Reference no: EM131018492

Midterm One Morning Exam-

MULTIPLE CHOICE QUESTIONS-

Use the following information for the next two (2) questions.

Zack has a busy life and he has to make some tough choices. Zack has to attend his Econ 101 midterm today (this takes 2 hours).  But, he gets to allocate the remaining 22 hours available between sleeping (X) and writing comic books (Y). He takes four hours to write one comic book.

1. What is the opportunity cost of sleeping 8 hours?

a) Depends on how much he was originally sleeping.

b) ½ of a comic book.

c) 2 comic books.

d) 4 comic books.

2. Suppose instead Zack faces those same 2 choices tomorrow, but he no longer has to attend the Econ 101 midterm, giving him 24 hours to allocate.  As compared to the original scenario, the opportunity cost of sleeping 8 hours ________?

a) Increases.

b) Stays the same.

c) Decreases.

d) Not enough information.

3. Which of the following is a normative statement?

a) Selecting this answer will lower your grade.

b) You got this question correct.

c) Your midterm grade is determined partly by your answers to this question.

d) This midterm is unfair.

4. Which of the following statements best describes economics?

a) Economics is the study of employment and commercial output.

b) Economics is the study of accounting with opportunity costs.

c) Economics is the study of choice under conditions of scarcity.

d) Economics is the study of choice given limited wants and unlimited resources.

5. Zordonox travelled to Earth from his home planet of Mars. While on Earth, he only visited the annual AARP (formerly known as the American Association of Retired Persons) convention, where he met over 1000 retired people. He reports to his Martian friends that the average earthling is wrinkled, has gray hair, is hard of hearing, and walks very slowly. What was Zordonox's biggest mistake with his report?

a) He did not collect a large enough sample of earthlings.

b) He failed to collect a random or representative sample of earthlings.

c) He did not observe his sample long enough.

d) He failed to get a cross-section of information.

6. Examine the graphs below.  Each shows a relationship between cataract rates among populations based on the distance to the nearest grocery store in the year 1999.  Which best describes the differences or similarities between the graphs?

 a) The chart on the left shows a positive relationship, while the chart on the right does not.

b) Both charts show a similar positive relationship, using time-series data.

c) Both charts show a similar positive relationship using cross sectional data.

d) Both charts show a positive relationship, though of different magnitudes, using time-series data.

Use the following information to answer the next three (3) questions.

Jack and Jill live together.  It takes Jack 4 hours to clean a room and 3 hours to cook a meal.  Jill takes 1 hour to cook the same meal and 2 hours to clean a room.  Both of them have 8 hours to work on cooking and cleaning.  Let (R) be the number of rooms cleaned and (M) be the number of meals cooked. Assume that both Jack and Jill have linear PPFs.

7. What is the PPF for Jack in terms of R and M?

a) 4R + 3M = 8

b) R = 2M + 2

c) M = 2 - 4R

d) 2M + 4R = 8

8. Jack and Jill need to cook a total of 6 meals, and clean a total of 3 rooms each day.  How will the jobs be allocated to ensure 6 meals are made and 3 rooms are cleaned every day?

a) Jill cooks 6 meals, Jack cleans 3 rooms.

b) There is not enough time for Jack and Jill to cook 6 meals and clean 3 rooms together.

c) Jack cooks 6 meals, and Jill cleans 3 rooms.

d) Jill cooks 6 meals and cleans 1 room.  Jack cleans 2 rooms.

9. Who has the comparative advantage in cooking meals?

a) Jack has the comparative advantage in cooking meals.

b) Jill has the comparative advantage in cooking meals.

c) Both Jack and Jill have the same opportunity cost for cooking meals.

d) Neither Jack nor Jill have the comparative advantage in cooking meals.

Use the following information to answer the next question.

Dexter and Deb both work for the Miami Metro Police Department.  Since Dexter is a very smart guy, he has the comparative advantage in catching criminals.  If Dexter and Deb spend all day catching criminals, together they can catch 10.  If they spend all day writing underage drinking tickets, together they can write 8 underage drinking tickets. For this question assume that both Dexter and Deb have linear PPFs.

