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Unformatted text preview: VERSION 1 1 M I M E 3 1 0 E N G I N E E R I N G E C O N O M Y Class Test #1 Wednesday, 13 February, 2008 90 minutes PRINT your family name / initial and record your student ID number in the spaces provided below. FAMILY NAME / INITIAL STUDENT ID # S O L U T I O N S This test consists of 17 multiple-choice questions, and two problems requiring a full solution. The multiple-choice question are worth a total of 75 points. There are no penalties for incorrect answers. The problems are worth a total of 25 points. MULTIPLE-CHOICE QUESTIONS Circle the correct answers on this test paper and record them on the computer answer sheet. Multiple-choice Statements Circle the correct answer on this paper and record it on the computer answer sheet. (3 points each for a total of 15) Note : There are no penalties for incorrect answers. 1. Assuming that there is no shift in the supply or demand curves, what will bring the market into equilibrium if the demand for a product is too high relative to its supply? The price will: A) rise, demand will fall, and supply will rise. B) rise, demand will rise, and supply will fall. C) fall, demand will fall, and supply will rise. D) fall, demand will rise, and supply will fall. 2. If you are willing to pay up to $20 for a shirt, but you only have to pay the market price of $16, the $4 difference is: A) your consumer surplus B) the producers deficit C) your consumer deficit D) the producers surplus #18: /10 #19: /15 Total: /25 VERSION 1 2 3. The law of diminishing marginal returns states that for a given production process, as more and more variable resources (e.g., labour) are added, output: A) decreases at an increasing rate. B) decreases at a decreasing rate. C) increases at an increasing rate. D) increases at a decreasing rate. 4. In a total cost function, if the marginal cost is greater than the average cost at a particular production rate, the production of an additional unit will cause the: A) average cost to increase. B) average cost to remain unchanged. C) marginal cost to decrease. D) marginal cost to remain unchanged. 5. In a statement of cash flow, which one of the following elements would be considered a use of funds? A) An increase in fixed assets at cost B) An increase in retained earnings C) A decrease in accounts receivables D) An increase in accounts payable Problems with Multiple-choice Answers Circle the correct answer on this paper and record it on the computer answer sheet. (5 points each for a total of 60) Note : There are no penalties for incorrect answers. 6. If the number of widgets demanded changes from 19 to 21 when the price changes from $1.50 to $0.50, the arc elasticity of demand is: A) 5 B) unitary elastic C) 1/10 D) 1/5 E) none of the choices given above Use the following information to answer questions 7 to 9....
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- Winter '08