Midterm1_2106_Spring_2011_version+A_solutions

Midterm1_2106_Spring_2011_version+A_solutions - Name: _...

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Name: ________________________ Class: ___________________ Date: __________ ID: A 1 Midterm 1: the test has 30 questions (2 points each) plus one bonus question (1 point) Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. In most societies, resources are allocated by a. a single central planner. b. a small number of central planners. c. those firms that use resources to provide goods and services. d. the combined actions of millions of households and firms. ____ 2. When the government attempts to improve equality in an economy the result is often a. an increase in overall output in the economy. b. additional government revenue since overall income will increase. c. a reduction in equality. d. a reduction in efficiency. ____ 3. If the price of a gallon of milk were fixed above the equilibrium price, then we would expect a. an increase in the number of gallons of milk people want to buy and an increase in the number of gallons of milk dairy farmers want to sell. b. an increase in the number of gallons of milk people want to buy and a decrease in the number of gallons of milk dairy farmers want to sell. c. a decrease in the number of gallons of milk people want to buy and an increase in the number of gallons of milk dairy farmers want to sell. d. a decrease in the number of gallons of milk people want to buy and a decrease in the number of gallons of milk dairy farmers want to sell. ____ 4. A worker in Thailand can earn $2 per day making cotton cloth on a hand loom. A worker in the United States can earn $80 per day making cotton cloth with a mechanical loom. What accounts for the difference in wages? a. U.S. textile workers belong to a union. b. There is little demand for cotton cloth in Thailand and great demand in the U.S. c. Labor is more productive making cotton cloth with a mechanical loom than with a hand loom. d. Thailand has a low-wage policy to make its textile industry more competitive in world markets. ____ 5. To improve living standards, policymakers should a. impose restrictions on foreign competition. b. formulate policies designed to increase productivity. c. impose tougher immigration policies. d. provide tax breaks for the middle class. ____ 6. Low rates of inflation are generally associated with a. low rates of government spending. b. small or nonexistent government budget deficits. c. low rates of productivity growth. d. low rates of growth of the quantity of money.
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Name: ________________________ ID: A 2 ____ 7. The circular-flow diagram is an example of a. a laboratory experiment. b. an economic model. c. a mathematical model. d. All of the above are correct. ____ 8. Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 50 units of food and 30 machines. This year, it is producing 55 units of food and 33 machines. Which of the following events could not explain the increase in output? a.
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Midterm1_2106_Spring_2011_version+A_solutions - Name: _...

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