10. Who has the comparative advantage in writing underage drinking tickets?

a) Dexter has the comparative advantage in writing underage drinking tickets.

b) Deb has the comparative advantage in writing underage drinking tickets.

c) Neither Dexter nor Deb has the comparative advantage in writing underage drinking tickets.

d) There is not enough information provided to answer this question.

Use the following information to answer the next two (2) questions.

Harry and Lloyd always want to look good for their parties and so they decide to make their own outfits.  Both of them are able to produce suits and canes. 

Harry can produce suits (S) and canes (C) according to the following relationship: S = 10 - 3C.  Lloyd can produce suits (S) and canes (C) according to the following relationship: C = 10 - 3S. 

11. What is the opportunity cost of producing a Cane (C) for Harry?

a) 10 suits

b) 3 suits

c) 1/3 of a suit

d) 1/10 of a suit

12. Harry and Lloyd are trying to trade with one another. Which of the following answers would both Harry and Lloyd accept when trading 6 suits?

a) 3 canes

b) 1 cane

c) 20 canes

d) 1/3 of a cane

13. Luke and Kyle are roommates living in the dorms.  The opportunity cost of doing one homework assignment is missing out on 5 games of Halo for Luke.  Kyle is a much better student and has the comparative advantage in doing homework assignments.  Assume that both Luke and Kyle have linear PPFs for this question. What must be the opportunity cost of 15 games of Halo for Kyle?

a) More than 3 homework assignments.

b) Less than 3 homework assignments.

c) More than 2 homework assignments.

d) Between 2 and 5 homework assignments.

14. The price of good A increases and this results in a higher price and quantity for good B.  Holding everything else constant, this must mean that _______.

a) Good B is an inferior good.

b) Good B is a complement for good A.

c) Good B is a substitute for good A.

d) Good A and good B are not related goods.

15. Suppose the initial demand curve for good A is given by Q = 9 - 2P.  Now income for individuals in this market increases and the demand curve changes to 3Q = 15 - 6P.  This tells us that good A is

a) A necessity.

b) An inferior good.

c) A luxury.

d) A normal good.

16. Which of the following will shift the supply curve for good A to the right?

a) A decrease in the cost of equipment used in the production of good A

b) A surplus in good A

c) An increase in the wages of workers who produce good A

d) An increase in the number of people who prefer A

17. Suppose the market demand and market supply curves for bicycles in Madison are given by the following equations where P is price per bicycle and Q is quantity of bicycles:

Market demand:  P^d = 300 - 5Q^d

Market supply:  Q_s = 0.4P_s

Given these two curves we know that the equilibrium price is $100 and the equilibrium quantity is 40 bicycles.  Suppose that Madison increases the number of bike paths and this increase in bike paths results in the demand curve shifting. Given this shift there is now a shortage of 30 bicycles at a price of $100. Given this information and holding everything else constant, what is the new market demand curve?

a) PD = 450 - 5QD

b) PD = 400 - 5QD

c) PD = 300 - 4QD

d) PD = 300 - 5QD

18. Let the demand and supply functions for horror films in Monsteria be represented by the following equations where P is the price per horror film and Q is the quantity of horror films:

Demand:  P_D = 15 - 2Q_D 

Supply:  P_S = 3 + Q_S

Suppose Monsteria is ruled by a dictator and this dictator implements a price floor of $9 in the market for horror films. Holding everything else constant, what will be the loss in consumer surplus due to the imposition of this price floor?

a) $9

b) $16

c) $7

d) $0

19. Queen Elizabeth wants to know the demand equation of the housing market in London.  Before your investigation, Queen Elizabeth tells you she set the housing price ceiling equal to $2 and at that price ceiling price there is an excess demand for housing equal to 3 houses.  The supply of houses is represented by Q_S = P - 1, and the demand curve is linear.  Which of the following could be the demand curve for Houses?

a) P = 10 - Q_D

b) P = 10 - 2Q_D

c) P = 10 + Q_D

d) P = 10 - 4Q_D

Use the following graphs to answer the next two (2) questions.

