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 A) Waste less B) Reduce Inputs C) Be more efficient D) Increase the quality or quantity of its resource Answer D 5) According to the law of demand, as price rises, ceteris paribus, A) Demand increases. B) Demand decreases C) Quantity demanded decreases D) Quantity demanded increases Answer C

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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 A) Complements B) Substitutes C) Unrelated goods D) Perfect substitutes Answer A 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 A) price to rise. B) price to decrease C) quantity supplied to increase D) quantity demanded to decrease 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 A) Both equilibrium price and quantity fall B) Both equilibrium price and quantity will increase. C) Equilibrium price will increase and quantity will decrease. D) Equilibrium price will fall but quantity will increase. Answer B 10) In the article “Why Costs and Benefits Must Influence Health and Safety Choices”, the 90/10 phenomenon” refers to A) Over 90% of health care costs are incurred by less than 10% of the population. B) Over 90% of the risks a person incurs in there lifetime are caused by less than 10% of
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## This note was uploaded on 10/30/2008 for the course ECON 001 taught by Professor Zarnowski during the Spring '08 term at Dartmouth.

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

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