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Midterm

EC120 Practice Midterm 1 2013.pdf

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Department
Economics
Course
EC120
Professor
Ken Jackson
Semester
Fall

Description
Economics 120 Test 1 – Friday, Oct. 5 – 4.30 pm. 1. On the FRONT of your computer card use a dark lead pencil to PRINT the following • instructor’s name, section letter (next to class), time/dayof your section • WLU ID number starting at far left column ( FILL IN BOXES UNDER EACH NU)BER  UW students add a 0 to the end of your 8 digit UW ID number • last name, empty space, first name starting at far left column FILL IN BOXES UNDER EA)H LETTER 2. On the BACK of your computer card use a dark lead pencil to • Print your ID number starting at far left column FILL IN BOXES UNDER EACH NU)BER  UW students add a 0 to the end of your 8 digit UW ID number • Fill in box A in the column marked “Test Form” • Answer all 50 questions by completely filling in the box. If you change an answer then completely erase your previous answer. 3. You have 90 minutes. No student may leave before 5:00 pm. Hand in the computer card only. You can keep the question paper and are advised to record your answers on it. 4. There are 50 multiple-choice questions. You will be given one mark for each correct answer and zero marks for missing, incorrect or multiple answers. 5. Non-programmable calculators are allowed. Dictionaries are not allowed. Section A B C D E F G Day/time Tu.Th 10:00 Tu,Th 11.30 Tu.Th.1:00 Tu.Th 2:30 MW MW 4:00 W 7:00 11:30 Instructor Sinclair Sinclair Mesta Tahir Sinclair Jefferson Mesta 1 Correctly filled out front of form Correctly filled out back of form 2 Multiple Choice Identify the choice that best completes the statement or answers the question by filling in the circle on the scantron that corresponds to the best answer. ____ 1. The difference between production possibilities frontiers that are bowed out and those that are linear ( a straight line) 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. e. bowed out production possibilities frontiers show decreasing opportunity cost where line ar ones show constant opportunity cost. Figure 2-8 ____ 2. Refer to Figure 2-8. What is the opportunity cost of moving from point A to point B? a. 8 bathtubs b. 20 barrels c. the difference between the 8 bathtubs you get and the 20 barrels you give up d. the difference between the 20 barrels you get and the 8 bathtubs you give up ____ 3. Refer to Figure 2-8. If this economy puts all of its resources into the production of bathtubs it could produce a. 20 barrels and 12 bathtubs. b. 35 barrels and no bathtubs. c. no barrels and 16 bathtubs. d. This economy would not choose to put all of its resources into the production of one good. 3 Table 3-1 Labour Hours Needed to Make 1 Pound of: Pounds produced in 40 hours: Meat Potatoes Meat Potatoes Farmer 8 4 5 10 Rancher 6 2 6.667 20 ____ 4. Refer to Table 3-1. The opportunity cost of 1 pound of meat for the farmer is a. 1 hour of labour. b. 2 hours of labour c. 2 pounds of potatoes. d. 1/2 pound of potatoes. e. both b and d are correct. ____ 5. Refer to Table 3-1. The Farmer has an absolute advantage in a. meat, and the Rancher has an absolute advantage in potatoes. b. potatoes, and the Rancher has an absolute advantage in meat. c. meat, and the Rancher has an absolute advantage in meat. d. neither good, and the Rancher has an absolute advantage in both goods. ____ 6. Refer to Table 3-1. The Rancher has a comparative advantage in a. neither good, and the Farmer has a comparative advantage in both goods. b. both goods, and the Farmer has a comparative advantage in neither good. c. meat, and the Farmer has a comparative advantage in potatoes. d. potatoes, and the Farmer has a comparative advantage in meat. ____ 7. Refer to Table 3-1. The Farmer and Rancher both could benefit by the Farmer specializing in a. meat and the Rancher specializing in potatoes. b. potatoes and the Rancher specializing in meat. c. neither good and the Rancher specializing in both goods. d. They cannot benefit by specialization and trade. ____ 8. One result of a cold snap in Florida, which is a major producer of oranges, could be an increase in a. farm machinery prices. b. the price of diesel fuel used in farming. c. migrant farm workers' wages. d. the price of oranges. ____ 9. If Francis receives an increase in his pay, we would expect a. Francis's demand for