The left hand graph represents the linear supply curve in a market while the right hand graph represents the linear demand curve in the same market.

20.  The equilibrium quantity and equilibrium price in this market is

a) 90 units, $5

b) 60 units, $20

c) 32 units, $16

d) 50 units, $25

21. When the above market is in equilibrium the amount consumers spend on the good can be calculated as the product of the number of units purchased times the price per unit. In this problem, consumer expenditure in equilibrium is equal to?

a) $450

b) $1200

c) $412

d) $1250

Use the information below to answer the next three (3) questions.

Suppose the market for corn in Utopia can be described as follows:

The demand for corn is linear and when the price of corn is $1000, zero units of the good are demanded. When the price of corn is $0, then 1000 units of corn are demanded.

The supply of corn is linear and when the price of corn is $200, zero units of the good are supplied. When the price of corn is $1000, then 800 units of corn are supplied.

22. Given the above information, the equilibrium quantity and equilibrium price in this market is

a) 600 units, $400

b) 600 units, $800

c) 400 units, $400

d) 400 units, $600

23. Suppose a price floor of $800 per unit is imposed in this market by the government of Utopia. Holding everything else constant, which of the following statements is true?

a) There will be no effect on this market since the price floor to be effective must be set higher than the equilibrium price.

b) There will be no effect on this market since the price floor to be effective must be set lower than the equilibrium price.

c) The price floor will create a surplus of 400 units of corn in this market.

d) The price floor will create a shortage of 400 units of corn in this market.

24. Suppose the government guarantees producers of corn in Utopia a price of $800 per unit. Holding everything else constant, what are the costs to the government of the implementation of this subsidy program in the market for corn?

a) $320,000

b) $480,000

c)  $160,000

d) $240,000

Use the following information to answer the next three (3) questions.

Montrovia is a small, closed economy that produces tires. The domestic demand and domestic supply of tires in Montrovia is given by the following equations where P is the price per unit and Q is the quantity of tires:

Domestic Demand: P = 500 - (5/1000)Q

Domestic Supply: P = 100 + (1/600)Q

You are also told that the world price for tires is $150 per tire.

25. Suppose Montrovia is considering opening its tire market to international trade. Holding everything else constant, which of the following statements is true?

a) If Montrovia opens its tire market to trade, Montrovia will import 40,000 tires and domestic producers in Montrovia will favor this policy change.

b) If Montrovia opens its tire market to trade, Montrovia will import 70,000 tires and domestic consumers in Montrovia will favor this policy change.

c) If Montrovia opens its tire market to trade, Montrovia will export 40,000 tires and domestic consumers in Montrovia will favor this policy change.

d) None of the above answers is correct.

26. Suppose Montrovia opens its tire market to international trade while simultaneously the government of Montrovia implements a tariff that raises the price per tire to $180. Holding everything else constant, the amount of tariff revenue the government earns from this tariff will equal?

a) $480,000

b) $16,000

c) $2,880,000

d) $1,800,000

27. What is the deadweight loss in Montrovia given the tariff described in the previous question?

a) $270,000

b) $9,000

c) $720,000

d) $360,000

Use the following information for the next three (3) questions.

In Gotham city, all the gadgets are provided by the Wayne family. The following equations give the demand and supply curves for gadgets in Gotham where P is the price per gadget and Q is the quantity of gadgets:

Demand for gadgets: P = 100 - 2Q

Supply of gadgets: P = 20 + 2Q

28. Suppose the city mayor decides to impose a $20 tax on gadgets. Holding everything else constant, what is the equilibrium quantity of gadgets after the imposition of this tax?

 

a) 15 gadgets

b) 10 gadgets

c) 25 gadgets

d) We need to know who is paying the tax to determine equilibrium.

29. Holding everything else constant, how much money will the mayor of Gotham collect from this tax?

a) $500

b) $0

c) $300

d) $200

30.  Given this excise tax and holding everything else constant, how much is the deadweight loss due to the imposition of this excise tax in Gotham?

a) $150

b) $100

c) $50

d) $0