Midterm03 - Professor McClelland Monday Econ 102 Midterm...

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Professor McClelland Monday, October 27, 2003 Econ 102 Midterm Exam Note: Total time – 50 minutes Answer both Part A and Part B Part A and Part B are of equal value USE TWO EXAM BOOKS, ONE FOR PART A AND THE OTHER FOR PART B. ON EACH EXAM BOOK PRINT YOUR NAME AND YOUR TA'S NAME. Part A (25 minutes) Justify, qualify, or repudiate EACH of the following. BE BRIEF . (1) Any economic good created this year by factors of production located in America will end up being counted as part of this year’s American Gross Domestic Product (GDP). (2) The conventional economics textbook claim that a society must choose between “guns or butter” is not always true. Sometimes the supply of military goods (guns) can be increased without decreasing the supply of civilian goods (butter). (3) In any economic sector (such as agriculture) the law of diminishing returns does not apply as long as technology in that sector is rapidly improving. (4) If belts and pants are close complements and the price of pants increases sharply, that will shift the demand curve for belts to the right. (Use a supply-and-demand diagram to explain your answer.)
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