2010Midterm1Fall09A_answers

2010Midterm1Fall09A_answers - Name: _ Date: _ Version A...

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Page 1 Name: __________________________ Date: _____________ Version A with answers 1. When the San Francisco city manager faces a complaint that the city council chamber podium is not accessible to individuals with disabilities, he responds that the one million dollar improvement will not happen because “that money could be spent building 70 curb ramps.” This statement best represents the economic concept of: A) resources are scarce. B) the real cost of something is what you must give up to get it. C) “how much?” is a decision at the margin. D) when markets don't achieve efficiency, government intervention can improve society's welfare. Use the following to answer question 2: Figure: Supply, Demand, and Equilibrium 2. (Figure: Supply, Demand, and Equilibrium) In the figure, there will be an excess demand of the good at a price of P 3 . A) True B) False
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Page 2 Use the following to answer question 3: 3. (Table: Wages and Hours Worked) The table shows data on wages per hour and number of hours worked. Graphing the relationship with wages on the vertical axis and hours worked on the horizontal axis, the slope between point D and point E is: A) 0.5. B) 5. C) 45. D) 2. 4. “In 2008, air travel decreased substantially despite significant reductions in ticket prices.” If this information is correct, then it indicates that the law of demand did not apply to air travel in 2008. A) True B) False Answer: is False because lot of other things were going on a well (e.g. declining income) causing the downward-sloping demand curve to shift to the left. 5. If an economy has used up all opportunities to make someone better off (without making someone else worse off) then it has achieved ________. A) equity B) opportunity cost C) marginal optimality D) efficiency Use the following to answer question 6:
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6. (Table: Production Possibilities Schedule I) If the economy produces 10 units of capital goods per period, it also can produce at most ________ units of consumer goods per period. A) 5 B) 4 C) 3 D) 2 7. In one day, Kessy can bake 10 cookies or mix 15 glasses of lemonade. His friend, Ava, can make 10 cookies or 10 glasses of lemonade. His other friend, Ian, can make 10 cookies or 20 glasses of lemonade. Who has the lowest opportunity cost in cookie production? A) Kessy B) Ava C) Ian D) Kessy and Ava have the same opportunity cost in cookie production. 8. In 2003, Congress passed a tax cut. Since taxes were reduced, the country did not incur any opportunity cost from this decision. A) True B) False 9. Market failure occurs when the pursuit of self-interest leads to bad results. A) True B) False The question can be re-phrased as if A then B, where A= self interest leads to bad results, and B= market failure. The pursuit of self interest could result in a bad but that bad might or might not be inefficiency, it could be bad only in a unfair sense of the word. So, strictly speaking, the answer is False. That said, if “bad” is defined as inefficient, the answer is True. We accepted both answers.
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2010Midterm1Fall09A_answers - Name: _ Date: _ Version A...

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