Download Midterm #1 1. The following table shows the supply and demand

Midterm #1
1. The following table shows the supply and demand schedules for Arabian light crude oil
on the free market
Price
(Dollars/
barrel)
26
27
28
29
30
Quantity demanded
(mil. barrels per day)
Quantity Supplied
(mil. barrels per day)
14
13
12
11
10
10
11
12
13
14
Given the information in the table, the only price at which there is neither shortage nor
surplus is
A) $28 per barrel.
B) $29 per barrel.
C) $27 per barrel.
D) $26 per barrel.
2. Which of the following is an opportunity cost of recycling aluminum, paper and
cardboard from trash?
A) Spending time doing other things.
B) The salary paid to the administrator of the recycling program.
C) The cost of special collection bins for recyclable trash.
D) Purchasing a new garbage truck designed to collect sorted trash.
3. A cultural norm is
A) a physical or mental structure that significantly influences economic decisions.
B) a standard people use when they determine whether a particular activity or
behaviour is acceptable.
C) a generalization about the workings of an abstract economy.
D) an action taken to influence the course of economic events.
4. Given the equations for demand and supply: Qd = 48 - 4P and Qs = 4P - 16,
respectively, the quantity demanded equals the quantity supplied at a price of
A) $8.
B) $16.
C) $4.
D) $12.
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5. Economic reasoning
A) provides correct answers to just about every question.
B) is only used by economists.
C) should only be applied to economic matters.
D) provides a framework with which to conduct analysis.
Use the following to answer question 6:
40
Rye
30
20
10
0
10
20
Eggs
6. Refer to the graph above. The graph indicates that with the resources and technology it
has available, Ricardia
A) can produce both 40 units of rye and 20 units of eggs.
B) can produce either 20 units of rye or 40 units of eggs.
C) can produce either 40 units of rye or 20 units of eggs.
D) cannot produce both 20 units of rye and 10 units of eggs.
E) cannot produce both 20 units of rye and 5 units of eggs.
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Price
Price
Use the following to answer question 7:
Quantity
(C)
(B)
Quantity
Price
Price
(A)
Quantity
(D)
Quantity
7. If the quantity demanded by consumers is the same for every price, then the demand
curve would look like
A) A.
B) B.
C) C.
D) D.
8. If market supply increases
A) equilibrium price will fall, causing a movement along the demand curve.
B) equilibrium price will rise and demand will shift to the left.
C) equilibrium price will rise, causing a movement along the demand curve.
D) equilibrium price will fall and demand will shift to the right.
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9. Which statement BEST characterizes the tension that existed under feudalism?
A) Some individuals were excluded from market trade and felt unfairly treated.
B) Some individuals felt the result of market forces did not provide for their needs.
C) Some individuals felt that too few people owned the productive capital.
D) Some individuals were unable to provide a desirable life for themselves on the
manor.
10. Suppose an economy is trying to decide whether it should increase military spending or
increase spending on the poor. In this case, the society should
A) always spend more on the military because national security is essential.
B) base its choice on the circumstances it is currently faced with.
C) always spend more on the poor because poverty is undesirable.
D) always spend more on both since reducing poverty and increasing national security
are equally important.
11. You're deciding whether to install a $400 sunroof and a $200 security system in your
car. Suppose the marginal benefit from the sunroof is $350 while the marginal benefit
from the security system is $300. The economic decision rule dictates that you should
A) not purchase either because the benefits of each do not exceed the costs.
B) purchase only the sunroof because that will provide you with the greatest marginal
benefit.
C) purchase only the security system because its marginal benefit exceeds its marginal
cost.
D) purchase both options because the combined cost of both is less than the combined
benefit.
Price per unit
Use the following to answer question 12:
7
6
5
4
3
2
1
0
A
B
C
D
50 100 150 200 250 300 350
Quantity per week
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12. Consider the following demand table:
Price
$5.00
$4.00
$3.00
$2.00
Quantity demanded per week
100
150
200
250
Refer to the graph above. Which of the demand curves best reflects the demand table?
A) A.
B) B.
