Sample Exam 2 Questions

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

42.    Hamburger market.
a)    The demand curve will have "four steps" and the supply curve will have "four steps."
b)    P = $4 and Q = 8
c)    CS = $26 and PS = $18, therefore total social welfare = $44.
d)    The market had one too many trades, 9 instead of the predicted 8.  Consequently, the total profits generated by the market, $38, is less than the potential profit of $44.  In other words, there is a "missing" $6 of profits.  The missing profit can be seen by examining the trades that took place.  In trade #4, a seller with a $5 cost was able to make a trade, even though the market diagram suggests that they shouldn't be trading in equilibrium (only the $1 and $3 sellers should be trading).  On the buyer side, there is one $9 buyer missing from the trades.  Also, two $4 buyers made a trade when only one of them should have.  If the $9 buyer had been able to make a trade instead of one of the extra $4 buyers, then an extra $5 of profit could have been generated.  If the remaining $4 buyer was matched up with the $5 seller, then there would have been a loss of $1 in profit from that transaction.  Thus, the missing $6 of profit is due to the wrong buyer ($4 buyer took the place of the $9 buyer) and an extra low value buyer (the other $4 buyer) matching up with a high cost seller (the $5 seller).
e)    Qd = 4 and Qs = 14.  This results in a surplus of 10 hamburgers.