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Midterm

MGEA02H3 Study Guide - Midterm Guide: Broccoli, Demand Curve, Economic Equilibrium


Department
Economics for Management Studies
Course Code
MGEA02H3
Professor
all
Study Guide
Midterm

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ECMA04H
First Term Test - October 20, 2010 Time: 90 minutes
Prof. Gordon Cleveland
Version A
Instructions: PLEASE READ CAREFULLY
1. On the Scantron answer sheet, you must
PRINT your last name and first name
enter your student number as the identification number
FILL IN THE BUBBLES under your name and student number
FILL IN THE BUBBLE ASSOCIATED WITH YOUR TEST VERSION
NOTE - THIS IS VERSION A
2. If you fail to carry out all the tasks indicated in part 1, 4 marks will be deducted
from your final score.
3. This exam consists of 25 multiple choice questions (and a 26th which will
confirm your exam version). For each question, choose the correct answer. If two
multiple choice answers both seem to be approximately correct, choose the best of
the two answers. Enter the answers to the multiple choice questions on the
Scantron sheet provided to you by filling in the appropriate bubble. If
answers are not written on this sheet, there will be no marks given for
answers. Each correct answer is worth 4 marks (except for question 26, where the
correct answer simply confirms your exam version); incorrect answers receive 0
marks.
4. When entering your answers on the Scantron sheet:
Use a medium (HB) pencil
Fill in the bubble neatly and completely
Erase any changes as completely as possible
Be very careful to place each answer in the correct place
Note: this exam consists of 8 pages, including this cover page. Make sure that all 8
pages are included in your exam, and notify an invigilator immediately if any are
missing.

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Page 2 of 8
ECMA04H FIRST TERM TEST October 20, 2010
This term test consists of 25 questions (plus a 26th identifier question). Answer each question by choosing
the best alternative and indicating your choice in the appropriate place on the scantron sheet provided
with this exam (it is the only thing you will turn in at the end of the exam). You may take the rest of the
exam away with you, so you can use the fronts and back of these pages for your rough work. If you wish
to keep a record of your answers, make a note of them on this test booklet. The scantron sheet will not be
returned to you, but correct answers will be posted on the course website, and your grade will be available
to you through the intranet.
Each correct answer to questions 1 through 25 is worth 4 marks (there is no deduction for wrong
answers).
1. A point on the graph of a demand curve has co-ordinates P1 and Q1. Which of the following three
interpretations of this point (on the demand curve) are correct?:
I. The maximum price that any consumer is willing to pay for this good is P1 and the minimum amount
this consumer is willing to purchase at that price is Q1 of the good.
II. At the price P1, the maximum amount of the good that consumers are willing to purchase is Q1 of the
good.
III. Although some consumers are willing to pay more than P1 for this good, the maximum price
consumers are willing to pay for the last unit of the good (i.e., the Q1th unit of the good) is P1.
(A) Only statement I is correct
(B) Only statement II is correct
(C) Only statement III is correct
(D) Statements I and II are both correct
(E) Statements I and III are both correct
(F) Statements II and III are both correct
(G) Statements I and II and III are all correct
(H) None of the statements are correct
2. If the government decides to levy a small excise tax on the buyers in a perfectly competitive market in
which the elasticity of demand is greater than the elasticity of supply, then we can conclude that:
(A) The buyers will bear all of the tax
(B) The sellers will bear all of the tax
(C) The buyers will bear more of the tax than sellers
(D) The sellers will bear more of the tax than buyers
(E) The government will bear most of the tax
(F) It is not possible to tell who will bear most of the tax without additional information
(G) The tax will be shared equally between the buyers and the sellers
(H) There will be a smaller amount of excess burden than there would have been if the elasticity of supply
is greater than the elasticity of demand
(I) all of the above
(J) none of the above
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3. The price of a particular good falls by a small amount, and as a result the total amount of money spent
purchasing this good decreases. We can conclude that:
(A) In the neighbourhood of the original price, the supply curve of this good is elastic
(B) In the neighbourhood of the original price, the supply curve of this good is inelastic
(C) In the neighbourhood of the original price, the supply curve of this good is perfectly elastic
(D) In the neighbourhood of the original price, the supply curve of this good is perfectly inelastic
(E) In the neighbourhood of the original price, the demand curve of this good is elastic
(F) In the neighbourhood of the original price, the demand curve of this good is inelastic
(G) In the neighbourhood of the original price, the demand curve of this good is perfectly elastic
(H) In the neighbourhood of the original price, the demand curve of this good is perfectly inelastic
(I) In the neighbourhood of the original price, the demand curve of this good is unit elastic
(J) None of the above
4. When a perfectly competitive market reaches equilibrium, which of the following statements are true:
I. The quantity of the good supplied by suppliers is just equal to the quantity of the good that consumers
wish to purchase.
II. All consumers will get to consume the amount of the good they are willing to consume at that price
and all suppliers will get to supply the amount of the good they are willing to supply at that equilibrium
price
III. There will be no consumers who want to change their consumption behaviour and no suppliers who
wish to change their supply decisions.
A) only I B) only II C) only III D) I & II E) I & III
F) II & III G) I, II & III H) none of the three
5-8. A country produces goods X and Y and has the following equation for its production possibilities
frontier (or production possibilities curve):
Y = 30 - .3(1+2X)2
Questions 5 through 8 concern this country.
5. The point X = 2.5, Y = 20.2 is:
A) attainable and efficient B) attainable and inefficient C) unattainable
D) unattainable and efficient E) imaginable and feasible F) none of the above
6. You are told that the economy is producing efficiently and has chosen to produce and consume 2 units
of X and 22.5 units of Y. At this point on the production possibilities frontier, you can use calculus to
obtain the opportunity cost of X as:
A) 1.4 B) 2.8 C) 3.0 D) 4.8 E) 5.0
F) 5.8 G) 6.0 H) 6.4 I) 7.2 J) none of the above
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