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Midterm

Sample Midterm.pdf

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Department
Economics
Course Code
ECN 104
Professor
Frank Trimnell

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RYERSON UNIVERSITY ECN 104 INTRODUCTORY MICROECONOMICS INSTRUCTOR: TSOGBADRAL GALAABAATAR TIME: 2 HOURS Instructions: 1. Select the best answer for each multiple choice question and record the letter you have chosen on the scanner sheet. Answer all 60 questions. 2. No references (formula sheet, notes, books, etc.) are permitted. 3. Only non-programmable calculators are allowed. STUDENT’S NAME:__________________________________________________________ (Please Print) ID# Good Luck! 1 1. What does the adage, "There is no such thing as a free lunch," mean? a. Even people on welfare have to pay for food. b. The cost of living is always increasing. c. To get something we like, we usually have to give up another thing we like. d. All costs are included in the price of a product. 2. What does efficiency mean? a. Society is conserving resources in order to save them for the future. b. Society’s goods and services are distributed fairly among society's members. c. Society has lessened its dependence on foreign energy sources. d. Society is getting the most it can from its scarce resources. 3. What is a marginal change? a. a long-term trend b. a large, significant adjustment c. a change for the worse, and so is usually short-term d. a small incremental adjustment 4. Suppose your management professor has been offered a corporate job with a 30% pay increase. He has decided to take the job. What happened for him? a. The marginal cost of leaving was greater than the marginal benefit. b. The marginal benefit of leaving was greater thanthe marginal cost. c. The marginal benefit of teaching was greater than the marginal cost. d. The marginal cost of teaching was greater than the marginal benefit. 5. A friend of yours asks you why market prices are better than government-determined prices. What do you say? a. because they generally reflect the value of a good to society, but not the cost of making it b. because they generally reflect the cost of making a good to society, but not its value c. because they generally reflect both the value of a good to society and the cost of making it d. because they generally reflect neither the value of a good to society nor the cost of making it 6. What can cause market failure? a. low consumer demand b. government intervention and price controls c. externalities and market power d. high prices and foreign competition 7. When economists attempt to simplify the real world and make it easier to understand, what do they do? a. They make assumptions. b. They make mistakes in judgment. c. They make predictions. d. They make evaluations. 2 8. What are factors of production? a. They are used to produce goods and services. b. They are owned by firms. c. They are abundant in most economies. d. They are used by both firms and households. 9. According to a simple circular-flow diagram, in how many markets do households and firms interact? a. one type of market b. two types of markets c. three types of markets d. Households and firms do not interact Figure 1 10. Refer to Figure 1. What is the opportunity cost to the economy of getting 30 additional toothbrushes by moving from point A to point D? a. 10 toasters b. 15 toasters c. 20 toasters d. 25 toasters 11. Refer to Figure 1. Which point or points are inefficient? a. point A, D b. point B c. point C d. point A, B, D 12. When a production possibilities frontier shifts outward, what concept is being demonstrated? a. tradeoffs b. efficiency c. economic growth d. opportunity cost 13. What would unemployment cause an economy to do? a. produce inside its production possibilities frontier b. produce on its production possibilities frontier c. produce outside its production possibilities frontier d. unemployment could actually cause a, b, or c, depending on how severe it is 3 14. How do economists consider normative statements? a. descriptive, making a claim about how the worldis b. statements about the normal condition of the world c. prescriptive, making a claim about how the world ought to be d. statements that establish production goals for the economy 15. Which of the following is NOT a positive statement? a. Higher gasoline prices will reduce gasoline consumption. b. Equity is more important than efficiency. c. Trade restrictions lower our standard of living. d. Prices rise when the government prints too much money. Table 1 Hours needed to make one unit of: Cars Airplanes Canada 40 160 Japan 50 150 16. Refer to Table 1. What is the opportunity cost of 1 car for Japan? a. 4 airplanes. b. 3 airplanes. c. 1/3 airplane. d. 1/4 airplane. 17. Refer to Table 1. What is the opportunity cost of 1 car for Canada? a. 4 airplanes. b. 3 airplanes. c. 1/3 airplane. d. 1/4 airplane. 18. Refer to Table 1. Which of the following is correct? a. Japan has a comparative advantage in airplanes and Canada has an absolute advantage in cars. b. Japan has a comparative advantage in cars and Canada has an absolute advantage in airplanes. c. Japan has a comparative advantage in cars and Canada has an absolute advantage in neither good. d. Japan has a comparative advantage in airplanes and Canada has an absolute advantage in both goods. 19. Refer to Table 1. If Canada and Japan trade based on the principle of comparative advantage, what product will Japan export to Canada? a. Cars b. both airplanes and cars c. Airplanes d. Japan should buy both products from Canada. 4 Figure 2 20. Refer to Figure 2. If Paul divides his time equally between corn and wheat, what will he be able to produce? a. 4 bushels of wheat and 1 bushel of corn. b. 4 bushels of wheat and 5 bushels of corn. c. 5 bushels of wheat and 4 bushels of corn. d. 5 bushels of wheat and 5 bushels of corn. 21. Refer to Figure 2. What is the opportunity cost of 1 bushel of wheat for Cliff? a. 1/4 bushel of corn. b. 1/2 bushel of corn. c. 1 bushel of corn. d. 4 bushels of corn. 22. Refer to Figure 2. Assume that Cliff and Paul were both producing wheat and corn, and both were dividing their time equally between the two. Then they decide to specialize in the product for which they have a comparative advantage. What would happen to the production of corn? a. Increase by 1 bushel. b. Increase by 2 bushels. c. Increase by 3 bushels. d. Increase by 4 bushels. 5 Scenario 1. Suppose you are an owner of a small factory which produces tables and chairs. You have 3 workers; worker A, B and C. Worker A can produce 4 tables or 4 chairs in one day. Worker B can produce 1 tables or 3 chairs, worker C can produce 3 tables or 6 chairs in one day. 23. Refer to Scenario 1. Who has the comparative advantage in chairs. a. Worker A. b. Worker B. c. Worker C. d. We don’t have enough information to answer the question. 24. Refer to Scenario 1. Suppose workers A and B are making only chairs and C is making only tables. Which of the following is correct? a. The current production plan is efficient. b. The current production plan is not efficient. c. The current production plan is not feasible. d. None of above. 25. What happens at the equilibrium price? a. Buyers have an incentive to buy more. b. It is possible for there to be a shortage. c. Firms have an incentive to increase production. d. Everyone in the market has been satisfied. Figure 3 26. Refer to Figure 3. What are the equilibrium price and quantity? a. $35 and 200 b. $35 and 600 c. $25 and 400 d. $15 and 200 27. Refer to Figure 3. What happens at a price of $35? a. There would be a shortage of 400 units. b. The market would be in equilibrium. c. There would be a surplus of 200 units. d. There would be a surplus of 400 units. 6 28. If a shortage exists in a market, what do we know? a. The actual price is below equilibrium price and quantity demanded is greater than quantity supplied. b. The actual price is above equilibrium price and quantity demanded is greater than quantity supplied. c. The actual price is above equilibrium price and quantity supplied is greater than quantity demanded. d. The actual price is below equilibrium price and quantity supplied is greater than quantity demanded. 29. What would an early frost in the vineyards of the Okanagan Valley cause? a. an increase in the demand for wine, increasing price b. an increase in the supply of wine, decreasing price c. a decrease in the demand for wine, decreasing price d. a decrease in the supply of wine, increasing price 30. If the demand for a product decreases, what would we expect? a. equilibrium price to increase and equilibrium quantity to decrease b. equilibrium price to decrease and equilibrium quantity to increase c.
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