Exam 1 - Econ 2103 — Principles of Microeconomics Exam 1...

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Unformatted text preview: Econ 2103 — Principles of Microeconomics Exam 1 — Spring 2011 1. A nation’s capacity to produce is limited by its finite endowment of Land and labor a. b. Capital and technology @ All of the above (1. None of the above, a nation’s capacity to produce is limitless Use the diagram below to answer the following questions. Books 100 O 25 50 75 100 Video Games 1. The diagram above represents a which gives the maximum combinations of output that a country can produce given its current endowment of resources and technology. La?» Production Possibilities Curve b. Consumption Opportunities Curve c. Demand Elasticity Curve (1. Indifference Curve 2. Opportunity cost is defined as and provides a measure of the value of what is given up to pursue some activity. In the diagram above, the opportunity cost of producing books is a. Value of all other alternatives foregone; more books Value of the next best alternative foregone; video game production foregone c Value of the next best alternative foregone; fewer books d Value of all other alternatives foregone; Video game production foregone 3. In the diagram above, the opportunity cost of each additional video game is approximately when moving from combination C to combination F. a. 50 books b. 10 books c. 5 books 2/5 ofabook 4. When moving from combination G to combination E, the opportunity cost of additional video games is approximately a. 2/5 ofa book b. 5 books 0 books (1. 3.2 books 5. On the diagram above, combination would be described as efficient, combination __ as inefficient, and combination as unattainable. a. C; I; I 11‘ G; H; D :3 D; E; H d. E; C; I Use the di_agrams below to answer the following questions. Books U.S. Books Canada 30 10 30 Video Games 20 Video Games 6. Canada has the absolute advantage in production, and the comparative advantage in production. a. Books; Video Games b. Books; Books Neither good; Video Games d. Video Games; Neither Good 7. If the two countries decided to specialize in the production of a single good and trade, would specialize in books, and would specialize in video games. a. Canada; U.S. U.S.; Canada c. Canada; Canada (1. The U.S. could not benefit from trade with Canada and would not engage in specialization 8. Ifthe U.S. and Canada decided to specialize in the production ofa single good and trade, which ofthe following prices would be acceptable to both countries? at 1 Book trades for 2 1/2 Video Games b. 1 Book trades for 1/2 Video Game (c? 1 Video Game trades for 2/3 Book 71. 1 Video Game trades for 1 1/2 Books 9. Suppose the U.S. and Canada agree to specialize and trade, with one book trading for 1.5 Video games. After trade, the U.S. would like to consume 20 books. How many video games will the U.S. consume after trade? a. 10 b. 12 15 d. 18 10. Suppose the U.S. and Canada agree to specialize and trade, with one book trading for 1.5 video games. After trade, the U.S. would like to consume 20 books. How many books and video games will Canada consume after trade? a. 10 books and 10 video games 37 I/b? 15 books and 20 Video games )7 5 books and 10 video games 10 books and 5 video games 1 r a.) x, '2» \\ . z 1 1,49%?» \, 11. Why would nations specialize and trade? To allow the consumption of a combination of goods and services they can't provide for m themselves. b. To sacrifice their standard of living in an effort to foster relations with outside nations c. To promote world peace d. All of the above Use the diagram below reflecting the consumer’s tastes and budget constraint to answer the following questions. Good Y U2 Mget Constraint |_ Good X 12. Which of the combinations depicted above are affordable for this consumer? Ci) Combination D b. Combination B c. Combination F (:1. None of the above 13. Which of the following combinations exactly exhaust the consumer’s income? a. Combination A b. Combination F Combination C d. Combination B 14. Which of the combinations depicted above generate the same level of utility (or satisfaction)? a. A, D, and E all generate the same level of utility b. F, C, and B all generate the same level of utility A, B, and E all generate the same level of utility Both answer options (a) and (b) above are correct. 15. Of the combinations that the consumer can afford and that completely exhaust income, which combination generates the highest level of satisfaction and represents the consumer’s optimal bundle? a. A b. B "E9 c d. D Suppose a consumer has $500 income to spend on two goods: books and video games. The price of a book is $20 and the price ofa video game is $30. 16. Which of the following equations represents the consumer’s budget constraint? a. Y = mX + b 1‘15? 