midterm oct 8 - ECON1000B Principles of Microeconomics...

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ECON1000B: Principles of Microeconomics Midterm Test #1 : October 8, 2010 Time Allowed : 60 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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ECON1000B: Midterm Test #1, October 8, 2010 Part I: Place your answers (and work where necessary) in the space provided. Clearly label all axes, curves, and points. 1. Production Possibilities Curves (12 marks) Suppose that Canadian resources can produce the following Production Possibilities for Wheat and T-shirts. a) 1 mark: Wheat units intercept = 45,000 and T-shirts intercept = 60,000 1 mark: PPC curve is concave (could be points) d) i) 1 mark: no change in the T-shirts intercept 1 mark: Wheat intercept = 54,000 (1.2*45,000) Don’t worry about shape of PPC provided it only touches at Military intercept a) Sketch the country's production possibilities curve (PPCo) in the space above with Wheat units on the vertical axis. (2 marks) b) Why does this Production Possibility have the shape you gave it? Explain and illustrate with some actual numbers. (2 marks) 1 mark: (Concave) because opportunity cost is increasing 1 mark: recognition that wheat decreases by the same amount each time but T-shirts increase by less each time. c) The opportunity cost of increasing production of Wheat from 9,000 to 18,000 is 8,000 T-shirts (must have T-shirts ) ? (1 mark) d) The opportunity cost per unit of increasing production of T-shirts from 36,000 to 48,000 thousands is ___9,000/12,000 = 0.75 (Wheat but don’t worry about this )? (1 mark) e) What is the opportunity cost of changing output from 25,000 Wheat and 15,000 T-shirts to 27,000 Wheat and 36,000 T-shirts? (1 mark) 1 mark: = no opportunity cost f) How could this country produce 12,000 Wheat and 60,000 T-shirts if resources don’t increase? Explain briefly. (2 marks) 1 mark: = technological change 1 mark: technological change results in more output per unit of resource. h) Suppose that technological change increases the output of Wheat by 20% for each amount
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midterm oct 8 - ECON1000B Principles of Microeconomics...

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