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) You are told that a 5 percent increase in the price of a good increases the quantity supplied by 11) _______
percent after one month. Supply of this good is ________. This good is most likely produced
using productive resources that are ________.
A) elastic; unique or rare
B) inelastic; plentiful or easily obtained
C) decreasing; unique or rare
D) elastic; plentiful or easily obtained
E) unit elastic; unique or rare
2) Complete the following sentence. Microeconomics is 2) _______
A) concerned exclusively with the role of the government in the economy.
B) concerned with normative issues only.
C) not concerned with factors of production.
D) the branch of economics that studies the choices of individuals and businesses.
E) concerned with the size of the total amount of income earned by all households in an
3) On a graph of a production possibilities frontier, opportunity cost is represented by 3) _______
A) a point on the vertical axis.
B) a ray through the origin.
C) a point on the horizontal axis.
D) the slope of the production possibilities frontier.
E) the x-axis intercept.
4) Which of the following statements is normative? 4) _______
A) Scientists should not make normative statements.
B) As e-book prices fall, people buy more of them.
C) If income increases, sales of luxury goods fall.
D) Warts are caused by handling toads.
E) There is more caffeine in a cup of tea than in a cup of coffee. Use the information below to answer the following questions. 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.
5) Given Fact 2.4.1, Andy and Rolfe 5) _______
A) cannot gain from trade.
B) can gain from trade if Andy specializes in butter production and Rolfe specializes in bread
C) can trade, but only Rolfe will gain.
D) can trade, but only Andy will gain.
E) can gain from trade if Andy specializes in bread production and Rolfe specializes in butter
6) During the next hour John can choose one of the following three activities: playing basketball, 6) _______
watching television, or reading a book. The opportunity cost of reading a book
A) depends on how much the book cost when it was purchased.
B) depends on how much John enjoys the book.
C) is the value of playing basketball and the value of watching television.
D) is the value of playing basketball if John prefers that to watching television.
E) is the value of watching television if John prefers playing basketball to watching television.
7) A shift of the supply curve for rutabagas occurs if there is 7) _______
A) a change in preferences for rutabagas.
B) a change in income.
C) a change in the price of a related good that is a substitute for rutabagas.
D) a change in the price of rutabagas.
E) none of the above.
8) What will happen to the equilibrium price and quantity of coffee if it is discovered to help 8) _______
prevent colds and, at the same time, Brazil and Vietnam emerge in the global market as massive
producers of coffee?
A) The equilibrium quantity will increase and the equilibrium price will remain unchanged.
B) The equilibrium price will rise and the effect on the equilibrium quantity is uncertain.
C) The equilibrium quantity will decrease and the equilibrium price will rise.
D) The equilibrium price will fall and the effect on the equilibrium quantity is uncertain.
E) The equilibrium quantity will increase and the effect on the equilibrium price is uncertain.
9) Trade is organized using the social institutions of 9) _______
D) property rights.
E) all of the above.
10) When the efficient quantity is produced 10) ______
A) resources are used in the activities in which they are most highly valued.
B) the quantity demanded equals the quantity supplied.
C) marginal social benefit equals marginal social cost.
D) the sum of consumer surplus and producer surplus is maximized.
E) all of the above. 11) Canada produces both lumber and wine. Canada exports lumber and imports wine. The rest of 11) ______
the world imports Canadian lumber and exports wine to Canada. If Canada did not trade with
the rest of the world, then the equilibrium price of lumber would be ________ in Canada than
the rest of the world, and the equilibrium price of wine would be ________ in Canada than the
rest of the world.
A) the same or lower; the same or higher
B) lower; higher
C) higher; higher
D) lower; lower
E) higher; lower
Use the table below to answer the following question.
12) Refer to Table 6.4.1. The table shows the demand and supply schedules for rice. With a 12) ______
production quota of 2,000 boxes a week, the price of a box of rice is ________, the marginal cost
of producing rice is ________ a box, and the quantity of rice produced is ________ boxes a week.
