Midterm 1 Sample Question PDF

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Midterm 1 Sample Question

Indicate the answer choice that best completes the statement or answers the question. 1. When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing a. scarcity. b. surpluses. c. inefficiencies. d. inequalities. 2. Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the principle that a. trade can make everyone better off. b. people face trade-offs. c. rational people think at the margin. d. people respond to incentives. 3. Efficiency means that a. society is conserving resources in order to save them for the future. b. society's goods and services are distributed equally among society's members. c. society's goods and services are distributed fairly, though not necessarily equally, among society's members. d. society is getting the maximum benefits from its scarce resources. 4. The principle that "trade can make everyone better off" applies to interactions and trade between a. families. b. states within the United States. c. nations. d. All of the above are correct. 5. The "invisible hand" directs economic activity through a. advertising. b. prices. c. central planning. d. government regulations. 6. A microeconomist — as opposed to a macroeconomist — might study a. the effect of a national healthcare program on the nation’s unemployment rate. b. the effect of new regulations on production in the pulp and paper industry. c. the effect of changes in interest rates on gross domestic product. d. the growth rate of production in the economy. 7. For economists, statements about the world are of two types: a. assumptions and theories. b. true statements and false statements. c. specific statements and general statements. d. positive statements and normative .

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Midterm 1 Sample Question statements. 8. Economists sometimes give conflicting advice because a. graduate students in economics are encouraged to argue with each other. b. economists have different values and scientific judgment. c. economists acting as scientists do not like to agree with economists acting as policy advisers. d. economics is more of a belief system than a science. Table 3-3 Production Opportunities

England France

Hours Needed to Make 1 Unit of Cheese Wine 1 4 5 2

Number of Units Produced in 40 Hours Cheese Wine 40 10 8 20

9. Refer to Table 3-3. Assume that England and France each has 40 labor hours available. If each country divides its time equally between the production of cheese and wine, then total production is a. 8 units of cheese and 10 units of wine b. 24 units of cheese and 15 units of wine c. 40 units of cheese and 20 units of wine d. 48 units of cheese and 30 units of wine Figure 3-5 Hosne’s Production Possibilities Frontier

Merve’s Production Possibilities Frontier

10. Refer to Figure 3-5. If Hosne must work 0.5 hour to make each purse, then her production possibilities frontier is based on how many hours of work? .

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Midterm 1 Sample Question a. 2 hours b. 5 hours c. 20 hours d. 50 hours Figure 3-10 Alice and Betty’s Production Possibilities in one 8-hour day. Alice’s Production Possibilities Frontier

Betty’s Production Possibilities Frontier

11. Refer to Figure 3-10. If point A represents Alice’s production and point B represents Betty’s production, a. Alice produces 200 pitchers of lemonade and 100 pizzas while Betty produces 180 pitchers of lemonade and 180 pizzas. b. Alice produces 180 pitchers of lemonade and 180 pizzas while Betty produces 200 pitchers of lemonade and 100 pizzas. c. Alice produces 100 pitchers of lemonade and 200 pizzas while Betty produces 180 pitchers of lemonade and 180 pizzas. d. Only Alice can benefit from specialization and trade. 12. The opportunity cost of an item is a. the number of hours that one must work in order to buy one unit of the item. b. what you give up to get that item. c. always less than the dollar value of the item. d. always greater than the cost of producing the item. Table 3-20 Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. Minutes Needed to Make 1 Brad .

Bushel of Wheat Pound of Beef 10 12 Page 3

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Midterm 1 Sample Question Theresa

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13. Refer to Table 3-20. What is Theresa’s opportunity cost of producing one bushel of wheat? a. 5/6 pound of beef b. 6/5 pound of beef c. 3/5 pound of beef d. 5/3 pounds of beef Figure 3-15 Perry’s Production Possibilities Frontier

Jordan’s Production Possibilities Frontier

14. Refer to Figure 3-15. Which of the following is not correct? a. Perry and Jordan could each consume 2 novels and 6 poems without trade. b. Jordan could consume 2 novels and 6 poems both with and without trade. c. Perry and Jordan could each consume 2 novels and 6 poems with trade. d. Perry and Jordan could each consume 12 poems without trade. Figure 3-22 Alice and Betty’s Production Possibilities in one 8-hour day. Alice’s Production Possibilities Frontier

