201_Winter08_Midterm1%20Solutions

201_Winter08_Midterm1%20Solutions - Econ 201 - Midterm #1 -...

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Econ 201 — Midterm #1 — Winter 2008 Name: SOLUTIONS 1 Multiple Choice (26 points) (In this section each question is worth 1 point) Answers to MC questions are in bold 1. What does trade allow a country to do that it cannot do by itself? (a) produce inside its production possibilities frontier. (b) produce outside its production possibilities frontier. (c) consume inside its production possibilities frontier. (d) consume outside its production possibilities frontier. (e) shift its production possibilities frontier outward. 2. The lecture suggested that the rate of return of higher education (a) Decreased over the past 30 years (b) Increased over the past 30 years (c) Did not change over the past 30 years (d) Is higher in the U. S. than in the United Kingdom 3. The course packet reading Capitalist Punishment is a book review of a book related to (a) The invention of the concept of opportunity cost (b) The invention of supply and demand curves (c) The invention of the production possibility frontier (d) The invention of the concept of the invisible hand For questions 4-6, please refer to figure 1 and the statements below. Production of guns A B C Production of butter Production Possibilities Frontier FIGURE 1 Statements: I. Infeasible without trade II. Feasible without trade III. Feasible only with trade IV. Inefficient V. Efficient 4. Which statements apply to point A? (a) I and IV (b) I and V (c) II and IV (d) II and V 5. Which statements apply to point B? (a) II and IV (b) I and V (c) II and V (d) III and V 6. Which statements apply to point C? (a) I only (b) II only (c) III only (d) I and III 1
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7. The lecture talked about the equilibrium price as explained by the textbook in Chapter 3. The lecture claimed: (a) The price for a given commodity is always the same at all times and locations (b) The price for a given commodity is always higher at all locations on the weekend (c) The price for a given commodity is always higher at all locations on weekdays (d) The price for a given commodity differs across locations 8. The course packet reading on Iran has the following explanation for long lines of cars waiting for gasoline (a) Price ceiling on gasoline (b) Price ceiling on oil (c) Shortage of oil (d) High tax on gasoline 9. A government subsidy will have which of the following effects on a market equilibrium? (a) An increase in price and increase in quantity (b) An increase in price and decrease in quantity (c) A decrease in price and increase in quantity (d) A decrease in price and decrease in quantity 10. Economists know that a particular good can be classified as an inferior good if a(n) in buyers’ income causes a(n) . (a) increase; increase in demand (b) increase; increase in quantity demanded (c) increase; decrease in demand (d) decrease; decrease in demand 11. If demand and supply are linear functions with the usual slopes, then a decrease in the price of a good will result in: (a) an increase in demand. (b) an increase in supply.
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201_Winter08_Midterm1%20Solutions - Econ 201 - Midterm #1 -...

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