2304-13459 Econ Midterm Exam #1 Fall 2004
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Choose the one alternative that best completes the statement or answers the question. 1. The term "ceteris paribus" is a synonym for A) quantity demanded. B) quantity supplied. C) perfect competition. D) other things equal. E) small changes. 2. Unlike inferior goods, in the case of normal goods A) an increase in price will decrease quantity demanded. B) an increase in income will shift the demand curve to the right. C) an increase in price will not affect quantity demanded. D) an increase in price will increase quantity demanded. E) an increase in income will shift the demand curve to the left. 3. Opportunity cost is best defined as A) the highest-valued alternative that is sacrificed in making a choice. B) how much money is paid for something. C) all the alternatives that are sacrificed in making a choice. D) zero, when resources are used efficiently. 4. If there is a shortage of oil on the world market, then A) at the current price, the quantity demanded exceeds the quantity supplied. B) the equilibrium quantity is being produced and consumed. C) the quantity supplied equals the quantity demanded. D) at the current price, the quantity supplied exceeds the quantity demanded. E) oil is no longer scarce. 5. Where the demand curve intersects the supply curve A) there is no shortage of the good. B) consumers are willing to buy what sellers are willing to sell. C) the price will neither rise nor fall until something else changes. D) the price and quantity are in equilibrium. E) All of the above. 6. Beer and pizza are complements if A) the demand for pizza increases when the price of beer falls. B) the demand curves of both goods shift whenever their respective supply curves shift. C) the supply of pizza increases when the price of beer rises. D) the demand for pizza increases when the price of beer rises. E) the demand for pizza and beer rise and fall together. 7. A decrease in the quantity demanded of a product occurs whenever A) B) C) D) E) the price of a complement for the product falls. income increases. the price of a substitute for the product rises. the price of the product rises. the price of the product falls.
For questions 8-13, consider this PPF diagram. (The PPF is the curved line through points B and C.)
8. From this diagram, we can see A) the maximum production of oranges, given a certain amount of production of apples. B) the maximum production of apples, given a certain amount of production of oranges. C) that choosing to produce apples often implies sacrificing oranges. D) how the opportunity cost of apples changes as more apples are grown. E) All of the above. 9. The economic reason that the PPF is bowed out in this diagram is A) that society has to choose. B) the law of increasing costs. C) that there are opportunity costs of foregone apples involved in increasing the production of oranges. D) scarcity. E) All of the above. 10. Which of the following is an unattainable combination of apples and oranges? A) A B) B C) C D) D 11. Suppose the economy is currently at point A. Then, A) the economy is efficient because no more apples can be produced without losing some oranges. B) this is impossible because A is not an attainable combination. C) the economy is inefficient because at point C, more apples and more oranges are being produced. D) the economy is inefficient because it's possible to produce more oranges without losing some apples. E) the opportunity cost of an additional apple is higher than at point B. 12. Suppose the economy is currently at point B. Then, the opportunity cost of an additional apple is A) higher than at point C. B) zero, because at point D, more apples are produced without giving up any oranges. C) lower than at point A. D) equal to the number of apples that can be produced by producing one fewer orange. E) impossible to determine, because we don't know how many dollars apples cost. 13. If the development of a new fertilizer makes apple growing more productive, then A) the PPF might move inward so that A becomes efficient. B) the PPF might move outward so that D becomes attainable. C) the PPF will not change, since opportunity costs haven't changed. D) the PPF might move inward so that A becomes unattainable. E) the PPF might move inward so that B becomes inefficient.