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Betty’s Production Possibilities Frontier

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Midterm 1 Sample Question

15. Refer to Figure 3-22. Which of the following statements is correct regarding absolute advantage? a. Alice has an absolute advantage in the production of both lemonade and pizzas. b. Betty has an absolute advantage in the production of both lemonade and pizzas. c. Alice has an absolute advantage in the production of pizzas while Betty has an absolute advantage in the production of lemonade. d. Alice has an absolute advantage in the production of lemonade while Betty has an absolute advantage in the production of pizzas. 16. The forces that make market economies work are a. work and leisure. b. politics and religion. c. supply and demand. d. taxes and government spending. 17. Which of the following would not result from all countries specializing according to the principle of comparative advantage? a. The size of the economic pie would increase. b. Worldwide production of goods and services would increase. c. The well-being of citizens in each country would be enhanced. d. Each country’s production possibilities frontier would shift inward. 18. A competitive market is one in which there a. is only one seller, but there are many buyers. b. are many sellers, and each seller has the ability to set the price of his product. c. are many sellers, and they compete with one another in such a way that some sellers are always being forced out of the market. d. are so many buyers and so many sellers that each has a negligible impact on the price of the product. Figure 4-2

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Midterm 1 Sample Question

19. Refer to Figure 4-2. Suppose Phil and Miss Kay are the only consumers in the market. If the price is $12, then the market quantity demanded is a. 0 units. b. 2 units. c. 4 units. d. 6 units. Figure 4-14

20. Refer to Figure 4-14. Which of the following would explain a movement from E1 to E2? a. There is an improvement in the technology used to produce this good. b. The cost of an input to the production of this good increases. c. This good becomes very popular. d. The price of a substitute good decreases. 21. A shortage exists in a market if a. there is an excess supply of the good. .

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Midterm 1 Sample Question b. quantity supplied exceeds quantity demanded. c. the current price is below its equilibrium price. d. All of the above are correct. Figure 4-26

22. Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for convertible automobiles of an increase in the price of steel? a. Point A to Point B b. Point C to Point B c. Point C to Point D d. Point A to Point D 23. The price elasticity of demand measures how much a. quantity demanded responds to a change in price. b. quantity demanded responds to a change in income. c. price responds to a change in demand. d. demand responds to a change in supply. Figure 5-12

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Midterm 1 Sample Question

24. Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is a. 0.4. b. 1. c. 2. d. 2.5. Figure 5-13

25. Refer to Figure 5-13. Between point A and point B on the graph, demand is a. perfectly elastic. b. inelastic. c. unit elastic. d. elastic, but not perfectly elastic. .

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Midterm 1 Sample Question 26. Which of the following is likely to have the most price inelastic demand? a. white chocolate chip with macadamia nut cookies b. Mrs. Field’s chocolate chip cookies c. milk chocolate chip cookies d. cookies 27. Which of the following is not an example of a public policy? a. rent-control laws b. minimum-wage laws c. taxes d. equilibrium laws 28. A binding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. a. (ii) only b. (iv) only c. (i) and (iii) only d. (ii) and (iv) only Figure 6-5

29. Refer to Figure 6-5. If government imposes a price floor at $9, then the price floor causes a. quantity demanded to decrease by 40 units. b. quantity supplied to increase by 20 units. c. a surplus of 60 units. d. All of the above are correct. Figure 6-20 .

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Midterm 1 Sample Question

30. Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. Which of the following is correct? a. Buyers and sellers will share the burden of the tax equally. b. Buyers will bear more of the burden of the tax than sellers will. c. Sellers will bear more of the burden of the tax than buyers will. d. Any of the above is possible.

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Midterm 1 Sample Question Answer Key 1. a 2. b 3. d 4. d 5. b 6. b 7. d 8. b 9. b 10. b 11. a 12. b 13. c 14. a 15. b 16. c 17. d 18. d 19. b 20. b 21. c 22. c 23. a 24. d 25. b .

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Midterm 1 Sample Question 26. d 27. d 28. d 29. d 30. c

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