A) $1.40; $1.40; 2,500
B) $1.30; $1.60; 2,000
C) $1.40; $1.40; 2,000
D) $1.60; $1.30; 2,500
E) $1.60; $1.30; 2,000
13) A country opens up to trade and becomes an importer of some good. Consumer surplus 13) ______
________, producer surplus ________, and total surplus ________.
A) increases; increases; increases
B) increases; decreases; increases
C) decreases; decreases; decreases
D) decreases; increases; increases
E) increases; decreases; decreases
14) Choose the statement or statements that are correct. 14) ______
I. The value of one more unit of a good or service is its marginal benefit.
II. Marginal benefit equals the total amount we spend on a good or service.
III. Marginal benefit is the maximum amount willingly paid for another unit of a good or
A) II only.
B) I only.
C) I, II, and III.
D) III only.
E) I and III. 15)Choose the correct statement. (think hard, one answer looks good and is wrong) 15) ______
A) When the efficient quantity is produced in a competitive market, consumer surplus is
B) The competitive market pushes the quantity produced to its efficient level.
C) When the efficient quantity is produced in a competitive market, producer surplus is
D) When the efficient quantity is produced in a competitive market, producer surplus is
E) Competitive equilibrium occurs when demand equals supply.
16) If the cross elasticity of demand between goods A and B is negative, then 16) ______
A) the demands for A and B are both price inelastic.
B) A and B are substitutes.
C) A and B are complements.
D) the demands for A and B are both price elastic.
E) A and B are independent goods.
17) Suppose the government introduces a ceiling on the fees that lawyers are permitted to charge. If 17) ______
the fee ceiling is set ________ the equilibrium wage rate, the amount of work done by lawyers
________, the consumer surplus of people who hire lawyers ________, and the producer surplus
of law firms ________. (take your time and sketch out the possible sequence of answers)
A) above; decreases; decreases; decreases
B) below; decreases; decreases; decreases
C) above; increases; increases; increases
D) below; decreases; increases; decreases
E) below; increases; increases; increases
18) At West, recognized as the "jewel in Vancouver's culinary crown", reservations are essential. At 18) ______
Le Bistro Chez Michel, a restaurant in North Vancouver, reservations are recommended. At Vij's,
a restaurant not too far from the University of British Columbia, reservations are not accepted.
West allocates scarce table resources by ________, Le Bistro Chez Michel allocates scarce table
resources by ________, and Vij's allocates scarce table resources by ________.
A) first-come, first-served; first-come, first-served; first-come, first-served
B) personal characteristics; personal characteristics; first-come, first-served
C) personal characteristics; personal characteristics and first-come, first-served; first-come,
D) a command system; a combination of a command system and first-come, first-served;
E) market price; market price and force; force
Use the figure 2.2.1 above to answer the following questions. 19) In Figure 2.2.1, when 2,000 bicycles are produced each month 19) ______
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.
Use the figure 6.2.1 below to answer the following question.
20) Refer to Figure 6.2.1. If the minimum wage is set at $2 per hour, what is the level of 20) ______
unemployment in millions of hours?
A) 50 B) 20 C) 10 D) 40 E) 0
21) An economic model is 21) ______
A) tested by examining the realism of its assumptions.
B) not useful unless it predicts with 100 percent accuracy.
C) not useful because it simplifies real problems.
D) tested by the Testing Committee of the Canadian Economic Association.
E) useful if it predicts well, even if its assumptions are not realistic.
Use the figure 4.1.3 below to answer the following question. 22) Given the relationship shown in Figure 4.1.3 between total revenue from the sale of a good and 22) ______
the quantity of the good sold, then
A) demand for this good is perfectly elastic.
B) this is an inferior good.
C) this is a normal good.
D) the price elasticity of demand is 1.
E) the price elasticity of demand is zero.
Use the figure below to answer the following question.