pef07_sam_mid

# pef07_sam_mid - W1105.002 Principles of Economics Fall 2007...

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1 W1105.002 Principles of Economics Fall 2007 Sample Midterm This Exam is composed of two sections. Make sure you complete both. Student Name ______________________________ UNI ____________________________ Section 1: Multiple Choice Questions /20 Section 2: Definitions /12 Section 3: Exercises /38 Total /70

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2 Section 1 1. Which of the following statements is not correct? a. Trade allows for specialization. b. Trade has the potential to benefit all nations. c. Trade allows nations to consume outside of their production possibilities curves. d. Absolute advantage is the driving force of specialization. 2. Each day Shawn can produce 1000 donuts or 50 leaves of bread; in a day Sue can produce 600 donuts or 40 loaves of bread. Then a. Sue has a comparative advantage in the production of donuts. b. Shawn should specialize in the production of donuts. c. Shawn and Sue should both produce donuts and bread as both items are in demand. d. Shawn should produce both goods as he has an absolute advantage. . 3. Last year, Joan bought 50 pounds of hamburger when her household’s income was \$40,000. This year, her household income was only \$30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is a. positive, so Joan considers hamburger to be an inferior good. b. positive, so Joan considers hamburger to be a normal good and a necessity. c. negative, so Joan considers hamburger to be an inferior good. d. negative, so Joan considers hamburger to be a normal good, but not a necessity. 4. When the rental price of DVD movies is \$4, Denise rents five per month. When the price is \$3, she rents nine per month. Denise's demand for DVD rentals is a. elastic and her demand curve would be relatively flat. b. elastic and her demand curve would be relatively steep. c. inelastic and her demand curve would be relatively flat. d. inelastic and her demand curve would be relatively steep. 5. Which of the following is not a determinant of the demand for gasoline? a. the price of oil. b. the price of ethanol c. the price of gasoline d. the price of vehicles. 6. Ford Motor Company announces that it will offer \$3,000 rebates on new Mustangs starting next month. As a result of this information, today’s demand curve for Mustangs a. shifts to the right. b. shifts to the left. c. shifts either to the right or to the left, but we cannot determine the direction of the shift from the given information. d. will not shift; rather, the demand curve for Mustangs will shift to the right next month. 7. Relative to a situation in which liquor is not taxed, the imposition of a tax on liquor causes a. the equilibrium quantity of liquor demanded to decrease and the equilibrium quantity of liquor supplied to decrease.
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pef07_sam_mid - W1105.002 Principles of Economics Fall 2007...

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