Mid1a_201_W01

Mid1a_201_W01 - Cal Poly Pomona EC 201 Bruce Brown Midterm...

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Cal Poly Pomona, EC 201 - Bruce Brown NAME_______________________________ Midterm I, February 1, 2001 (please clearly print your family name with all capital letters) - You may write on the exam. It will be returned with the scantron forms. - You may use an ordinary language dictionary (not electronic or economics dictionary). Use of a calculator is also allowed, but can not be shared by students. You may leave when finished. - Hand in both this exam and your scantron form when you are done! Part I - (10 points) -- Answer the following two questions on the “essay” portion of your scantron form 886. 1) a) Draw a Production Possibilities Frontier (PPF) for an economy with one type of productive resource, workers. Assume the economy has 1000 workers, all identical, and that any one worker can produce either one (1) gun or four (4) butter per period. Place butter on the horizontal axis. Label the values of the horizontal and vertical intercepts (where the PPF crosses the axes), as well as the slope. b) Show what happens to the PPF if 200 additional workers (identical to the original workers) enter the labor force – so that afterward the economy has 1200 workers, each of whom could produce either one (1) gun or four (4) butter per period. Again label the values of the horizontal and vertical intercepts (where the PPC crosses the axes), as well as the slope. c) What was the opportunity cost of one (1) butter in this economy before, and after the increase in number of workers. Did it change? – Why or why not? 2) Draw two (2) standard supply and demand diagrams for apples. Indicate the equilibrium price P * and equilibrium quantity Q * in each . a) On the first diagram, show the effect of an exogenous increase in the price of pears – a substitute good for apples (realize you have drawn the S and D for apples , not pears). Show any effect this change in the price of pears has on the apple market. Indicate any effect on the price and quantity transacted of apples. b) On the second diagram, assume the equilibrium price, P * is 50 cents per apple. Show the effect of a law which makes it illegal to sell apples for more than 40 cents per apple. Is this a price floor or ceiling? Is it binding or non-binding? Does a shortage or surplus result? If so, clearly show the surplus or shortage on your graph. Part II - (30 points) - - Clearly fill in the bubble on your scantron form which corresponds to the best answer 1. Consider just the demand curve (ignore the supply curve). If the price of good x falls, holding all else constant (ceteris paribus): a) The demand curve will shift leftward b) The demand curve will shift rightward c) The demand curve will become flatter d) Consumers will demand more of this good – a fact shown by moving down and to the right along a fixed, stationary demand curve. 2. Which of the following is NOT conceptually held constant along a demand curve for good x?
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Mid1a_201_W01 - Cal Poly Pomona EC 201 Bruce Brown Midterm...

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