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ECN 101 Economics I Summer Term Final Examination 01/09/08 Assist. Prof. Dr. B.Müge TUNAER VURAL Student’s Name: Num. I. Multiple Choice Questions. Each worth 3 pts. Total=30 pts. 1. Consider the table below, which country has comparative advantage? Food Cloth Country A 6 3 Country B 1 2 a. Country A has a comparative advantage in production of both goods b. Country B has a comparative advantage in production of both goods c. Country A has a comparative advantage in the production of food d. Country B has a comparative advantage in the production of food 2. Which of the following situations lead to a lower equilibrium price? a. An increase in demand without a change in supply b. A decrease in supply accompanied by an increase in demand c. A decrease in supply wihtout a change in demand d. A decrease in demand accompanied by an increase in supply e. An increase in demand accompanied by an increase in supply 3. When the magnitude of decrease in supply is greater than the magnitude of a decrease in demand a. Both equilibrium price and quantity will increase b. Both equilibrium price and quantity will decrease c. Equilibrium quantity will increase equilibrium price will decrease d. Equilibrium quantity will decrease equilibrium price will increase 4. According to the law of increasing opportunity costs a. the more one is willing to pay for resources, the larger will be the possible level of production. b. increasing the production of a particular good will cause the price of good tor rise. c. in order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods. d. only by keeping production constant can rising prices be avoided. 5. Which of the following events would cause a rightward shift in the market supply curve for automobiles? a. A technological improvement which reduces the cost of production. b. An increase in the wages of autoworkers. c. A higher sales tax on automobiles. d. A decrease in the number of sellers. II. Problem Sets 2. (24) Suppose that the market for potatoes consists of Jennifer and Mark. Potatoes are normal good for Jennifer and inferior good for Mark. a. (8) Suppose that Mark’s income goes up and Jennifer’s income goes down. Show the effects of these changes on the individual demand curves of Jennifer and Mark. b. (8) Show the effects of the changes in income on the market for potatoes and state what happens to the equilibrium price and quantity. c. (8) Suppose instead that the income of both Jennifer and Mark goes up. Show the effect of this increase in incomes on the market for potatoes and state what happens to the equilibrium price and quantity. 3. (13) Show the effect of a decrease in the price of movie tickets on the market for popcorn and determine what happens to the equilibrium price and quantity traded of popcorn. How are the two goods related to each other?