each good he purchases to remain unchanged. b. Francis's demand for normal goods to increase. c. Francis's demand for luxury goods to increase. d. Francis's demand for inferior goods to increase. e. Both b and c are correct. ____ 10. Which of the following would NOT shift the demand curve for a good or service? a. a change in income b. a change in the price of the good or service c. a change in expectations about the price of the good or service d. a change in the price of a related good 4 ____ 11. Lead is an important input in the production of crystal. If the price of lead increases, all else equal, we would expect the supply of a. crystal to be unaffected. b. crystal to decrease. c. crystal to increase. d. lead to increase. ____ 12. Workers at a bicycle assembly plant currently make minimum wage. If the provincial government increases the minimum wage by $1.00 an hour it is likely that the a. demand for bicycle assembly workers will increase. b. supply of bicycles will shift to the right. c. supply of bicycles will shift to the left. d. firm must increase output to maintain profit levels. ____ 13. Which of the following would definitely result in a higher price in the market for Snickers? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase ____ 14. 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. e. None of the above are correct. ____ 15. Beef is a normal good. You observe that both the equilibrium price and quantity of beef has fallen over time. Which of the following would be most consistent with this observation? a. Consumers have experienced an increase in income and beef-production technology has improved. b. The price of chicken has risen and the price of steak sauce has fallen. c. Consumer tastes have changed so as to prefer beef less than before. d. The demand curve for beef must be positively sloped. ____ 16. Demand is said to be inelastic if a. the quantity demanded changes only slightly when the price of the good changes. b. demand shifts only slightly when the price of the good changes. c. buyers respond substantially to changes in the price of the good. d. the price of the good responds only slightly to changes in demand. ____ 17. When the price of kittens was $25 each, the pet shop sold 20 per month. When they raised the price to $35 each, they sold 14 per month. The elasticity of demand for kittens would be a. 1.66. b. 1.06. c. 0.94. d. 0.60. 5 Figure 5-2 ____ 18. Refer to Figure 5-2. The elasticity of demand from point B to point C, using the midpoint method would be a. 2.5 b. 1.25 c. 1 d. 0.9 e. 0.75 ____ 19. Refer to Figure 5-2. If the price decreased from $18 to $6, what would happen to total revenue? a. Total revenue would increase by $1200 and demand would be elastic. b. Total revenue would increase by $800 and demand would be elastic. c. Total revenue would decrease by $1200 and demand would be inelastic. d. Total revenue would decrease by $800 and demand would be inelastic. ____ 20. If a change in the price of a good results in no change in total revenue, a. the demand for the good must be elastic. b. the demand for the good must be inelastic. c. the demand for the good must be unit elastic. d. buyers must not respond very much to a change in price. ____ 21. Suppose the government increases the tax on gasoline in order to raise revenue. Since raising the gasoline tax would increase the price of gasoline, the government must be assuming that the a. demand for gasoline is price elastic. b. demand for gasoline is price inelastic. c. demand for gasoline is price unit-elastic. d. tax on gasoline will not affect the consumption of gasoline. ____ 22. When the price elasticity of demand is perfectly inelastic, the elasticity a. is zero and the demand curve is vertical. b. is zero and the demand curve is horizontal. c. approaches infinity and the demand curve is vertical. d. approaches infinity and the demand curve is horizontal. 6 ____ 23. When demand is elastic in the current price range, a. an increase in price would increase total revenue because the decrease in quantity demanded is less than the increase in price. b. an increase in price would decrease total revenue because the decrease in quantity demanded is greater than the increase in price. c. a decrease in price would decrease total revenue because the increase in quantity demanded is smaller than the decrease in price. d. a decrease in price
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