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Final

ECON 2002.01 Study Guide - Final Guide: Tuition Payments, Price Floor, Absolute AdvantageExam


Department
Economics
Course Code
ECON 2002.01
Professor
All
Study Guide
Final

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Please bubble in the answer on your scantron. There are 40 questions.
1) Irene needs 1 hour to make 1 chair, and need 4 hour to make 1 table. Greg need 1 hour to
make 1 chair, and need 2 hour to make 1 table
A) Irene has the absolute advantage in the production of tables.
B) Greg has the absolute advantage in the production of chairs.
C) Irene has the comparative advantage in the production of chairs.
D) Greg has the comparative advantage in the production of chairs.
Answer: C
2) Which of the following will cause, other things being equal, a movement along the
supply curve for LED televisions?
A) An improvement in the technology of producing LED televisions.
B) An increase in resource costs for producing LED televisions.
C) A reduction in the price of LED televisions.
D) An expectation that the price of LED televisions will be lower in the future.
Answer: C
3) If demand increases while supply decreases, then the equilibrium price
A) always increases.
B) always decreases.
C) may increase, decrease, or stay the same.
D) never changes.
Answer: A
4) Which of the following is a price floor?
A) rent controls
B) minimum wage rates
C) a freeze on upward-moving gasoline prices
D) college tuition caps
Answer: B
5) Suppose the price of cheese rises. In the market for pizza, one would expect that
A) the supply of pizza would increase, and the price would fall.
B) the demand for pizza would increase, and the price would increase.
C) the demand for pizza would decrease, and price would fall.
D) the supply of pizza would decrease, and price would rise.

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Answer: D
6) Refer to the above figure. If government sets the maximum legal price of gasoline at $2
per gallon, then the $2 limit acts as
A) a price floor.
B) a price ceiling.
C) an equilibrium price.
D) a just price.
Answer: B
7) Refer to the above figure. If the government set a price floor of $3.50 per gallon, there
would be
A) an excess quantity demanded equal to 100,000 gallons.
B) an excess quantity supplied equal to the distance BD.
C) an excess quantity supplied equal to the distance BF.
D) an excess quantity supplied equal to 100,000 gallons.
Answer: D
8) The prices of certain goods, such as ice and gasoline, often increase after a natural
disaster such as a hurricane. The economic explanation for this observation is that
A) people panic in disaster situations.
B) disasters bring out the worst in people.
C) the disaster temporarily reduces the supply of the goods and increases the demand for

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the goods.
D) the disaster temporarily reduces the supply of the goods and reduces the demand for
the goods.
Answer: C
9) Which of the following is a normative statement?
A) An increase in consumer income will lead to increased sales of beef.
B) A decrease in the rate of unemployment will lead to upward pressure on consumer
prices.
C) An increase in the income tax will cause a greater reduction in savings than an
increase in the sales tax.
D) An economy with high unemployment can be worse off than an economy with high
inflation.
Answer: D
10) Opportunity cost is illustrated on the production possibilities curve by a
A) bowed-out shape of the curve.
B) shift to the right of the curve.
C) shift to the left of the curve.
D) movement along the curve.
Answer: D
11) Pam graduates from law school and gets a position in a law firm. At the same time the
price of hamburger falls while other food prices have stayed the same. She notices that
she buys less hamburger than she did before. Is she violating the law of demand?
A) Yes, since she is buying less hamburger at a lower price.
B) Yes, since she is buying less hamburger in a relatively short period of time and we
wouldn't expect her tastes to have changed.
C) No, since the law of demand refers to relative price changes and the price of
hamburger falling is an absolute price change.
D) No, since other things are not held constant, such as her income.
Answer: D
12) The price of bread in terms of gallons of milk per loaf is 0.6 and the price a gallon of
milk in terms of pounds of butter per gallon is 1.2. What is the relative price of bread to
butter?
A) 1.39
B) 0.6
C) 0.72
D) 0.50
Answer: C
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