14. An increase in demand, ceteris paribus, will usually cause A) a higher quantity and a lower price. B) a decrease in supply. C) a lower quantity and a lower price. D) a lower quantity and a higher price. E) a higher quantity and a higher price. 15. Scarcity exists because of A) unlimited wants. B) limited resources. C) the capitalist system. D) the combination of (a) and (b). E) comparative advantage. 16. Along a production-possibilities frontier the opportunity cost is A) the sacrifice of one good required to produce one more unit of another good. B) how much money it costs to produce one more of each good. C) zero. D) the total dollar amount of each good produced. E) the total quantity (in units) of each good produced. 17. Suppose wine and beer are substitutes. When the price of wine increases, A) the supply of beer will rise. B) the demand for beer will fall. C) the price of beer will rise. D) the price of beer will fall. 18. New scientific evidence that indicates regular exercise improves resistance to the common cold and heart disease should _____ the equilibrium price and _____ the equilibrium quantity of health club memberships. A) increase; decrease B) increase; increase C) decrease; decrease D) decrease; increase 19. Suppose the demand for gasoline increases because cars become less energy-efficient, and the supply decreases because OPEC cuts its oil production. What will happen to the equilibrium price of gasoline? A) it will increase. B) it will decrease. C) it will first then increase, decrease. D) it might either increase or decrease--it's impossible to tell from the information given. 20. In this situation, what will happen to the equilibrium quantity of gasoline? A) it will increase. B) it will decrease. C) it will first decrease, then increase. D) it might either increase or decrease--it's impossible to tell from the information given. 21. In this situation, the demand for gasoline-powered lawn mowers will _________, and their equilibrium price will __________ . (Assume that gasoline and gasoline-powered lawn mowers are complements, and that the supply of gasoline-powered lawn mowers is unaffected.) A) increase; increase. B) increase; decrease. C) decrease; increase. D) decrease; decrease. E) It's impossible to tell from the information given.
22. Betty and Ann live on a desert island. With a day's labor, Ann can produce 6 fish or 3 coconuts; Betty can produce 4 fish or 1 coconut. Betty's opportunity cost of producing 1 coconut is A) 1/4 fish. B) 4 fish. C) 1 fish. D) 2 fish. E) 0 fish. 23. In this same situation, Ann's opportunity cost of producing 1 coconut is A) 6 fish. B) 1/6 fish. C) 2 fish. D) 1/3 fish. E) 3 fish. 24. In this same situation, Ann has A) absolute advantage in producing coconuts, and Betty has absolute advantage in producing fish. B) comparative advantage in producing both coconuts and fish. C) comparative advantage in producing coconuts, and Betty has comparative advantage in producing fish. D) absolute advantage in producing both coconuts and fish. E) comparative advantage in producing coconuts, and no one has comparative advantage in producing fish. 25. In this same situation, Ann should A) produce both coconuts and fish for herself. B) produce neither good for herself. C) specialize in coconuts, and trade coconuts to Betty for fish. D) specialize in fish, and trade fish to Betty for coconuts. 26. If Betty and Ann trade, then one possible price for a coconut is A) 1/6 fish. B) 1/3 fish. C) 1 fish. D) 3 fish. E) 6 fish.
For questions 27-29, suppose that the demand and supply for basketball tickets are as given in the schedules below. Price ($) Quantity Demanded Quantity Supplied 10 28,000 16,000 15 24,000 16,000 20 20,000 16,000 25 16,000 16,000 30 12,000 16,000 27. As the price of tickets goes up, the quantity demanded A) increases. B) decreases. C) stays the same. 28. The equilibrium price and quantity in this market are A) $15 and 24,000 tickets. B) $15 and 16,000 tickets. C) $20 and 20,000 tickets. D) $25 and 16,000 tickets. E) $30 and 12,000 tickets. 29. Suppose that the team decides to hold its ticket price down, and charge fans only $10 per ticket. The result of this policy will be A) excess demand of 12,000 tickets. B) excess supply of 16,000 tickets. C) equilibrium at a new price of $10. D) equilibrium at the original equilibrium price. E) It is impossible to know, without knowing how much demand increases.
30. The supply curve of wheat is upward-sloping because higher prices A) are required to induce farmers to supply more because of the law of increasing costs. B) induce people to buy less wheat. C) reduce the demand for wheat. D) induce people to buy substitutes such as corn and rice. E) negate improvements in farming technology. 31. An increase in the number of firms selling tacos will cause, ceteris paribus, A) an increase in the equilibrium price of tacos. B) a decrease in the equilibrium quantity of tacos. C) a decrease in quantity demanded. D) an increase in quantity demanded. E) an increase in demand. 32. Some...