Download Midterm Exam 1 Econ 101 Answer Section

Midterm Exam 1
Answer Section
Econ 101
TRUE/FALSE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
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T
F
F
T
T
T
T
F
T
F
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1
1
1
1
1
1
1
1
1
1
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1
1
1
1
1
1
1
1
1
1
MULTIPLE CHOICE
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
ANS:
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C
D
A
C
B
D
D
A
E
A
SHORT ANSWER
21. ANS:
It is expected that the individual committing a crime is trying to make her/himself better off, and has considered
the potential consequences of her/his actions (perhaps getting caught and punished).
PTS: 1
22.ANS:
Growth does not eliminate scarcity. When output grows more rapidly than population, people are better off. But
they still face trade-offs. At any point along the production possibilities curve, to get more of one thing, one
must give up something else.
PTS: 1
23. ANS:
Since it is a testable proposition, it is a positive economic statement. The statement need not be true, only
testable.
PTS: 1
24. ANS:
No. Very likely the reduction in price is due to an increase in supply (not an increase in quantity supplied). As
DVD technology has progressed, DVD players have become standardized and more efficiently mass-produced,
leading to an increase in supply. What has likely been observed is a rightward shift of the supply curve, not a
movement along the supply curve.
PTS: 1
25. ANS:
As homes and buildings are being reconstructed, the demand for building supplies will increase significantly.
The increase in demand causes a movement along the supply curve, resulting in an increased quantity of
building supplies traded. Prices will rise precipitously if supply is highly inelastic.
PTS: 1
26. ANS:
Markets tend toward equilibrium because when a shortage exists, consumers who are unhappy about not being
able to purchase the products or services they want will tend to bid the prices higher, moving the market toward
equilibrium. If a surplus exists, suppliers are unhappy about not being able to sell the quantity of goods or
services they wish, and will tend to lower prices in order to persuade consumers to purchase more goods and
services.
PTS: 1
27. ANS:
A price floor set above the equilibrium price will result in a surplus.
PTS: 1
28. ANS:
No. During summer months, the demand for beach resort accommodations tends to increase, pushing up both
prices and occupancy for the duration. An increase in demand (a shift of the curve. occurs. This does not violate
the law of demand, which states that there is an inverse relationship between price and quantity demanded, all
other things being equal.
PTS: 1
29. ANS:
Elasticity of demand = Percentage change in quantity demanded/Percentage change in price. Using the average
quantities and average prices to calculate elasticity, we obtain:
PTS: 1
30. ANS:
ANS:
The production possibilities curve is likely to shift inward when economic resources are destroyed during a war.
PTS: 1