York University — Economics Department — Faculty of Liberal Arts and Professional Studies
ECON1000.03 Midterm — Professor Lanfranco
Name___________________________________________ Student Number:____________________________________
INSTRUCTIONS: This exam is 3 hours long, and you should finish early. Put all of your answers to be graded on the
Scantron “bubble page ” answer sheet. Use the “white space” on front and back of these exam pages to draw diagrams
and do calculations to assist in arriving at your answers. Do not leave answers blank. Your grade is based on the
number of correct answers. It is smart to first record your answers on these exam pages, and then transfer them neatly to
your Scantron answer sheet.
Write your name and student number on this exam page, and in the appropriate spaces on the Answer Sheet. There are
three (3) places for your student number there, including the “bubble” format at the upper left side. Lastly, write the
Version of this exam on the top center of your Scantron answer sheet.
Turn in BOTH this EXAM and your SCANTRON ANSWER SHEET. You will get no grade if the Scantron sheet is not
accompanied by this signed copy of the exam.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Complete the following sentence. Microeconomics is 1) _______
A) not concerned with factors of production.
B) concerned with the size of the total amount of income earned by all households in an
C) the branch of economics that studies the choices of individuals and businesses.
D) concerned with normative issues only.
E) concerned exclusively with the role of the government in the economy.
2) Complete the following sentence. Capital is 2) _______
A) "gifts of nature."
B) stocks and bonds.
C) money in the bank.
D) tools, instruments, machines, buildings, and other constructions that businesses use to
produce goods and services.
3) During the next hour John can choose one of the following three activities: playing basketball, 3) _______
watching television, or reading a book. The opportunity cost of reading a book
A) is the value of playing basketball if John prefers that to watching television.
B) is the value of playing basketball and the value of watching television.
C) is the value of watching television if John prefers playing basketball to watching television.
D) depends on how much John enjoys the book.
E) depends on how much the book cost when it was purchased.
4) Which of the following statements is normative? 4) _______
A) Scientists should not make normative statements.
B) If income increases, sales of luxury goods fall.
C) As e-book prices fall, people buy more of them.
D) Warts are caused by handling toads.
E) There is more caffeine in a cup of tea than in a cup of coffee. 5) An economic model is 5) _______
A) tested by examining the realism of its assumptions.
B) not useful unless it predicts with 100 percent accuracy.
C) useful if it predicts well, even if its assumptions are not realistic.
D) not useful because it simplifies real problems.
E) tested by the Testing Committee of the Canadian Economic Association.
6) On a graph of a production possibilities frontier, opportunity cost is represented by 6) _______
A) the slope of the production possibilities frontier.
B) a point on the horizontal axis.
C) a ray through the origin.
D) the x-axis intercept.
E) a point on the vertical axis.
Use the figure 2.1.5 below to answer the following question.
7) The graph in Figure 2.1.5 shows Maryanne's PPF for food and sunscreen. Maryanne faces 7) _______
________ opportunity cost of food and ________ opportunity of sunscreen, which can be seen by
the shape of the PPF.
A) a decreasing; an increasing
B) an increasing; a decreasing
C) an increasing; an increasing
D) a decreasing; a decreasing
E) a constant; a constant
Use the figure 2.2.1 below to answer the following question. 8) In Figure 2.2.1, when 2,000 bicycles are produced each month 8) _______
A) the marginal benefit from another bicycle is greater than the marginal cost of another
B) more bicycles must be produced to reach the efficient level of output.
C) the economy is efficient at this level of production of bicycles.
D) fewer bicycles must be produced to reach the efficient level of output.
E) both A and B.
9) Suppose a hurricane causes extensive devastation, destroying houses, roads, schools and 9) _______
factories. What would be the effect of this hurricane on a production possibilities frontier
consisting of consumption goods and capital goods?
A) There would be a movement along the existing production possibilities frontier towards a
more capital-intensive point.
B) There would be a movement from the existing production possibilities frontier inwards
towards a point with unused or misallocated resources.
C) It would shift inward at all points.
D) It would shift outward at all points.
E) There would be a movement along the existing production possibilities frontier towards a
less capital-intensive point.
Use the information below to answer the following question Fact 2.4.1
In an eight-hour day, Andy can produce either 24 loaves of bread or 8 kilograms of butter. In an eight-hour day, Rolfe
can produce either 8 loaves of bread or 8 kilograms of butter.
10) Given Fact 2.4.1, Andy and Rolfe 10) ______
A) can gain from trade if Andy specializes in butter production and Rolfe specializes in bread
B) can trade, but only Andy will gain.
