MIDTERM_WINTER

MIDTERM_WINTER - ECON 201-WINTER MIDTERM Instructor: Jeta...

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ECON 201-WINTER MIDTERM Instructor: Jeta Menkulasi Name: Date: 01/16/2007 MULTIPLE CHOICE (1.6 points): Choose the one alternative that best completes the statement or answers the question. 1. Greta starts using a new baking technique and she can now do twice as much of everything—in a single day Greta can now make 10 cakes or 8 pies, rather than the 5 cakes and 4 pies she could previously bake. We now know that: A) Greta's production possibilities frontier has shifted right, but her opportunity costs of making pies are unchanged. B) Greta's production possibilities frontier has shifted right, but her opportunity costs of making pies have decreased. C) Greta's production possibilities frontier has not changed, but her opportunity costs of making pies have increased. D) Greta's production possibilities frontier has not changed, but her opportunity costs of making pies have decreased. 2. If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibilities curve has a(n): A) zero slope. B) constant, negative slope. C) increasing, negative slope. D) decreasing, negative slope. 3. A recent news story reported that OPEC is expected to decrease the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of the many families driving and flying to vacation sites. What would be the combined effect of these two events on the summer market for gasoline? A) an increase in the price and the quantity B) an increase in the price and an unpredictable change in the quantity C) an unpredictable change in both the price and the quantity D) an unpredictable change in the price and a decrease in the quantity Page 1
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A) a change in technology B) a change in factor costs C) a change in the price of the good D) a change in suppliers' expectations of prices 5. When the price of gas goes up and the demand for tires goes down, this means tires and gas are: A) substitutes. B) complements. C) both expensive. D) both inexpensive. Use the following to answer questions 6-7: Exhibit: Real GDP Suppose that in year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. 6. (Exhibit: Real GDP) The growth rate of nominal GDP from year 1 to year 2 is: A) 10%. B) 7.8%. C) 19.7%. D) 8.8%. 7. (Exhibit: Real GDP) Using year 1 as the base year, the growth rate of real GDP from year 1 to year 2 is: A) 10%. B) 7.8%. C) 19.7%. D) 8.8%. Use the following to answer question 8: Exhibit: Price Index Suppose that in the base period a college student buys 20 gallons of gasoline at $2.00 per gallon, 2 CDs for $13 each, and 4 movie tickets for $7 each. In the next month, the price of gasoline is $2.25 per gallon, CDs cost $12.50 each, and the price of a movie ticket is $7.50. Page 2
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MIDTERM_WINTER - ECON 201-WINTER MIDTERM Instructor: Jeta...

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