Midterm2 Fall 2011 - Exam#2 Fall2011 Greenversion , form...

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1 Exam #2 Principles of Microeconomics – Econ1014 Fall 2011 Green version Fill out the front page of your scantron form as soon as you get the form. You will include your name, student ID and exam version on the scantron form. You will not be given time to do this after time is called, so make sure to do this before you start answering the exam questions. You will have 60 minutes to answer the following questions. Be sure to read directions carefully, use your exam copy to help you solve the problems and transfer all your answers to the scantron form. You will not be given time to fill out any scantron answers after time is called, so make sure to do this before time is called. You must stop writing and put down your pen or pencil immediately when you are told it is time to stop the exam. Failure to follow these directions is considered cheating and will result in a grade of zero for this exam. You are allowed to use only a pencil, eraser and ruler for the exam. Any other materials used or in sight are prohibited. In particular, you are NOT allowed the use of a calculator or any translation device. Failure to follow these directions is considered cheating and will result in a grade of zero for this exam.
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2 1. Which of the following statements about free trade is true? 1. Free trade allows countries to increase their consumption possibilities without increasing their production possibilities. 2. Free trade allows countries to increase their consumption possibilities by increasing their production possibilities. 3. Free trade allows countries to increase their production possibilities but not their consumption possibilities. 4. Free trade allows countries to produce closer to their Production Possibilities Frontier. 5. Free trade allows countries to produce on their Production Possibilities Frontier. 2. Which of the following is a reason why minimum wage legislation may not be very effective at reducing poverty in the US? 1. Minimum wage legislation is a price floor and, if it is binding, it will result in job loss for unskilled workers. Workers without jobs cannot earn much income. 2. Most minimum wage workers are high school drop outs. 3. The minimum wage is not very effective as a price ceiling. 4. All of the above. 5. None of the above. 3. Refer to Figure A: If the figure above represents two possible Production Possibility Frontiers for a single economy, which of the following would provide a possible example of an economy experiencing a shift like that from PPF1 to PPF2? 1. The United States during the Great Depression as the unemployment rate rose to 25%. 2. The United States during the Second World War as the country increased production to meet the increased demand for goods and services that occurred because of the need to provide for the war effort.
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