C) can trade, but only Rolfe will gain.
D) can gain from trade if Andy specializes in bread production and Rolfe specializes in butter
E) cannot gain from trade.
11) Individuals A and B can both produce goods X and Y. Individual A has a comparative 11) ______
advantage in the production of X if
A) the amount by which A must reduce production of Y is less than the amount by which B
must reduce production of Y to produce an additional unit of X.
B) the amount by which A must reduce production of Y is more than the amount by which B
must reduce production of Y to produce an additional unit of X.
C) A has a preference to consume X.
D) B has superior knowledge about how to produce X.
E) A is faster than B at producing X.
12) Trade is organized using the social institutions of 12) ______
C) property rights.
E) all of the above. 13) Suppose the price of a football is $20.00 and the price of a basketball is $10.00. The ________ of a 13) ______
football is ________.
A) relative price; 1/2 basketball per football
B) opportunity cost; $10.00
C) relative price; 2 basketballs per football
D) relative price; $10
E) opportunity cost; $15.00
14) Which one of the following events shifts the demand curve for grape jelly to the right? 14) ______
A) an increase in income if grape jelly is a normal good
B) a decrease in the population
C) a decrease in the price of grape jelly
D) an increase in the price of peanut butter, a complement of grape jelly
E) a decrease in the price of strawberry preserves, a substitute for grape jelly
Use the figure 3.3.2 below to answer the following question.
15) Which one of the following would result in the demand curve shifting from D to D i1 Figu2e 15) ______
A) a rise in the price of hamburgers, a substitute for pizza
B) a rise in the price of pizza
C) a fall in the price of pizza
D) an increase in the supply of pizza
E) a rise in the price of Coke, a complement of pizza
16) Which one of the following would not shift the supply curve of good X to the right? 16) ______
A) a fall in the price of Y, a substitute in production of X
B) a rise in the price of X
C) an improvement in technology used in the production of X
D) an increase in the price of Y, a complement in production of X
E) a fall in the price of the factors of production used in producing X
17) A shift of the supply curve for rutabagas occurs if there is 17) ______
A) a change in the price of a related good that is a substitute for rutabagas.
B) a change in preferences for rutabagas.
C) a change in income.
D) a change in the price of rutabagas.
E) none of the above.
Use the table 3.4.1 below to answer the following question. Price Quantity
(dollars per Demanded Supplied (units)
1 1,100 50
2 800 200
3 600 420
4 500 500
5 420 580
6 350 640
7 320 680
8 300 700
18) Refer to Table 3.4.1. At a price of $3 a unit 18) ______
A) the market is in equilibrium.
B) there is a 180-unit surplus.
C) there is a 180-unit shortage.
D) there is a tendency for the price to rise.
E) C and D.
Use the figure 3.5.1 below to answer the following question.
19) Initially, the demand curve for good A is D in Figure 3.5.1. Suppose good B is a substitute for 19) ______
good A. If the price of B falls
A) there will be a surplus of good A at2P .
B) the price of A will rise.
C) the equilibrium quantity of good A will increase.
D) the demand curve for good A will shift from D to D .
E) all of the above are true except B.
20) If A is an inferior good and consumer income rises, the demand for A 20) ______
A) decreases and the equilibrium price and the equilibrium quantity decrease.
B) increases and the equilibrium price rises but the equilibrium quantity decreases.
C) decreases and the equilibrium price falls but the equilibrium quantity increases.
D) decreases and the equilibrium price rises; as a result, the equilibrium quantity decreases.
E) increases and the equilibrium price and the equilibrium quantity increase. 21) If both demand and supply increase, then the equilibrium price 21) ______
A) and equilibrium quantity increases.
B) falls and the equilibrium quantity could either increase or decrease.
C) rises and the equilibrium quantity could either increase or decrease.
D) falls but the equilibrium quantity increases.
E) could either rise or fall, but the equilibrium quantity increases.
22) What will happen to the equilibrium price and quantity of coffee if it is discovered to help 22) ______
prevent colds and, at the same time, Brazil and Vietnam emerge in the global market as massive
producers of coffee?
A) The equilibrium price will fall and the effect on the equilibrium quantity is uncertain.
B) The equilibrium price will rise and the effect on the equilibrium quantity is uncertain.
C) The equilibrium quantity will increase and the equilibrium price will remain unchanged.
D) The equilibrium quantity will increase and the effect on the equilibrium price is uncertain.
E) The equilibrium quantity will decrease and the equilibrium price will rise.
23) A price elasticity of demand of 2 m