C) C.
D) D.
13. Who would likely argue that you need to study the trees before you can understand the
forest?
A) A macroeconomist.
B) A Marshallian economist.
C) A microeconomist.
D) A positive economist.
14. This production possibility table illustrates
A)
B)
C)
D)
Eggs
Rye
10
0
8
10
6
20
4
30
2
40
0
50
decreasing marginal opportunity cost.
constant marginal opportunity cost.
zero opportunity cost.
increasing marginal opportunity cost.
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Use the following to answer question 15:
6
Price
5
4
3
2
1
1
2
3
4
Quantity
5
6
15. Refer to the graph above. The slope of the curve is
A) minus 1.
B) minus 2.
C) minus infinity.
D) different at different points.
16. In the 1990s, the Internet has begun to provide services before only provided by highend PCs. At the same time, the price of computer chips to make high-end PCs has fallen
by 75 percent. What is the effect of the events on equilibrium price and quantity of
high-end PCs?
A) Price falls continuously and quantity rises continuously.
B) Price falls continuously as does quantity sold.
C) Price rises then falls while quantity sold falls continuously.
D) Price falls continuously while quantity falls initially but then rises, recouping earlier
losses.
17. An increase in the current price of gold is expected to cause a __________, while the
expectation of a future increase in the price of gold is expected to cause a __________.
A) rightward shift of the supply of gold curve; movement along the supply of gold
curve
B) movement along the supply of gold curve; rightward shift of the supply of gold
curve
C) leftward shift of the supply of gold curve; movement along the supply of gold curve
D) movement along the supply of gold curve; leftward shift of the supply of gold curve
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18. Historically, the distinction between socialism and capitalism has become
A) more pronounced as socialist countries have eliminated reliance on markets.
B) less pronounced as both capitalist and socialist countries have both eliminated
reliance on government planning.
C) less pronounced as government's economic role in capitalist countries has increased
and socialist countries have integrated some capitalist institutions.
D) more pronounced as capitalist countries have eliminated reliance on government
planning.
19. In practice, distribution under command economies is determined by
A) central planners.
B) individual altruism and cooperation.
C) market forces of supply and demand.
D) the ability of each individual to produce.
E) none of the above.
20. To demonstrate graphically the principle of increasing marginal opportunity cost, the
production possibility curve must be
A) bowed out.
B) bowed in.
C) straight.
D) flat.
21. The law of supply states that
A) less of a good will be supplied the higher its price, other things changing
proportionately.
B) quantity supplied increases as price increases, other things constant.
C) quantity supplied decreases as price increases, other things constant.
D) more of a good will be supplied the higher its price, other things changing
proportionately.
22. Political forces
A) affect the invisible hand through scarcity.
B) do not affect the invisible hand.
C) affect the invisible hand through the legal system.
D) affect the invisible hand through cultural norms.
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Industrial Goods
Use the following to answer question 23:
9
8
7
6
5
4
3
2
1
0
F
E
A
D
C
1
B
2
3 4 5 6 7 8
Agricultural Goods
23. Refer to the graph above. If countries A and B face the production possibility curves A
and B respectively, which dotted curve represents their combined production possibility
curve?
A) C
B) D
C) E
D) F
24. Soviet-style socialism is an economic system
A) based on private property rights.
B) that tries to organize society the way that most families are organized and strives to
see that individuals get what they need.
C) based on markets.
D) based on central planning and government ownership of the means of production.
25. The term efficiency means
A) any means necessary to achieve the maximum possible benefits.
B) using the quickest methods to obtain a goal.
C) laying off workers and downsizing.
D) using the cheapest means to achieve a reasonable outcome.
E) using the most effective methods to yield maximum benefits.
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26. The fact that a litre of milk is likely to cost more at a convenience store than at a
supermarket is an example of
A) social forces.
B) market forces.
C) normative economics.
D) political forces.
27. If a country takes advantage of the comparative advantage of some resources over
others its production possibility curve is likely to be
A) straight.
B) bowed inward.
C) flat.
D) bowed outward.
