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Midterm

# Test 1 2008 Fall v1.pdf

14 Pages
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School
McMaster University
Department
Economics
Course
ECON 1B03
Professor
Hannah Holmes
Semester
Fall

Description
Page 1 of 14 McMaster University Department of Economics ECON 1B03 Midterm Test #1 VERSION 1 Instructor: Professor H Holmes Duration: 2 hours Total Number of Pages: 14 INSTRUCTIONS: Answer all questions on the scan sheets. USE AN HB PENCIL ONLY. Make sure you carefully fill in the bubbles. YOU MUST FILL IN YOUR STUDENT NUMBER, VERSION NUMBER AND SECTION NUMBER ON THE SCAN SHEET OR YOUR GRADE WILL NOT BE RECORDED. You may use the Casio FX calculator. Hand in the scan sheet and this test copy. TOTAL MARKS AVAILABLE: 50 NAME:____________________________________________________ STUDENT #: _______________________________________________ MUGSI ID: ________________________________________________ SECTION: Circle One: 9:30-10:20 11:30-12:20 Wednesday Night Page 2 of 14 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. Any point on a country’s production possibilities frontier represents a combination of two goods that an economy a. will never be able to produce. b. can produce using all available resources and technology. c. can produce using some of its resources and technology. d. may be able to produce sometime in the future with additional resources and technology. Figure 1 ____ 2. Refer to Figure 1. The economy CANNOT produce at which point or points? a. A b. C c. A, C d. A, C, D, Figure 2 Page 3 of 14 ____ 3. Refer to Figure 2 on the previous page. The opportunity cost of getting 1 additional toaster by moving from point D to point C is a. 10 toothbrushes. b. 7 toothbrushes. c. 30 toothbrushes. d. It is impossible for the economy to move from point D to point C. Figure 3 ____ 4. Refer to Figure 3.. Which of the following combinations is impossible for this economy to produce? a. 30 barrels and 6 bathtubs b. 25 barrels and 12 bathtubs c. 20 barrels and 8 bathtubs d. 10 barrels and 14 bathtubs ____ 5. Without trade a. a country is better off because it will become self-sufficient. b. a country’s production possibilities frontier isalso its consumption possibilities frontier. c. a country can still benefit from international specialization. d. more product variety is available in a country. ____ 6. The difference between production possibilities frontiers that are bowed out and those that are linear is that a. bowed out production possibilities frontiers illustrate tradeoffs where linear production possibilities frontiers do not. b. bowed out production possibilities frontiers show increasing opportunity cost where linear ones show constant opportunity cost. c. bowed out production possibilities frontiers are the result of perfectly shiftable resources where linear production possibilities frontiers are not. d. linear production possibilities frontiers illustrate real world conditions more than bowed out production possibilities frontiers. Page 4 of 14 Table 1 Labor Hours Needed to Make 1 Pound of: Pounds produced in 40 hours: Meat Potatoes Meat Potatoes Farmer 8 2 5 20 Rancher 4 5 10 8 ____ 7. Refer to Table 1. The opportunity cost of 1 pound of meat for the farmer is a. 1/4 hour of labour. b. 4 hours of labour. c. 4 pounds of potatoes. d. 1/4 pound of potatoes. ____ 8. Refer to Table 1. The opportunity cost of 1 pound of potatoes for the farmer is a. 8 hours of labour. b. 2 hours of labour. c. 4 pounds of meat. d. 1/4 pound of meat. ____ 9. Refer to Table 1. The Rancher has an absolute advantage in a. both goods, and the Farmer has a comparative advantage in meat. b. meat, and the Farmer has a comparative advantage in potatoes. c. meat, and the Farmer has a comparative advantage in neither good. d. both goods, and the Farmer has a comparative advantage in potatoes. Figure 4 ____ 10. Refer to Figure 4. Assume that both Paul and Cliff divide their time equally between the production of corn and wheat, and they do not trade. If they were the only producers of corn and wheat, then total production of wheat and corn would be a. 8 bushels of wheat and 7 bushels of corn. b. 7 bushels of wheat and 6 bushels of corn. c. 6 bushels of wheat and 8 bushels of corn. d. 7 bushels of wheat and 7 bushels of corn. Page 5 of 14 ____ 11. Refer to Figure 4. Assume that Cliff and Paul were both producing wheat and corn, and each were dividing their time equally between the two. Then they decide to specialize in the product they have a comparative advantage in. As a result, total production of corn would a. increase by 1 bushel. b. increase by 3 bushels. c. increase by 5 bushels. d. decrease by 2 bushels. Table 2 Labor Hours needed to make one unit of: Amount produced in 160 hours: Quilts Dresses Quilts Dresses Helen 40 10 4 16 Carolyn 80 16 2 10 ____ 12. Refer to Table 2. Helen has a comparative advantage in a. quilts and Carolyn has an absolute advantage in neither good. b. dresses and Carolyn has an absolute advantage in quilts. c. quilts and Carolyn has an absolute advantage in dresses. d. dresses and Carolyn has an absolute advantage in both goods. ____ 13. Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that a. Mike has an absolute advantage in chairs. b. Mike has a comparative advantage in tables. c. Sandy has an absolute advantage in chairs. d. Sandy has a comparative advantage in chairs. ____ 14. You lose your job and as a result, you buyfewer mystery books. This shows that you consider mystery books to be a/an a. normal good. b. inferior good. c. luxury good. d. complementary good. ____ 15. Suppose that a decrease in the price of X results in less of good Y sold. This would mean that X and Y are a. complementary goods. b. normal goods. c. inferior goods. d. substitute goods. ____ 16. When we move up or down a given demand curve, a. only price is held constant. b. income and the price of the good are held constant. c. all nonprice determinants of demand are assumed to be constant. d. all determinants of quantity demanded are held constant. Page 6 of 14 ____ 17. Which of the following cause and effect events is in order for a seller? a. Technology improves, profit falls, the supply curve shifts left. b. An input price falls, profit increases, the supply curve shifts right. c. An input price rises, profit falls, the supply curve shifts right. d. An input price rises, profit rises, the supply curve shifts left. Figure 5 ____ 18. Refer to Figure 5. If the price is \$25, there would be a a. surplus of 300 and price would fall. b. surplus of 200 and price would fall. c. shortage of 200 and price would rise. d. shortage of 300 and price would rise. ____ 19. Suppose roses are currently selling for \$40.00 per dozen. The equilibrium price of roses is \$30.00 per dozen. We would expect a a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease. Page 7 of 14 Figure 6 ____ 20. Refer to Figure 6. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing south? a. A b. B c. C d. D ____ 21. Refer to Figure 6. Which of the four graphs represents the market for pizza delivery in a college town in September? a. A b. B c. C d. D Page 8 of 14 ____ 22. Suppose that the number of buyers in a market increases and a technological advancement occurs. What would we expect to happen in the market? a. The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous. b. The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous. c. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. d. Both equilibrium price and equilibrium quantity would increase. ____ 23. Suppose that demand decreases AND supply decreases. What would you expect to occur in the market for the good? a. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would dec
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