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): 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? Page 1
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4. Which would NOT cause the supply curve for the market of good X to shift? 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.
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