test1_solns

# test1_solns - Department of Economics Prof Gustavo Indart...

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Unformatted text preview: Department of Economics Prof. Gustavo Indart University of Toronto November 7, 2003 ECO 100Y – L0301 INTRODUCTION TO ECONOMICS Midterm Test #1 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS : 1. The total time for this test is 50 minutes. 2. This exam consists of two parts. 3. This question booklet has 6 (six) pages. 4. Aids allowed: a simple calculator. 5. Use pen instead of pencil . DO NOT WRITE IN THIS SPACE P a r t I /20 Part II 1. /20 2 . /20 3 . /20 T O T A L /80 SOLUTIONS 2 PART I (20 marks) Instructions : Circle the most appropriate answer . Each question is worth 2.5 (two and one-half) marks. No deductions will be made for incorrect answers. 1. Assume that there are only two goods available in an economy: Food and Clothing. An average family buys 10 units of Food and 5 unit of Clothing. Prices in Year 1, the base year, are \$20 per unit of Food and \$40 per unit of Clothing. Now assume that in Year 2 prices change so that Food now costs \$25 and Clothing costs \$38. The consumer price index for Year 2 is: a) 100 b) 110 c) 120 d) 130 2. 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 3. The demand curve for shrimp would decrease if a) disposable income increases and shrimp is a normal good b) disposable income decreases and shrimp is an inferior good c) the price of white wine (a complementary good) decreases d) the price of salmon (a substitute good) decreases 4. 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) decrease in the price of hides and increase in demand for beef c) increase in the price of hides and decrease in supply of beef d) increase in the price of hides and increase in supply of beef 5. If the price elasticity of demand for tape decks is -0.5 (that is, 0.5 in absolute value), then a 20% increase in price will a) reduce quantity demanded by 40%...
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test1_solns - Department of Economics Prof Gustavo Indart...

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