ECON 1001 A. Come to the PASS workshop with your mock exam complete. During the workshop you can work with other students to review your work.

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1 It is most beneficial to you to write this mock midterm UNDER EXAM CONDITIONS. This means: Complete the midterm in 1.5 hour(s). Work on your own. Keep your notes and textbook closed. Attempt every question. After the time limit, go back over your work with a different colour or on a separate piece of paper and try to do the questions you are unsure of. Record your ideas in the margins to remind yourself of what you were thinking when you take it up at PASS. The purpose of this mock exam is to give you practice answering questions in a timed setting and to help you to gauge which aspects of the course content you know well and which are in need of further development and review. Use this mock exam as a learning tool in preparing for the actual exam. Please note: Come to the PASS workshop with your mock exam complete. During the workshop you can work with other students to review your work. Often, there is not enough time to review the entire exam in the PASS workshop. Decide which questions you most want to review the Facilitator may ask students to vote on which questions they want to discuss in detail. Facilitators do not bring copies of the mock exam to the session. Please print out and complete the exam before you attend. Facilitators do not produce or distribute an answer key for mock exams. Facilitators help students to work together to compare and assess the answers they have. If you are not able to attend the PASS workshop, you can work alone or with others in the class. Good Luck writing the Mock Exam! Dates and locations of mock exam take-up: Mock 1: Friday Oct 1-2:30pm Room: RB 1200 Mock 2: Tuesday Oct 6-7:30pm Room: SA 413

2 1. Which of the following is not regarded as a Principle of Economics according to the textbook? a. Rational people make decisions at the margin b. People face trade offs c. Trade makes everyone better off d. Supply and demand will always meet at the equilibrium 2. A country s standard of living depends on: a. Productivity b. Comparative Advantage c. Trade d. Absolute Advantage 3. Laura decides to spend 2 hours playing hockey rather than work at her job that pays $12.00 per hour. What is Laura s trade-off? a. The $24.00 she could have earned working for 2 hours. b. An increase in skills that she obtains from playing hockey for 2 hours. c. Nothing because she enjoys hockey more than working. d. Nothing because she spent $24.00 on renting hockey equipment. 4. In a circular-flow diagram, which flows are involved? a. Inputs and outputs flow in the same direction as the flow of dollars, from firms to households. b. Income payments flow from firms to households, and sales revenue flows from households to firms. c. Resources flow from firms to households and goods and services flow from households to firms. d. Taxes flow from households to firms and transfer payments flow from firms to households. 5. What are the three most important factors of production? a. Land, human capital and machinery b. Technology, investment, labour c. Labour capital and technology d. Land, labour and capital

3 6. Kevin is flying to California for a music festival Thursday evening. His flight costs $724, his hotel and meals will cost $211 per day, and the price of a single day pass is $75. Kevin has the option of returning Saturday evening or Monday evening. If he stays for the extra day at the festival, what is the marginal cost? a. $286 b. $935 c. $1,010 d. $ PPF for Ben and Jerry: For Jerry, what is the opportunity cost of 2 ice creams? a. 2 cones b. 2/3 cones c. 6/4 cones d. 3 cones 8. Look at the same graph as question 7, which of the following is correct? a. Ben as a comparative advantage in neither good and Jerry has a comparative advantage in both goods. b. Ben has a comparative advantage in cones and Jerry has a comparative advantage in ice cream. c. Ben has a comparative advantage in ice cream and Jerry has a comparative advantage in cones. d. Ben has a comparative advantage in both goods and Jerry has a comparative advantage in neither good.

4 9. How does trade benefit the two actors involved? a. Trade benefits both actors equally b. Trade benefits both actors but it is not always equal c. Trade benefits the producer more than the consumer d. Trade benefits the consumer more than the producer 10. Look at the following graph: A movement from point B to point A is caused by: a. An increase in human capital b. A decrease in technology c. A decrease in the price of a good d. An increase in the price of a good 11. If the cross-price elasticity of demand of two goods is 3, what would the two goods be? a. Complements b. Luxuries c. Normal goods d. Substitutes

5 12. Suppose that bagels are currently selling for $12.00 per dozen. The equilibrium price of bagels is $14.00 per dozen. What would you expect? a. A shortage to exist and market price of bagels to increase. b. A shortage to exist and market price of roses to decrease. c. A surplus to exist and market price of roses to increase. d. A surplus to exist and market price of roses to decrease. 13. Suppose that demand increases AND supply decreases. What would happen in the market for the good? a. Equilibrium price would decrease, but the impact on the equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on the equilibrium quantity would be ambiguous. c. Both equilibrium price and quantity would increase. d. Both equilibrium price and quantity would decrease. 14. The market demand for a good is given as Q d =220-4P. The Market supply for that same good is given as Q s =2P What would result if the market price were $50? a. A shortage of 120 b. A surplus of 140 c. A surplus of 120 d. A shortage of Two goods are complements if a decrease in the price of one good a. Increase the quantity demanded of the other good. b. Reduced the demand for the other good. c. Reduced the quantity demanded of the other good. d. Raises the demand for the other good 16. Which of the following are examples of inferior goods? a. Vegetables b. Sports cars c. Bus passes d. Homes

