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Economics 1021

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Department
Economics
Course
Economics 1021A/B
Professor
Jeannie Gillmore
Semester
Fall

Description
V111 NAME _________________________________ THE UNIVERSITY OF WESTERN ONTARIO LONDON CANADA E. Rivers ECONOMICS 1021B-001 March 18, 2012 MIDTERM #2 INSTRUCTIONS: 1. You will have 2 hours to complete the exam. 2. Check that your examination contains 50 questions. 3. Use a BLACK PENCIL to complete your Scantron Form. i. Print your NAME and complete your SIGNATURE ii. Enter your STUDENT NUMBER iii. Enter your SECTION NUMBER – 001 iv. Ensure that the VERSION CODE on your question packet matches the version code on your Scantron Form. In order to get credit for a question, you must record the correct answer on your Scantron Form. No credit will be given for answers recorded in your question packet. 4. You may have pencils, erasers, your student card, and a non-graphing, non- programmable calculator at your desk. All other items must be left in your bag at the front of the examination room. 5. Please ensure that all electronic devices (cell phones, laptops, etc.) are turned off before storing them in your bag at the front of the examination room. 6. There are no washroom breaks allowed during the test. 7. WHEN YOU HAVE FINISHED, PLEASE HAND IN ALL EXAM MATERIALS (YOUR SCANTRON FORM, YOUR QUESTION PACKET, AND ALL SCRAP PAPER YOU HAVE BEEN PROVIDED). V111 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the figure below to answer the following question. Figure 1 1) Shelly's budget line is shown in Figure 1 Which point is unaffordable given her income and current prices? A) A and B B) B only C) C only D) C and D only E) All points are unattainable. 2) David has an income of $30 to buy movie tickets and bus tickets. The price of a movie ticket is $6 and the price of a bus ticket is $2. What is David's real income? A) $32 B) $38 C) $30 D) 5 movie tickets or 15 bus tickets E) 15 movie tickets or 5 bus tickets 3) David has an income of $30 to buy movie tickets and bus tickets. The price of a movie ticket is $6 and the price of a bus ticket is $2. What is the relative price of a bus ticket in terms of movie tickets? A) 1/3 movie tickets B) 15 movie tickets C) $6 D) $3 E) 2 movie tickets A-1 V111 4) The magnitude of the slope of the budget line is the A) relative price of the good measured on the horizontal axis. B) price of the good measured on the vertical axis. C) absolute price of the good measured on the horizontal axis. D) real price of the good measured on the vertical axis. E) relative price of the good measured on the vertical axis. 5) Suppose all prices double and income also doubles. Which statement is true? A) The budget line shifts rightward. B) The slope of the budget line increases. C) The budget line does not change. D) The slope of the budget line decreases. E) The budget line shifts leftward. 6) Larry consumes only beer ( ) and chips ( ). The equation of his budget line (with beer measured on the vertical axis) is A) QB = Y - C B/P )C . B) QB= Y/P B (PC B )Q B C) QB= Y/P B (PC B )Q C D) QC = Y/PC- (B CP )QB. E) QB= Y/P C (PB C )Q C 7) An indifference curve is A) a line that shows combinations of goods among which a consumer is indifferent. B) the boundary between normal goods and inferior goods. C) the boundary between what a consumer can afford and what he cannot afford. D) the boundary between what can be produced and what cannot be produced. E) a line with a positive slope. A-2 V111 Use the figure below to answer the following question. Figure 2 8) Which of the indifference curve graphs in Figure 2 shows perfect complements? A) (a) B) (b) C) (c) D) (d) E) (c) and (d) 9) A constant marginal rate of substitution between two goods implies A) one good is normal and one good is inferior. B) the goods are perfect complements. C) the goods are perfect substitutes. D) the goods are imperfect substitutes. E) the goods are both inferior. A-3 V111 Use the figure below to answer the following question. Figure 3 10) Figure 3 shows three indifference curves for Brenda. Which one of the foltrue?g is A) Brenda prefers consuming at poito consuming at point . B) Brenda prefers consuming at poito consuming at point . C) The marginal rate of substitution is higher athan at point . D) Brenda prefers consuming at poito consuming at either poinor point . E) Brenda would be equally happy consuming at either por point . 