Exam 1. ECON 101 Fall 2013 Vesselinov

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1 Class: Date: Exam 1. ECON 101 Fall 2013 Vesselinov Multiple Choice Identify the choice that best completes the statement or answers the question. Figure Refer to Figure 2-5. The opportunity cost of this economy moving from point A to point C is a. 75 soccer balls. b. 300 sweaters. c. 125 soccer balls. d. 200 soccer balls. 2. Refer to Figure 2-5. If this economy is efficient, it could produce a. 100 sweaters and 100 soccer balls. b. 300 sweaters and 200 soccer balls. c. 240 sweaters and 75 soccer balls. d. 150 sweaters and 100 soccer balls. 3. When small changes in price lead to infinite changes in quantity demanded, demand is perfectly a. inelastic, and the demand curve will be vertical. b. inelastic, and the demand curve will be horizontal. c. elastic, and the demand curve will be horizontal. d. elastic, and the demand curve will be vertical. 1

2 Figure 3-4 Perry s Production Possibilities Frontier Jordan s Production Possibilities Frontier 4. Refer to Figure 3-4. If Perry and Jordan both spend all of their time writing poems, then total production is a. 6 poems. b. 24 poems. c. 12 poems. d. 3 poems. 5. Refer to Figure 3-4. Jordan should specialize in the production of a. novels. b. both goods. c. poems. d. neither good. 2

3 Figure Refer to Figure At a price of $35, there would be a a. surplus of 400 units. b. surplus of 200 units. c. shortage of 400 units. d. surplus of 600 units. 7. In a competitive market, the quantity of a product produced and the price of the product are determined by a. sellers. b. both buyers and sellers. c. buyers. d. None of the above is correct. 8. When a tax is placed on the buyers of lemonade, the a. sellers bear the entire burden of the tax. b. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal. c. burden of the tax will be always be equally divided between the buyers and the sellers. d. buyers bear the entire burden of the tax. 3

4 Figure Refer to Figure 6-5. If the horizontal solid line on the graph represents a price ceiling, then the price ceiling is a. not binding but creates a surplus of 40 units of the good. b. binding and creates a surplus of 90 units of the good. c. not binding, and there will be no surplus or shortage of the good. d. binding and creates a surplus of 40 units of the good. Figure Refer to Figure 2-4. Efficient production is represented by which point(s)? a. W, Y, Z b. V c. V, Y, Z d. Y, Z 4

5 Figure 9-1 The figure illustrates the market for wool in Scotland. 11. Refer to Figure 9-1. With trade, Scotland will a. export 11 units of wool. b. import 15 units of wool. c. import 6 units of wool. d. export 5 units of wool. 12. Refer to Figure 9-1. When international trade in wool is allowed, consumer surplus in Scotland a. increases by the area C + F. b. increases by the area B + D. c. decreases by the area D + G. d. decreases by the area B + D. 13. The law of supply states that, other things equal, an increase in a. quantity supplied causes price to decrease. b. price causes quantity supplied to increase. c. quantity supplied causes price to increase. d. price causes quantity supplied to decrease. 5

6 14. Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is a. inelastic and equal to b. elastic and equal to c. elastic and equal to d. inelastic and equal to Table 3-5 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. Labor Hours Needed to Make 1 Unit of Number of Units Produced in 40 Hours Cheese Bread Cheese Bread England Spain Refer to Table 3-5. England has a comparative advantage in the production of a. neither good and Spain has a comparative advantage in the production of both goods. b. cheese and Spain has a comparative advantage in the production of bread. c. bread and Spain has a comparative advantage in the production of cheese. d. both goods and Spain has a comparative advantage in the production of neither good. 16. For a good that is a necessity, demand a. tends to be elastic. b. cannot be represented by a demand curve in the usual way. c. tends to be inelastic. d. has unit elasticity. 6

7 Figure Refer to Figure 6-6. If the government imposes a price ceiling of $8 on this market, then there will be a. a shortage of 20 units. b. a shortage of 10 units. c. a shortage of 40 units. d. no shortage. 18. The size of the deadweight loss generated from a tax is affected by the a. elasticities of both supply and demand. b. total revenue collected by the government. c. elasticity of supply only. d. elasticity of demand only. 7

8 Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. 19. Refer to Figure 8-8. The tax causes consumer surplus to decrease by the area a. A. b. A+B+C. c. B+C. d. A+B+C+D+F. 20. Refer to Figure 8-8. The deadweight loss of the tax is the area a. C+F. b. B+C+D+F. c. A+C+F+J. d. B+D. 8

9 Figure Refer to Figure At equilibrium, total surplus is measured by the area a. KBG. b. CFG. c. ACG. d. AFG. Figure Refer to Figure If the price were P1, producer surplus would be represented by the area a. D+H+F+G+I. b. F+G. c. D+H+F. d. F. 9

10 23. If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the a. market is not a competitive market. b. price of the good will fall due to market forces. c. consumer does not purchase the good. d. consumer has consumer surplus of $2 if he or she buys the good. Table 3-8 Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate. Labor Hours Needed to Make 1 Quantity Produced in 36 Hours Parasol Plate Parasol Plate Huang Min Refer to Table 3-8. Huang has an absolute advantage in the production of a. neither good and a comparative advantage in the production of plates. b. parasols and a comparative advantage in the production of parasols. c. parasols and a comparative advantage in the production of plates. d. neither good and a comparative advantage in the production of parasols. 25. The world price of a simple electronic calculator is $5.00. Before Zimbabwe allowed trade in calculators, the price of a calculator there was $7.50. Once Zimbabwe began allowing trade in calculators with other countries, Zimbabwe began a. exporting calculators and the price of a calculator in Zimbabwe decreased to $5.00. b. importing calculators and the price of a calculator in Zimbabwe decreased to $5.00. c. exporting calculators and the price of a calculator in Zimbabwe remained at $7.50. d. importing calculators and the price of a calculator in Zimbabwe remained at $

11 Figure 2-9 Panel (a) Panel (b) 26. Refer to Figure 2-9, Panel (a). Production at point B is a. possible but inefficient. b. impossible but efficient. c. possible and efficient. d. impossible and inefficient. 11

12 Figure Refer to Figure 6-9. At which price would a price floor be nonbinding? a. $8 b. $7 c. $5 d. $6 28. Alexandra created a new software program she is willing to sell for $300. She sells her first copy and enjoys a producer surplus of $250. What is the price paid for the software? a. $50. b. $550. c. $250. d. $ Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the a. tax is placed on the buyers of the product. b. tax is placed on the sellers of the product. c. demand for the product is more elastic than the supply of the product. d. supply of the product is more elastic than the demand for the product. 30. Two goods are complements when a decrease in the price of one good a. increases the demand for the other good. b. does not change the quantity demanded of the other good. c. decreases the quantity demanded of the other good. d. decreases the demand for the other good. 12

13 Figure Refer to Figure Over which range is the supply curve in this figure the most elastic? a. $100 to $220 b. $40 to $100 c. $16 to $40 d. $220 to $430 Figure 9-3. The domestic country is China. 32. Refer to Figure 9-3. With trade, China will a. export 150 pencil sharpeners. b. import 100 pencil sharpeners. c. export 250 pencil sharpeners. d. import 250 pencil sharpeners. 13