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# Midterm 1 Sample 2 Answers - Scarborough College University...

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Scarborough College, University of Toronto ECMA01F Midterm Test #1 : Sample2Answers Time Allowed : 50 Minutes This total marks in this test are 50. The test is divided into two parts: Part I - problem format - is worth 40 marks (80% of the total mark of 50) Part II - multiple choice- is worth 10 marks (20% of the total mark of 50) (5 multiple choice questions worth 2 marks each) Show your work where applicable . YOU MUST USE PEN INSTEAD OF PENCIL Print your name and student number clearly on the front of the exam and on any loose pages. Name: _______________________________________ (Family Name) (Given Name) Student # : ______________________ There are 6 pages to the exam. - 1/6 -

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ECMA01F: Midterm Test #1: Sample #2 Answers Part I Place your answers (and work where necessary) in the space provided. Clearly label all axes, curves, and points. 1. Production Possibilities Curve (10 marks) Ontario, with only labour and capital as resources, has the following production possibilities for Buses and Cars. a) 1 mark: Diagram with Bus intercept = 45,000 and Car intercept = 125,000 1 mark: Concave (to origin) PPC b) 1 mark: no change in Bus intercept and new PPC concave to the origin 1 mark: increase in Car intercept to 135,000 a) Sketch the country's production possibilities curve (PPCo) in the space below the table with Buses on the vertical axis. (2 marks) b) The opportunity cost of increasing Car production from 65,000 to 95,000 units is 12,000 Buses (must say Buses) ? (1 mark) c) The opportunity cost of increasing Buses production from 30,000 to 40,000 units is 40,000 Cars ? (1 mark) d) What is the opportunity cost/unit of increasing Car production from 95,000 to 131,000 units? Show your work. (2 marks) 1 mark: Opportunity Cost for the option = 18,000 Buses 1 mark: Opportunity Cost/unit = 0.6 Buses from 18,000/30,000 e) What is the opportunity cost of increased output from 25,000 Buses and 65,000 Cars to 18,000 Buses and 95,000 Cars? (1 mark) 1 mark: OC = 7,000 Buses f) Suppose that technological change increases the output of Cars by 8% for each amount of resource but does not effect Bus production. i) Sketch (particularly the intercepts) in your above diagram the production possibilities curve (PPC 1 ) that results from this technological change. (2 marks) ii) What is the opportunity cost of increasing Bus output from 40,000 to 45,000 units after technological change raises Car output by 8%? (1 mark) 1 mark: 27,000 Cars from something like 1.08*25,000 - 2/6 - Buses 45,000 40,000 30,000 18,000 0 Cars 0 25,000 65,000 95,000 125,000
ECMA01F: Midterm Test #1: Sample #2 Answers 2. Demand and Supply (12 marks)

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Midterm 1 Sample 2 Answers - Scarborough College University...

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