ECON 1B03 Study Guide - Midterm Guide: Pencil, Machine Industry, Opportunity Cost
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McMaster University Department of Economics
ECON 1B03
Winter 2012
Test 1 VERSION 1
Saturday February 11, 2012
90 minutes
Instructor: H Holmes
MULTIPLE CHOICE
Answer all questions on the scan sheet using HB pencil.
Calculators are permitted.
Hand in the scan and this sheet separately.
TOTAL MC MARKS AVAILABLE: 40
NAME:__________________________________________________________________________
STUDENT #:_____________________________________________________________________
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Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. Henry decides to spend two hours playing golf rather than working at his job which pays $8 per hour. Henry's
tradeoff is
a.
the $16 he could have earned working for two hours.
b.
nothing, because he enjoys playing golf more than working.
c.
the increase in skill he obtains from playing golf for those two hours.
d.
nothing, because he spent $16 for green fees to play golf.
____ 2. The two loops in the circular-flow diagram represent the flow of
a.
goods and the flow of services.
b.
dollars and the flow of financial assets.
c.
inputs and outputs and the flow of dollars.
d.
capital goods and the flow of consumer goods.
Figure 2-1
____ 3. Refer to Figure 2-1. Which arrow shows the flow of goods and services?
a.
A
b.
B
c.
C
d.
D
____ 4. 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
experienced a technological advance in its machine-making industry. As a result, this year the society wants
to produce 55 units of food and 30 machines. Which of the following statements is true?
a.
Because the technological advance occurred in the machine-making industry, it will not be
possible to increase food production without reducing machine production below 30.
b.
Because the technological advance occurred in the machine-making industry, increases in
output can only occur in the machine industry.
c.
In order to increase food production in these circumstances without reducing machine
production, the economy must reduce inefficiencies.
d.
The technological advance reduced the amount of resources needed to produce 30
machines. These resources could be used to produce more food.
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____ 5. If an economy is producing efficiently
a.
there is no way to produce more of one good without producing less of the other.
b.
it is possible to produce more of both goods.
c.
it is possible to produce more of one good without producing less of the other.
d.
it is not possible to produce more of one good at any cost.
Figure 2-4
____ 6. Refer to Figure 2-4. The opportunity cost to the economy of getting 30 additional toothbrushes by moving
from point A to point D is
a.
10 toasters.
b.
15 toasters.
c.
20 toasters.
d.
25 toasters.
____ 7. Refer to Figure 2-4. The opportunity cost of getting 15 additional toasters by moving from point D to point C
is
a.
10 toothbrushes.
b.
20 toothbrushes.
c.
30 toothbrushes.
d.
It is impossible for the economy to move from point D to point C.
____ 8. Economists view positive statements as
a.
affirmative, justifying existing economic policy.
b.
optimistic, putting the best possible interpretation on things.
c.
descriptive, making a claim about how the world is.
d.
prescriptive, making a claim about how the world ought to be.
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ECON 1B03 Full Course Notes
Verified Note
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Document Summary
Answer all questions on the scan sheet using hb pencil. Hand in the scan and this sheet separately. Identify the choice that best completes the statement or answers the question. ___: henry decides to spend two hours playing golf rather than working at his job which pays per hour. Which arrow shows the flow of goods and services: a, b, c, d. ___: 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 experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 55 units of food and 30 machines. In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies: the technological advance reduced the amount of resources needed to produce 30 machines.
