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term 1 test

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1. Yes or No Explaining ECO 100 Concepts (22 marks) 1.1 Yes or No (12) Here is an easy way to start this test just circle either Yes or No for the following statements to indicate whether you agree (Yes) or disagree (No) with each of them. Thank your kindly prof for not including a penalty for a wrong answer! (Assume positively-sloped supply and negatively-sloped Demand as appropriate. Keep in mind the concepts discussed in lectures.) a) If, during an economic crisis, an economy suffers unemployment, it is not producing at its maximum potential it is at a point inside its Production Possibility Curve (PPC). If the period of unemployment is prolonged and the skills of unemployed workers decline significantly, the PPC shifts inwards. Yes No b) The Demand Schedule for a good is given by this equation: P= 40 -2Q D For this Demand Schedule, the Price Elasticity of Demand has a value of 1.5 at QD=8. Yes No c) The less elastic the demand schedule, the greater the burden of an excise tax that will be borne by producers. Yes No d) The following equilibrium condition can be utilized in the indifference model of Consumer Theory: MU X =XMU P Y Y Yes No e) If the Marginal Rate of Substitution between hot dogs (X axis) and colas (Y axis) is less than the P CP HDprice ratio, the consumer should buy more hot dogs and fewer colas to maximize satisfaction.
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