test1_solns

# test1_solns - Department of Economics University of Toronto...

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Page 1 of 15 Department of Economics Prof. Gustavo Indart University of Toronto June 22, 2006 ECO 100Y – L0201 INTRODUCTION TO ECONOMICS Midterm Test # 1 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS : 1. The total time for this test is 1 hour and 50 minutes. 2. This exam consists of three parts. 3. This question booklet has 15 (fifteen) pages. 4. Aids allowed: a simple calculator. 5. Write with pen instead of pencil. DO NOT WRITE IN THIS SPACE Part I /20 Part II 1. /6 2. /6 3. /6 4. /6 5. /6 Part III 1. /10 2. /12 3. /10 4. /5 5. /8 6. /5 TOTAL /100 SOLUTIONS

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Page 2 of 15 PART I (20 marks) Instructions : Enter your answer to each question in the table. 1 2 3 4 5 6 7 8 9 10 D A C B D E C E D C 1. A welder makes \$25 an hour and must take two hours off work (without pay) to go to the dentist for a filling. The dentist charges \$100. The opportunity cost of the welder’s trip to the dentist is A) \$50 B) \$100 C) \$125 D) \$150 E) \$175 2. If the legal beer-drinking age is raised from 19 to 21, the equilibrium price and quantity of beer will change such that A) price falls, quantity falls B) price rises, quantity falls C) price falls, quantity rises D) price rises, quantity rises E) no change in price or quantity occurs 3. The demand curve for apples will remain the same if there is a change in the A) hourly wage rate of workers B) price of pears C) price of apples D) households' knowledge that bananas are a better source of healthful nutrients than apples E) income of apple eaters 4. If potatoes are an inferior non-Giffen good, then an increase in the price of potatoes will cause A) an increase in the demand for potatoes B) a decrease in the quantity demanded of potatoes C) a decrease in the demand for potatoes D) an increase in the quantity demanded of potatoes E) a decrease in money income 5. Beef and hides are complements in production. An increase in demand for hides, ceteris paribus , would cause A) a decrease in the price of hides and decrease in demand for beef B) a decrease in the price of hides and increase in demand for beef C) an increase in the price of hides and decrease in supply of beef D) an increase in the price of hides and increase in supply of beef E) no change in the price of beef
Page 3 of 15 6. If per capita income decreases by 5 percent and household expenditures on fur coats decrease by 10 percent, one can conclude that the price elasticity of demand for fur coats is A) elastic B) inelastic C) unity D) positive E) not determinable from the information given 7. The price of apples at a local market rises from \$2.95 to \$3.05 per kilo, and as a result the quantity of apples that households purchase decreases from 5100 to 4900 kilos/week while the quantity of oranges that households purchase increases from 3950 to 4050 kilos/week. The cross-price elasticity is

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## This note was uploaded on 06/09/2010 for the course ECO ECO100 taught by Professor Inheart during the Spring '09 term at University of Toronto.

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test1_solns - Department of Economics University of Toronto...

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