11) At the best affordable point, which statement is true? A) The marginal rate of substitution between two goods equals their absolute price. B) The highest affordable indifference curve has the same intercept as the budget line. C) The slope of the indifference curve equals the slope of the budget line. D) Other points on the same indifference curve are affordable but not preferred. E) Some income is not spent. A-4 V111 Use the figure below to answer the following question. Figure 4 12) Consider the budget line and indifference curve in Figure 4. If the price of good is $1 a unit, then the price of good Y is A) $2 a unit. B) $0.75 a unit. C) $1 a unit. D) $1.25 a unit. E) $1.33 a unit. 13) The short run is a time frame in which A) the amount of output produced is fixed. B) there is a shortage of most factors of production. C) at least one factor of production is fixed. D) the firm is not able to hire more workers. E) there is not enough time to make all of the decisions necessary to maximize profit. A-5 V111 Use the figure below to answer the following question. Figure 5 14) Refer to Figure 5 which illustrates Tania's total product curve. Average product of labour reaches its maximum for the ________ worker. A) first B) second C) third D) fourth E) fifth 15) Which one of the following statements is true? A) The highest value of average product occurs where average product equals marginal product. B) When the average product curve is falling, marginal product is greater than average product. C) The maximum total product occurs at minimum marginal product. D) When the average product curve is rising, marginal product is less than average product. E) The highest value of average product occurs where average product is greater than marginal product. A-6 V111 Use the table below to answer the following question. Table 1 Labour Output TFC TVC TC (workers per (teapots per (dollars per (dollars per (dollars per day) day) day) day) day) 0 0 20 0 20 1 4 20 ? 45 2 9 20 ? 70 3 13 20 ? 95 4 16 20 100 ? 5 18 20 125 145 16) Refer to Table 1, which gives Tania's total cost schedule. When output increases from 4 to 9 teapots, the marginal cost of one of the 5 teapots is A) $25. B) $5. C) $4. D) $4.25. E) $6.25. Use the figure below to answer the following question. Figure 6 17) Refer to Figure 6. Which one of the following statements?is A) Marginal cost is equal to the slope of curve . B) Total fixed cost is constant. C) The total fixed cost curve is labeled . D) Total variable cost and total cost both increase with output. E) The vertical gap between curveand C is equal to total variable cost. A-7 V111 Use the figure below to answer the following question. Figure 7 18) Refer to Figure 7, which illustrates short-run average and marginal cost curves. Which one of the following statements isals? A) Average fixed cost decreases with output. B) Curve D is the marginal cost curve. C) LineB comes closer to line as output increases because of a decrease in average fixed cost. D) The vertical gap between curves and C is equal to average fixed cost. E) The vertical gap between curves and C is equal to average variable cost. 19) If the average variable cost of producing 10 units is $18 and the average variable cost of producing 11 units is $20, we know that, between 10 and 11 units of output, A) average total cost is increasing. B) average fixed cost is increasing. C) total cost is either increasing or decreasing. D) marginal cost is increasing. E) none of the above. 20) An increase in the cost of labour shifts the A) total, average, and marginal product curves downward and total, average, and marginal cost curves upward. B) total, average, and marginal product curves downward and total, average, and marginal cost curves downward. C) total, average, and marginal product curves upward and total, average, and marginal cost curves downward. D) total, average, and marginal product curves upward and total, average, and marginal cost curves upward. E) none of the above. A-8 V111 21) Suppose a candy manufacturer can triple its production of fudge by doubling its production facility for making fudge. This indicates the presence of A) the law of diminishing returns. B) economies of scale. C) constant returns to scale. D) diseconomies of scale. E) market constraints. Use the figure below to answer the following question. Figure 8 22) Refer to Figure 8, which illustrates the short-run average total cost curves for four different plant sizes. Which plant has the lowest average total cost for an output rate of 5 sweaters a day? A) Plant A B) PlantB C) PlantC D) Plant D E) none of the above A-9 V111 Use the figure below to answer the following question. Figure 9 23) Refer to Figure 9, which illustrates the long-run average total cost curve. Which one of the following statements islse? A) Diseconomies of scale exist between 0 an1 units of output. B) Constant returns to scale exist betwe1nandQ 2 units of output. C) Constant returns to scale exist betwe0nandQ 1 units of output. D) Diseconomies of scale exist at quantities greater tunits of output. 2 E) Economies of scale exist between 0 and0units of output. 24) Assume that the leather market is a perfectly competitive market. The market demand curve for leather is ________ and each individual leather producer's demand curve is ________. A) horizontal; horizontal B) horizontal; downward sloping C) downward sloping; horizontal D) vertical; downward sloping E) downward sloping; vertical 25) For perfect competition to arise, it is necessary that market demand be A) elastic. B) small relative to the minimum efficient scale of a single firm. C) large relative to the minimum efficient scale of a single firm. D) perfectly elastic.
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