500 = 20x + 30Y c. Y = 200 — 5/6X d. None of the above 17. Given the prices above, how many books would have to be returned in order to free up enough income to purchase an additional Video game? 3/2 books 2 / 3 of a book c. 1/2 of a book d. 2 books 18. Your answer to number 17 above reflects what consumer choice principle? Market rates of substitution b. Diminishing marginal utility c. Latent factor analysis d. Utility theory 19. Which of the following characteristics of preferences is associated with more units of a good providing higher levels of utility, or “more is better"? a. Completeness b); Transitivity Nonsatiation d. Convex preferences 20. Suppose the consumer is dividing all of his income between books and video games and is purchasing 10 books and 10 video games. The marginal utility from the 10th book is 60 and the marginal utility from the 10th video game is 70. Is the consumer maximizing his utility with this purchase? a. Yes, he should continue purchasing 10 books and 10 video games b. No, he should purchase more video and fewer books No, he should purchase more books and fewer video games d. None ofthe above Use the following scenario to answer questions 21, 22, and 23. A consumer is maximizing her utility, given available income, by purchasing the optimal combination of X and Y when there is a decrease in the Price of X. For this consumer, X and Y are complements. 21. What would you expect to happen to the consumer’s optimal consumption combination of X and Y? Ta} She’ll consumer more of good X and more of good Y b. She’ll consume more of good X but less of good Y c. She’ll consumer less of good X and less of good Y d. She’ll consume less of good X but more of good Y 22. What do you expect will happen to the consumer’s demand curve for good X? 53 She'll move to a new point on her demand curve at a higher quantity demanded b. She’ll move to a new point on her demand curve at a lower quantity demanded c. She’ll move to a new demand curve shifted to the right of her original demand curve (1. She’ll move to a new demand curve shifted to the left of her original demand curve 23. 24. 25. 26. 27. 28. 29. 30. What do you expect will happen to the consumer's demand curve for good Y? a. She’ll move to a new point on her demand curve at a higher quantity demanded b. She’ll move to a new point on her demand curve at a lower quantity demanded (c3 She’ll move to a new demand curve shifted to the right of her original demand curve d. She’ll move to a new demand curve shifted to the left of her original demand curve Suppose you are told that when the price ofgood X is $5, a consumer purchases 4 units of some related good Y; when the price ofX is $7, the consumer purchases 2 units of the related good Y. For this consumer, goods X and Y are {a}, Complement goods T). Inferior Goods c. Normal Goods d. Substitute Goods Which of the following will not cause a decrease in the demand for gasoline? a. A decrease in the price of diesel fuel, a substitute for gasoline @ An increase in the price of gasoline c. A decrease in the number of consumers of gasoline d. All of the above would lead to a decrease in the demand for gasoline Assume that chicken and beef are substitutes. When the price of beef increases: The demand for chickens decreases The demand for beef decreases The demand for chicken increases The demand for beef increases a. b. e , d{” e. Both B and C are correct Which of the following disciplines are most closely related to the field of economics? a. Marketing, accounting, and management b. Environmental science, biology, and physics © Sociology, psychology, and geography d. Education, Physiology, and Exercise Science Suppose a consumer is dividing all ofhis income between two goods, X and Y. He spends $600 purchasing 275 units ofX at $1.50 each and 62.5 units of good Y. What is the price of good Y? @1 $3.00 I a b. $3.50 We. 3 mans-w «f ’v c. $4.00 d. None of the above Which of the following would likely cause a change in the quantity of paper demanded? A change in the price ink, a complement to paper A change in consumer income a. b. (a A change in the price of paper d. All of the above Which of the following would most likely cause an increase in the demand for staples? a. A decrease in the income of staple consumers, assuming staples are a normal good b. A decrease in the price of paper Clips, where paper clips and staples are assumed to be substitutes A decrease in the price of stapler, where staplers and staples are assumed to be complements d. A decrease in the price of staples . :7; ...
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Exam 1 - Econ 2103 — Principles of Microeconomics Exam 1...

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