28. If the price of chicken rises and the price of beef doesn't rise, consumers will respond by
A) substituting chicken for beef.
B) increasing purchases of beef and chicken.
C) substituting beef for chicken.
D) reducing purchases of beef and chicken.
Use the following to answer question 29:
Mary
Economics
Math
5
0
4
1
3
2
2
3
1
4
0
5
Paul
Economics
15
12
9
6
3
0
Math
0
1
2
3
4
5
29. Given Mary and Paul's production possibility tables for answering economics and math
problems in a day, we can conclude that:
A) Paul has a comparative advantage in solving math problems.
B) Mary has a comparative advantage in solving math problems.
C) Paul has a comparative advantage in solving both math and economics problems.
D) Mary does not have a comparative advantage in solving math or economics
problems.
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30. If you choose not to answer this question, an economist is likely to infer that
A) your opportunity cost of answering the question is too low.
B) your opportunity cost of not answering the question is too high.
C) you are irrational.
D) your opportunity cost of answering the question is too high.
31. The principle of increasing marginal opportunity costs states that the
A) initial opportunity costs are high, but they increase the more you concentrate on the
activity.
B) initial opportunity costs are low, but they decrease the more you concentrate on the
activity.
C) initial opportunity costs are low, but they increase the more you concentrate on the
activity.
D) initial opportunity costs are high, but they decrease the more you concentrate on the
activity.
32. Suppose that it takes one unit of labour to produce a banjo and one unit of labour to
produce a guitar, no matter how many of each are produced. Suppose further that
labour is the only input in the economy and that banjos and guitars are the only outputs.
In this case, marginal opportunity cost
A) is increasing.
B) cannot be determined.
C) is decreasing.
D) is constant.
33. The theory that quantity supplied and price are positively related, other things constant,
is referred to as the
A) law of demand.
B) law of opportunity cost.
C) law of profit maximization.
D) law of supply.
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Use the following to answer question 34:
S1
S0
Price
B
C
A
D0
D1
Quantity
34. Refer to the graph above. In response to the rise in the price of oil in the 1970s,
consumers switched to fuel-efficient cars and set their thermostats lower. This is best
reflected by
A) a shift in the supply curve for OPEC oil from S1 to S0.
B) a movement along the new supply curve, S1, from point B to point C.
C) a shift in the demand curve for OPEC oil from D0 to D1.
D) a movement along the original demand curve, D0, from point A to point B.
35. Students at Provincial U pay $60 per year for a parking permit, but many complain that
they are not able to find a parking place in designated university lots. This suggests that
A) student incomes are too low.
B) Provincial U should make parking free.
C) parking permits are underpriced.
D) parking permits are overpriced.
36. Microeconomics is
A) the study of aggregate economic relationships.
B) an analysis of economic reality that proceeds from the whole to the parts.
C) the study of unemployment, business cycles, and growth.
D) the study of individual choice and how economic forces influence that choice.
37. The more the current price exceeds the equilibrium price
A) the smaller the resulting shortage will be.
B) the greater the resulting surplus will be.
C) the smaller the resulting surplus will be.
D) the greater the resulting shortage will be.
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38. According to the law of supply, it takes an increase in the __________ of a product,
other things constant, to motivate firms to increase their quantity supplied of that
product.
A) opportunity cost
B) supply
C) production cost
D) price
39. Qs = -4 + 5P and Qd = 18 - 6P respectively, where price is dollars per litre and quantity
is thousands of litres. The equilibrium market price and quantity is
A) P = $14, Q = 66 thousand litres.
B) P = $2, Q = 6 thousand litres.
C) P = $22, Q = 106 thousand litres.
D) P = $3, Q = 6 thousand litres.
40. Which of the following statements about market economies is false?
A) Distribution is according to each individual's need.
B) Distribution is according to each individual's inherited wealth.
C) Distribution is according to each individual's ability.
D) Distribution is according to each individual's effort.
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Answer Key
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40.
A
A
B
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D
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B
A
D
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D
D
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A
A
B
C
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D
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B
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B
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C
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D
D
C
D
B
D
B
A
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