli is growing, a gas station would
be a good investment. You’ve invested 75,000,000 ID in landscaping and
construction (which was the original estimate for the total construction cost) when
the job foreman gives you the news that it will take another 10,000,000 ID to bring
the project to completion. Since you’ve already spent 75,000,000 ID it would be
foolish not to finish the project.
8. At the extreme, complements can become substitutes for one another.
Econ 202 Exam 1
Fall 2010
Short Answer/Essay:
9. (25 Points) The following table gives the demand schedule (price and quantity) and total
cost for a producer.
a.
Fill in the marginal revenue and marginal cost columns.
b.
Calculate the elasticity of demand between an output of 2 and 3 and also between 8
and 9 (moving from 2 to 3 and from 8 to 9). Specify whether demand is elastic or
inelastic at each point.
c.
Calculate the elasticity of supply between an output of 8 and 9 (moving from 8 to
9). Specify whether demand is elastic or inelastic at this point.
Quantity
Price (ID)
1
20000
2
19000
3
18000
4
17000
5
16000
6
15000
7
14000
8
12000
9
10000
10
8000
Marginal
Revenue
Total Cost
Marginal
Cost
Econ 202 Exam 1
Fall 2010
10. (35 points)
a. Label each of the two graphs below (hint: they are either supply or demand) for
chicken sandwiches in Suli.
b. Given that the price of a sandwich is 500 ID, highlight the total benefit and net benefit
for consumers and provide a numerical value for both.
c. Given that the price of a sandwich is 500 ID, highlight the total benefit and net benefit
for suppliers and provide a numerical value for both.
d. Calculate the aggregate net benefit to everyone in Sulaimani from chicken sandwiches
at a price of 500 ID.