6 17. Which is not a factor that influences demand? a. Expectations b. Input prices c. Number of buyers d. Prices of complement and substitute goods 18. A dress manufacturer is expecting higher prices for dresses in the near future. What would we expect? a. The dress manufacturer to supply more dresses now. b. The dress manufacturer to supply fewer dresses now. c. The demand for this manufacturer s dresses to fall. d. No change in the dress manufacturer s current supply. 19. In a perfectly competitive market, buyers and sellers are price setters. a. True b. False 20. Refer to the following graph: What would happen if the price is at $15? a. There would be a shortage of 200 and the price would decrease b. There would be a shortage of 300 and the price will increase c. There would be a surplus of 400 and the price would increase d. There would be a surplus of 700 and the price will decrease

7 21. Mangos are considered to be a normal good. If income increases, but a hurricane destroys majority of the year s crop, what will happen to the market for mangos? (Hint: draw it out!) a. Quantity will decrease but the effect on the price is ambiguous b. Price will decrease but quantity will increase c. Both price and quantity will decrease d. Price will increase, the effect on quantity is ambiguous 22. Which of the following will determine whether a good has more elastic demand? a. Higher availability of close substitutes b. Being a luxury as opposed to a necessity good c. A more narrowly defined market d. All of the above 23. Suppose there is a 4% increase in the price of good X and a resulting 4% decrease in the quantity of X demanded. What is the price elasticity of demand for X? a. 1 b. infinite c. 6 d Market Demand: Qd = 200 3P Market Supply: Qs = 4P If price increases from $20 to $40, what is the price elasticity of demand? a. 7.5 b. 0.8 c d Suppose the government increases the tax on gasoline in order to raise revenue. Since raising the gasoline tax would increase the price of gasoline, what must the government be assuming? a. The demand for gasoline is price inelastic. b. The demand for gasoline is price elastic c. The demand for gasoline is price unit elastic. d. The demand for gasoline is price perfect elastic.

8 26. Given the supply and demand curve above, what will happen to overall profits if supply increases? a. Nothing b. Increase c. Decrease d. There is not enough information to answer this question 27. Holding all else constant, if a pencil manufacturer increases production by 20% when the market price of pencils increases from $0.50 to $0.60, what is the price elasticity of supply, using the midpoint method? a. Elastic, since elasticity is equal to 0.9 b. Elastic, since elasticity is equal to 1.1 c. Inelastic, since elasticity is equal to 0.9 d. Inelastic, since elasticity is equal to When will a decrease in supply cause the largest increase in price? a. When demand is inelastic and supply is elastic b. When both supply and demand are elastic c. When demand is elastic and supply is inelastic d. When both supply and demand are inelastic

9 29. Why is the midpoint method used to calculate elasticity? a. It uses the same equation that is used to compute slope b. It automatically computes a positive number instead of a negative number c. It automatically rounds quantities to the nearest whole unit d. It gives the same answer regardless of the direction of change 30. Harry s Barber Shop increased it total monthly revenue from $1500 to $1800 when it raised the price of a haircut from $5 to $9. What the price elasticity of demand for Harrys Haircuts? a b c d If a demand curve is vertical, what are its slope and elasticity? a. 0, as is elasticity b. 0 and elasticity is undefined c. undefined and elasticity equals 0 d. undefined, as is elasticity 32. Moving down a linear demand curve, what happens to the slope and the elasticity? a. The slope changes but elasticity is constant. b. The slope and elasticity both change. c. The slope is constant but elasticity changes. d. The slope and elasticity are both constant. 33. Market demand is given as Q d = 200-3P. Market supply is given as Q s =2P Which legally imposed price would constitute a binding price ceiling? a. $25 b. $20 c. $30 d. $15

10 34. A minimum wage imposed above a market s equilibrium wage will result in the quantity a. Demanded of labor being greater than the quantity supplied of labor and a shortage of workers will occur. b. Supplied of labor being greater than the quantity demanded of labor and unemployment will occur. c. Demanded of labor being greater than the quantity supplied of labor and unemployment will occur. d. Supplied of labor being greater than the quantity demanded of labor and a shortage of workers will occur. 35. Rent control is an example of which of the following? a. Taxes b. Price floors c. Price ceilings d. None of the above 36. A tax placed on the sellers of blueberries a. Increases costs, lowers profit and shifts supply to the left. b. Increases costs, lowers profit and shifts supply to the right c. Reduces costs, raises profit and shifts supply to the left d. Increases costs, lowers profit and causes a movement along the supply curve 37. What will a tax placed on the seller of a product do to the equilibrium price and quantity? a. It will lower equilibrium price and raise equilibrium quantity b. It will raise equilibrium price and lower equilibrium quantity c. It will lower both equilibrium price and quantity d. It will raise both equilibrium price and quantity 38. Suppose the demand for picture frames is price inelastic and the supply of picture frames is price elastic. By what amount will a tax of $1.00 per frame levied on buyers of picture frames increase the equilibrium price paid by buyers of picture frames? a. By $1.00 b. By more than $0.50 but less than $1.00 c. By less than $0.50 d. By more than $1.00

11 39. The marginal buyer is someone who would: a. Enter the market if prices were any lower b. Enter the market if prices were any higher c. Leave the market if prices were any lower d. Leave the market if prices were any higher 40. Refer to the following graph: What is the share of tax burden per unit on consumer? a. $0.50 b. $1.00 c. $1.50 d. $11.00