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Exam 1 F04 Solutions

Exam 1 F04 Solutions - DARTMOUTH COLLEGE ECONOMICS 1 PRICE...

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D ARTMOUTH C OLLEGE P ROFESSOR J ESSE G IUMMO E CONOMICS 1: P RICE S YSTEM A NSWERS : M IDTERM E XAM #1 F ALL 2004 Instructions : You will have 65 minutes to complete this exam. This exam is worth 100 points. There are 10 multiple-choice questions worth a total of 20 points, and 3 essay questions worth a total of 80 points. P ART I: 10 M ULTIPLE -C HOICE Q UESTIONS (20 POINTS ) 1) Economists use the ceteris paribus assumption to express the assumption, A) “All else equal” B) “Everything effects everything else” C) “Scarcity is a fact of life” D) “There is no such thing a free lunch” Answer A 2) You own the Wizard of Oz on DVD. The opportunity cost of watching the Wizard of Oz for the second time is A) Is zero B) Is one-half the cost of the DVD, as this is the second time you have watched it. C) Is the value of the alternative use of the time you spend watching the DVD. D) Can not be calculated. Answer C 3) Periods of less than full employment correspond to A) Points outside the PPF B) Points inside the PPF C) Points on the PPF D) Either points inside or outside the PPF Answer B 4) For an economy to produce beyond its current PPF, the economy would need to Answer D 5) According to the law of demand, as price rises, ceteris paribus,

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D ARTMOUTH C OLLEGE P ROFESSOR J ESSE G IUMMO E CONOMICS 1: P RICE S YSTEM 6) Suppose the demand for newspapers goes up when the price of coffee goes down. We can say the two goods are 7) If the price of pizza sauce increases, there will be _______ of pizza. A) an increase in the supply of B) a decrease in the supply of C) an increase in the quantity supplied D) a decrease in the quantity supplied. Answer B 8) When there is excess supply in an unregulated market, the tendency is for Answer B 9) Suppose that video game cartridges are normal goods. If the income of video game players increases, you predict in the market for video games Answer B
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