ARE 201 Midterm: ARE 201 NCSU Exam2f07
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2
EQUATIONS YOU MAY NEED FOR THIS EXAM
Taxable Income = Gross Income - the larger of the Standard Deduction or Itemized Deduction
- the Value of Personal Exemptions
Disposable Income = Gross Income - Taxes Paid
Discretionary Income = Disposable Income - Family Living Expenditures
Depreciation = (Purchase price - salvage value) / years of useful life
Average Value or Average Value of Investment = (Purchase price + salvage value) / 2
Slope = change in Y / change in X, or change in P / change in Q, or RISE / RUN
Percent change = [(To - From)/ From] * 100
Percent change in Qd = [(Q1 - Q0) / Q0] * 100
Percent change in P = [(P1 - P0) / P0] * 100
Marginal revenue = change in total revenue / change in Quantity of control variable
Marginal cost = change in total cost / change in Quantity of control variable
Physical Efficiency = Units of Output / Units of Input
Economic Efficiency = Value of Output / Value of Input
= (Units of Output * Price of Output) / (Units of Input * Price of Input)
= PE * (Price of Output / Price of Input)
Change in Economic Efficiency = Change in the value of output / Change in the value of input
Average Relative Price in 1982-84 dollars = (Nominal Pricei / CPIi) X 100 Where i = year
EXPLANATION OF TERMINOLOGY USED
Graph = accurately scaled, precisely plotted, accurately drawn to scale, and labeled.
Rough sketch or illustrate = not scaled or precisely plotted, but completely labeled.
What “explain” means on one of my exams:
Webster's Collegiate Dictionary defines EXPLAIN as:
1. to make plain or understandable
2. to give the reason of or cause of
3. to show the logical development or relationships of
Webster's continues by enhancing the definition with the following statement:
"Explain implies a making plain or intelligible what is not immediately obvious or entirely known."
SHOW ALL YOUR WORK IN A NEAT AND ORGANIZED MANNER
3
Exam 2
ARE 201 Fall 2007
Answer the questions below to the best of your ability. Answer the questions on the test sheet.
Answer all parts of each numbered question. You must show all work to receive full credit for
your answers to numerical problems. The price associated with all parts of each question
(input) is provided so that you may make an informed management decision regarding the
production of this exam (output). Be thorough and complete in ALL your responses. Please
read and sign the Honor Pledge on the test sheet below or your exam will not be graded:
I have neither given or received unauthorized aid on this exam.
___________________________________ _________________________________
Student Name (print please) Student’s Signature
Circle the best, correct response for each multiple choice question below. Each multiple choice
question has an opportunity cost of 2 points.
1. What were the KEY words in the definition of economics as presented in class:
a) choices, scarcity, and time
b) normative and positive
c) capitalism, externality, organization
d) demand and supply
e) production, consumption, inventory
2. Goods are scarce because:
a) they sometimes have to be ordered
b) a person can never acquire "enough" goods and services at a price equal to zero
c) they are imported from other countries
d) we have all the resources we need to produce all the goods we want at zero price
e) none of the above
3. One of the functions of an economic system is to Provide for the Maintenance and Growth of
the System. An example of this function is as follows:
a) assembling the factors of production to produce a good or service
b) using prices to ration consumption
c) developing an asset replacement fund that utilizes the tax deduction for depreciation on
capital expenditures
d) Anti-Trust laws to prevent monopolies from taking advantage of consumers
e) none of the above
4. Consumer sovereignty refers to the following function of an economic system:
a) distributing resources, commodities, and proceeds from production
b) organizing the production process
c) providing for the maintenance and growth of the system
d) determining what commodities to produce and how much to produce
e) the rationing process or market system
Document Summary
Taxable income = gross income - the larger of the standard deduction or itemized deduction. = (units of output * price of output) / (units of input * price of input) = pe * (price of output / price of input) Disposable income = gross income - taxes paid. Discretionary income = disposable income - family living expenditures. Depreciation = (purchase price - salvage value) / years of useful life. Average value or average value of investment = (purchase price + salvage value) / 2. Slope = change in y / change in x, or change in p / change in q, or rise / run. Percent change = [(to - from)/ from] * 100. Percent change in qd = [(q1 - q0) / q0] * 100. Percent change in p = [(p1 - p0) / p0] * 100. Marginal revenue = change in total revenue / change in quantity of control variable.
