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Unformatted text preview: Name: Section#: ECON 201 10/20/2003 Prof. Gordon Midterm I Multiple Choice Answer Sheet 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Each question counts one point unless otherwise stated (Total: 40 pts) 1) Which of the following does not reduce consumer surplus? a) Monopoly b) 10 cent increase in price of NY Times c) 10 cent reduction in price of NY Times d) 10 cent tax on NY Times e) Government price floor on wheat 2) The word “Gini” as used in the course is a) A measure of inflation b) A measure of unemployment c) A measure of monopoly d) A measure of inequality e) A measure of externalities 3) Chief executives’ pay as a ratio to factory workers in the U. S. is a) Double b) Five times c) 50 times d) 500 times e) 5000 times 4) The period between the expansion and recession in a business cycle is called the a) Peak b) Trough c) Top d) Valley e) Bottom 5) Inflation is to the cost of living as _________ is to the standard of living a) Human capital b) Entrepreneurship c) Economic growth d) Productivity e) Labor input 6) What explains the willingness of someone making $20 per hour to spend one hour trying to get a refund of 50 cents? a) No opportunity to make $20 per hour during leisure time b) Poor ability at mental arithmetic c) Psychic satisfaction d) Both (b) and (c) e) Both (a) and (c) 7) Inequality in the United States differs from other countries because a) The poor are unusually badly off b) The poor do unusually well c) The rich are unusually well off d) The rich do unusually badly e) Both (a) and (d) 8) The minimum wage causes a) Unemployment b) Inflation c) Slower economic growth d) Faster economic growth e) Not enough information to answer 9) (True/False) You find that two variables x and y are positively correlated. Then either x causes y or y causes x. 10) Consider following statements i. ii. iii. a) b) c) d) e) Technological change positively influences long-term economic growth Capital accumulation positively influences long-term economic growth Consuming more today positively influences long-term economic growth Which of the following statements is true? i only ii only iii only i and ii ii and iii 11) John and Helge are eating lunch together. Seeing that Helge has grapes, but no cookies, John offers to trade him some of his own cookies for some of Helge’s grapes. Helge responds by: a) Refusing the deal, as John would not propose deal unless he were confident he would be better off, thereby making Helge worse off. b) Considering the deal, reasoning that he really likes cookies, so he thinks it possible that they could both be better off as a result of such a deal (as John really likes grapes) 12) Is more saving always better for an economy? a) Yes, because more saving leads to faster economic growth. b) Not always, because more saving could mean serious sacrifices today. c) None of the above 13) (True/False) A preference for variety (or "diversity") is a possible justification for decreasing marginal benefits. 14) (True/False) One of the factors of production is the number of firms producing a good. 15) Positive statements are statements about a) the relationship between variables in a model b) what is c) what ought to be d) none of the above 16) Imagine an economy where only two goods, guns and butter, are produced using only labor as an input. The production of guns takes 10 hours. The production of butter takes 2 hours. There is a total of 100 man-hours available in the economy. What is the marginal cost of guns in units of butter in the economy? a) 10 b) 2 c) 5 d) 1/5 e) none of the above 17) (True/False) Imagine that the labor force doubles to 200 man-hours in the economy described above. Since gun production uses more labor than butter production, the marginal costs of guns measured in units of butter per gun decreases. 18) Suppose the price level in an economy doubles every 14 years. Assume that the inflation rate is constant. What is the approximate inflation rate of the economy? a) 2% b) .2% c) .02% d) 5% e) .05% 19) (True/False) In a competitive market, if one seller increases his supply the price will go down. 20) (True/False) The quantity demanded at a given price is always at least as great as the quantity bought at that given price. 21) (True/False) If goods A and B are complements and the price of good A remains the same while the price of B goes up then the law of demand says that the quantity demanded of good A is smaller. 22) (True/False) The lowest price at which someone is willing to sell one more unit of a good is greater or equal to the marginal cost of producing that unit. For questions 23-25 use the following graph showing the supply and demand of Tacos at Norris. Taco Supply and Demand
7 Supply 6 5 4 3 2 Demand 1 0 20 30 40 50 60 70 80 90 number o f t acos 23) Suppose that Norris decides to sell 15 more tacos at every price. In the new equilibrium, _____ tacos will be sold at ____ each. a) 50, $3 b) 40, $3.50 c) 60, $2.50 d) 40, $3 e) none of the above 24) Norris gets a brand new taco machine that makes it cheaper and easier to make tacos. Also, Burger King is shut down by the health inspector (burgers are a substitute for tacos). The equilibrium price for tacos will _________ and the equilibrium quantity of tacos will _________. a) increase, increase b) decrease, increase c) stay the same, increase d) stay the same, decrease e) not enough information 25) Which of the following could cause a shift to the right in the demand curve for tacos? a) the price of taco ingredients decreases b) more students decide to go to Norris for lunch each day c) a report is released saying that tacos are bad for you d) the price of salsa (a complement of tacos that is sold separately) goes up 26) If the price of purple hats goes up and, all other things being equal, the equilibrium quantity of purple scarves sold goes down, then purple hats and purple scarves are a) substitutes b) both inferior goods c) complements d) both more expensive 27) President’s Choice orange soda is an inferior good. If I get a raise, the number of cans of orange soda I will buy will a) increase b) decrease c) account for a larger portion of my spending d) not enough information 28) (True/False) If you observe that the equilibrium price in a competitive market has gone down and the equilibrium quantity has gone up, then the supply curve must have shifted. 29) Which of the following violates the law of supply? a) people demand fewer bananas if the price goes down b) firms produce fewer bananas if banana worker wages go up c) a shift of the banana demand curve to the right causes the equilibrium banana price to drop d) bananas are an inferior good e) none of the above Short Answer (points in parenthesis in each part; answer on THIS page) Suppose that Sorinland has the PPF implied by the following: Apples (A) F-15’s (F) 30) (1 pt.) this graph a) has an increasing slope a 25 0 b) reflects the preferences of our firm’s customers f b 24 1 diversity c 21 2 c) is bowed outward d 16 3 d) exhibits the positive relationship between M and e 9 4 f 0 5 answer: _______________ 31) (3 pts.) The Prime Minister of Sorinland needs to know the opportunity costs of various changes in apple produ he is considering. Fill in the rest of the chart below (express your units in F-15's per apple): from a b c d e to b c d e f Opp. Cost in F15's/apple Johnny P., a citizen of Sorinland consumes apples and F-15's. Suppose that this marginal benefit and marginal cos curves (in terms of F-15's) are given by
MC = 6 F MB = 14 - F 32) (2 pts.) If Johnny P. is consuming F-15's and apples efficiently, how many F-15's will he consume? Number of F-15's: Suppose that Johnny P. has a PPF that can be described by the equation
A = 300 - 3F 2 33) (1 pts.) Find the quantity of Apples that Johnny P. will consume in his efficient allocation. (If it bothers you th Johnny P. has access to more apples than the entire nation of Sorinland, think about how much more it bothers the citizens of Sorinland!) Number of Apples: ...
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This note was uploaded on 09/04/2010 for the course ECON 201 taught by Professor Witte during the Spring '08 term at Northwestern.
- Spring '08