17 Aug Economics 201 Sample Midterm
Economics 201 Sample Midterm
Multiple Choice
Identify the letter of the 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. communism.
c. externalities.
d. market failure.
2. Daniel decides to spend the last two hours of the night before his economics exam studying instead of sleeping. For Daniel, his tradeoff would be
a. nothing, since no dollar value can be put on sleep.
b. nothing, since studying would be more beneficial than sleep.
c. the six hours of sleep he could have had if he had gone to bed before midnight.
d. the two hours of rest he would have gotten.
3. Which of the following best defines efficiency?
a. absolute fairness
b. equal distribution
c. minimum waste
d. consumer sovereignty
4. When government policies such as the welfare system try to help the most needy members of society, it
a. increases equity and reduces efficiency.
b. reduces charitable contributions in an economy.
c. increases the productivity of the needy in the society.
d. causes market failure to occur.
5. The decisions of firms and households are guided by profit and self-interest in a
a. command economy.
b. traditional economy.
c. market economy.
d. All of the above are correct.
6. Prior to its collapse, communist countries worked on the premise that economic well-being could be organized only through/by
a. a market economy.
b. government central planners.
c. government-imposed private monopolies.
d. increased competition.
7. The term market failure refers to
a. a situation in which the market on its own fails to allocate resources efficiently.
b. an unsuccessful advertising campaign which reduces buyer demand.
c. a situation in which competition among firms becomes ruthless.
d. a firm which is forced out of business because of losses.
8. The self-interest of the participants in an economy is guided into promoting general economic self-interest by
a. the invisible hand.
b. market power.
c. government intervention.
d. property rights.
9. Factors of production are
a. the mathematical calculations firms make to determine production.
b. weather and social and political conditions that affect production.
c. the physical relationships between economic inputs and outputs.
d. inputs into the production process.
Figure 2-1
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10. Refer to Figure 2-1. Which arrow shows the flow of income payments?
a. A
b. B
c. C
d. D
Figure 2-3
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11. Refer to Figure 2-3. The economy CANNOT produce at which point or points?
a. A
b. C
c. A, C
d. A, C, D,
12. Refer to Figure 2-3. Which point or points are efficient?
a. B, E
b. A, B, E
c. D
d. C
Figure 2-4
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13. Refer to Figure 2-4. The opportunity cost to the economy of getting 30 additional toothbrushes by moving from point A to point D is
a. 10 toasters.
b. 15 toasters.
c. 20 toasters.
d. 25 toasters.
Figure 2-5
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14. Refer to Figure 2-5. The shift of the frontier from A to B was most likely caused by which of the following?
a. technological improvement in the production of batteries
b. more labour available in the economy
c. a general technological breakthrough
d. more capital available in the economy
15. Microeconomics is the study of
a. the behaviour of consumers.
b. how individual households and firms make decisions.
c. how government affects the economy.
d. how the economy as a whole works.
Figure 2-9
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16. Refer to Figure 2-9. Cups of coffee per day and the hours that someone can go without sleep have
a. a positive correlation.
b. a negative correlation.
c. a random correlation.
d. no correlation.
Table 3-3
Labor Hours Needed to Make
One Unit of:
Amount Produced in 24 Hours:
Baskets
Birdhouses
Baskets
Birdhouses
Montana
6
2
4
12
Missouri
3
4
8
6
????
17. Refer to Table 3-3. The opportunity cost of 1 birdhouse for Montana is
a. 1/3 basket.
b. 1 basket.
c. 4/3 baskets.
d. 3 baskets.
18. Refer to Table 3-3. Montana has an absolute advantage in
a. birdhouses and Missouri has an absolute advantage in baskets.
b. baskets and Missouri has an absolute advantage in birdhouses.
c. neither good and Missouri has an absolute advantage in both goods.
d. both goods and Missouri has an absolute advantage in neither good.
19. Refer to Table 3-3. Montana has a comparative advantage in
a. baskets and Missouri has a comparative advantage in birdhouses.
b. birdhouses and Missouri has a comparative advantage in baskets.
c. neither good and Missouri has a comparative advantage in both goods.
d. both goods and Missouri has a comparative advantage in neither good.
20. Refer to Table 3-3. If Montana and Missouri trade based on the principle of comparative advantage, Montana will export
a. baskets and Missouri will export birdhouses.
b. birdhouses and Missouri will export baskets.
c. neither good and Missouri will export both goods.
d. both goods and Missouri will export neither good.
21. A market is a
a. group of demanders and suppliers of a particular good or service.
b. group of people with common desires.
c. place where only sellers meet.
d. place where only buyers come together.
22. You lose your job and as a result, you buy fewer mystery books. This shows that you consider mystery books to be a/an
a. normal good.
b. inferior good.
c. luxury good.
d. complementary good.
23. If goods A and B are complements, an increase in the price of A will result in
a. more of good A sold.
b. more of good B sold.
c. less of good B sold.
d. no difference in the quantity sold of either good.
Table 4-1
The table shows individual demand schedules for a market.
Price of the Good
Aaron
Angela
Austin
Alyssa
$0.00
20
16
10
8
0.50
18
12
6
6
1.00
14
10
2
5
1.50
12
8
0
4
2.00
6
6
0
2
2.50
0
4
0
0
24. Refer to Table 4-1. When the price of the good is $1.00, the quantity demanded in this market would be
a. 42 units.
b. 31 units.
c. 24 units.
d. 14 units.
25. A very hot summer in Atlanta will cause the demand for lemonade to
a. shift to the left.
b. shift to the right.
c. remain stable but we would move down the curve.
d. remain stable but we would move up the curve.
26. Fewer sellers in the market causes
a. the supply curve to shift to the left.
b. the supply curve to shift to the right.
c. a movement up a stationary supply curve.
d. a movement down a stationary supply curve.
27. An advance in production technology will
a. increase a firm’s costs.
b. allow firms to raise the price of their product.
c. shift the supply curve to the right.
d. Both a and b are correct.
28. Workers at a bicycle assembly plant currently make minimum wage. If the federal government increases the minimum wage by $1.00 an hour it is likely that the
a. demand for bicycle assembly workers will increase.
b. supply of bicycles will shift to the right.
c. supply of bicycles will shift to the left.
d. firm must increase output to maintain profit levels.
29. An increase in the price of oranges would lead to
a. an increased supply of oranges.
b. a reduction in the prices of inputs used in orange production.
c. an increased demand for oranges.
d. a movement up the supply curve for oranges.
Table 4-2
PRICE
QUANTITY DEMANDED
QUANTITY SUPPLIED
$10
10
60
$ 8
20
45
$ 6
30
30
$ 4
40
15
$ 2
50
0
30. Refer to Table 4-2. The equilibrium price and quantity would be
a. $4.40.
b. $6.30.
c. $8.30.
d. $10.35.
31. Refer to Table 4-2. If the price were $8, a
a. surplus of 50 units would exist and price would tend to fall.
b. surplus of 10 units would exist and price would tend to fall.
c. surplus of 25 units would exist and price would tend to fall.
d. shortage of 25 units would exist and price would tend to rise.
32. If the supply of a product decreases, we would expect equilibrium price
a. to increase and equilibrium quantity to decrease.
b. to decrease and equilibrium quantity to increase.
c. and equilibrium quantity to both increase.
d. and equilibrium quantity to both decrease.
33. Suppose that the incomes of buyers in a particular market for a normal good decline and there is also a reduction in input prices. What would we expect to occur in this market?
a. The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous.
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