Practice Exam - Summer 2007 Michigan State University...

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Michigan State University Principles of Microeconomics Summer 2007 First Midterm Examination Nicholas Sly There are 35 points on the exam. Choose the best answer for each question and mark it on your answer sheet. There is no penalty for guessing. Make sure your exam has 35 questions and 9 pages. You have 50 minutes to take the exam. No Calculators, Cellular phones or Notes allowed. 1. Which of the following is a question in positive economics? a. Should there be a tax on spaghetti of $2 per plate? b. Will social welfare be improved if we take $1,000 from Tom Izzo and give it to George Bush? c. If current revenues from tolls are not enough to maintain roadways, should we increase the tolls? d. Is the demand for spaghetti elastic or inelastic? 2. The diagram above shows two production possibilities curves for apples and pears, and a point Z. When XX is the production possibilities curve, Z is: a. inefficient, but attainable. b. efficient. c. unattainable. d. attainable for apples, but not pears. 3. Look at the diagram that accompanies question 2. Suppose there is a shift in the A reason for the shift may be that a. the amount of inputs increased. b. there was an improvement in the technology of production of pears. c. firms were wasting resources before, and then they became more efficient. d. none of the above would cause the change in the figure. 4. The diagram above shows the supply and demand curves for cherries. The shift in the supply curve could be caused by: a. an improvement in the technology of cherry production b. a tax on cherries Z Apples X X Y Pears
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c. an increase in incomes of consumers d. an increase in the price of cherries e. an increase in the price of apples, a substitute for cherries 5. Which of the following is a principal determinant of the market supply curve? a. consumer tastes and preferences b. the level of input prices c. the price elasticity of demand d. the number of buyers in the market e. all of the above 6. The Law of Demand means that a. at higher incomes more of normal goods will be demanded. b. the prices of substitutes and complements surely affect the amount of a good demanded. c. at higher incomes more inferior goods will be demanded. d. demand curves are negatively sloped. 7. If consumer demand for paperclips does not change but production costs for paper clips increase, then a. the supply curve will shift right b. Equilibrium price will rise and Equilibrium quantity will fall c. Equilibrium price and Equilibrium quantity will fall d. Equilibrium price will fall and Equilibrium quantity will rise e. Equilibrium price and Equilibrium quantity will rise 8. Two goods are substitutes if: a. Neither of them is inferior.
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Practice Exam - Summer 2007 Michigan State University...

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