Practice Final Exam
The practice final exam will be out of 120 points. You have 120 minutes to
complete the exam. You may use a scientific calculator and scratch paper.
Notes are not permitted on this exam.
The first section has 10 True/False questions that are worth 2 points
each, for a total of 20 points.
The second section has 5 multiple choice questions that are worth 2
points each, for a total of 10 points.
The third section has 8 short answer problems to solve that are
worth a total of 90 points.
When writing out a formula use the "carrot" button (^) for exponents with
parenthesis surrounding the base and exponent. For example U=(X^2)
(Y^3). When writing out the formula, only use capital letters to represent a
variable-eg use X, Y, and Z.
For all short answer questions, please bold your answers at the top. Label
which part of the answer your work represents.
Example of a short answer question: Assume X+Y=4.
a) If X=2, what is the value of Y?
b) If instead, X=3, what is the value of Y?
__________________________________________________
a) Y=2
b) Y=1
a) 2+Y=4 => Y=4-2 =>Y=2
b) 3+Y=4 => Y=4-3 => Y=1
, True/False (20 Points)
1. In the short-run, the levels of both labor and capital are fixed.
2. All taxes distort markets.
3. If a player has a dominant strategy, then they will also have a dominated strategy.
4. Utilitarian social welfare functions are an extreme form of egalitarianism.
5. Someone who is risk-neutral will always have a certainty equivalent equal to zero.
6. Externalities are always negative.
7. The lemons problem describes a market failure.
8. When supply is relatively more elastic, suppliers will experience more tax burden.
9. Firms always shut-down in the short-run when price is less than the profit maximizing
average total cost.
10. It is difficult to maintain a cartel in the short-run when there are two firms in a market
and both firms are forward looking.
Multiple Choice (10 Points)
1. Which of the following is not necessary for Pareto Efficiency?
a. Exchange efficiency
b. Output efficiency
c. Input efficiency
d. Resource efficiency
2. A coal plant is built next to a small town, and coal dust blows into the small town.
The residents of the town pay the coal company to install better filters into the
plant. This is an example of :
a. Tradeable permits.
b. The Coase theorem.
c. Pigouvian tax.
d. The Lemons problem.
3. Assume the demand function for paper towels is given by Q = 50 – 2P + 0.5I,
where P is the price of waffles and I is a consumer's income. If the price of
waffles is $10 and their income is $20. What type of good is paper towells?
a. Necessity
b. Inferior
c. Luxury
d. Ordinary
The practice final exam will be out of 120 points. You have 120 minutes to
complete the exam. You may use a scientific calculator and scratch paper.
Notes are not permitted on this exam.
The first section has 10 True/False questions that are worth 2 points
each, for a total of 20 points.
The second section has 5 multiple choice questions that are worth 2
points each, for a total of 10 points.
The third section has 8 short answer problems to solve that are
worth a total of 90 points.
When writing out a formula use the "carrot" button (^) for exponents with
parenthesis surrounding the base and exponent. For example U=(X^2)
(Y^3). When writing out the formula, only use capital letters to represent a
variable-eg use X, Y, and Z.
For all short answer questions, please bold your answers at the top. Label
which part of the answer your work represents.
Example of a short answer question: Assume X+Y=4.
a) If X=2, what is the value of Y?
b) If instead, X=3, what is the value of Y?
__________________________________________________
a) Y=2
b) Y=1
a) 2+Y=4 => Y=4-2 =>Y=2
b) 3+Y=4 => Y=4-3 => Y=1
, True/False (20 Points)
1. In the short-run, the levels of both labor and capital are fixed.
2. All taxes distort markets.
3. If a player has a dominant strategy, then they will also have a dominated strategy.
4. Utilitarian social welfare functions are an extreme form of egalitarianism.
5. Someone who is risk-neutral will always have a certainty equivalent equal to zero.
6. Externalities are always negative.
7. The lemons problem describes a market failure.
8. When supply is relatively more elastic, suppliers will experience more tax burden.
9. Firms always shut-down in the short-run when price is less than the profit maximizing
average total cost.
10. It is difficult to maintain a cartel in the short-run when there are two firms in a market
and both firms are forward looking.
Multiple Choice (10 Points)
1. Which of the following is not necessary for Pareto Efficiency?
a. Exchange efficiency
b. Output efficiency
c. Input efficiency
d. Resource efficiency
2. A coal plant is built next to a small town, and coal dust blows into the small town.
The residents of the town pay the coal company to install better filters into the
plant. This is an example of :
a. Tradeable permits.
b. The Coase theorem.
c. Pigouvian tax.
d. The Lemons problem.
3. Assume the demand function for paper towels is given by Q = 50 – 2P + 0.5I,
where P is the price of waffles and I is a consumer's income. If the price of
waffles is $10 and their income is $20. What type of good is paper towells?
a. Necessity
b. Inferior
c. Luxury
d. Ordinary
