ECO201: Midterm 1 Sample Questions
Page 1
Multiple Choice
1. Economics deals primarily with the concept of
a. poverty.
b. scarcity.
c. change.
d. power.
2. Daniel decides to spend an hour playing basketball rather than working at $6 per hour. His tradeoff is
a. nothing, because he enjoys playing basketball more than working.
b. the increase in skill he obtains from playing basketball for that hour.
c. the $6 he could have earned.
d. nothing, because he spent $6 for admission into the sports complex to play basketball.
3. In economics, the cost of something is
a. the out-of-pocket expense of obtaining it.
b. what you give up to get it.
c. always measured in units of time.
d. always higher than people think.
4. The opportunity cost of going to college is
a. the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses.
b. zero for students who are fortunate enough to have all of their college expenses paid by someone else.
c. the value of the best opportunity a student gives up to attend college.
d. zero, since a college education will allow a student to earn a larger income after graduation.
5. Carolyn decides to spend an additional hour working overtime rather than watching a video with her friends. She earns $8 for her
hour's work. Her opportunity cost of working is
a. the $8 she earns.
b. the enjoyment she would have received had she watched the video.
c. the $8 minus the enjoyment she would have received from watching the video.
d. nothing, since she would have received less than $8 of enjoyment from the video.
6. Ryan spends an hour studying instead of going for a bike ride. The opportunity cost to him of studying is
a. the improvement in his grades from studying for the hour.
b. the difference between the improvement in his grades from studying minus the enjoyment of a bike ride.
c. the enjoyment and exercise he would have received had he gone for a bike ride.
d. zero. Since Ryan chose to study rather than to ride his bike, the value of studying must have been greater than the value of the
bike ride.
7. You have spent $500 purchasing and repairing an old car which you expect to sell for $800 once the repairs are complete. You
discover that you need an additional part, which will cost $400, including labor, in order to complete the repairs. You can sell
the car as it is now for $300. What should you do?
a. You should complete the repairs and sell the car.
b. You should cut your losses and take the $300.
c. You should never sell something for less than it costs.
d. It doesn't matter which action you take; the outcome is the same either way.
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8. If Canada is better than the U.S. at producing hockey sticks, but the U.S. is better than Canada at producing roller blades,
a. the U.S. should impose a tariff on Canadian hockey sticks in order to protect jobs in the U.S. roller blade industry.
b. the U.S. should sell roller blades to Canada, and should buy Canadian hockey sticks.
c. the U.S. should subsidize its hockey stick industry so that it can compete with Canadian hockey sticks.
d. the U.S. should put a quota on the amount of Canadian hockey sticks imported.
9. Which of the following is the most accurate statement about production possibilities?
a. An economy can produce only on the production possibilities frontier.
b. An economy can produce at any point inside or outside a production possibilities frontier.
c. An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.
d. An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.
10. On a production possibilities frontier, production is efficient if
a. the production point is inside the frontier.
b. the production point is outside the frontier.
c. the production point is on or inside the frontier.
d. the production point is on the frontier.
11. An economy is said to be efficient if
a. it is possible to produce more of all goods.
b. it is possible to produce more of one good without producing less of another.
c. it is not possible to produce more of one good without producing less of another.
d. it is not possible to produce more of one good at any cost.
12. On the production possibilities frontier shown, which point or points are possible for this economy to produce?
a. A, B, C, D
b. A, B, C, F
c. A, B, C, D, E, F
d. D
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13. On the production possibilities frontier shown, which point represents the maximum possible production of CDs?
a. A
b. B
c. C
d. D
14. On the production possibilities frontier shown, which point or points are NOT possible for this economy to produce?
a. D
b. E, F
c. A, B, C
d. D, E, F
15. On the production possibilities frontier shown, which point or points are efficient?
a. A, B, C
b. A, C, F
c. E
d. D
16. On the production possibilities frontier shown, which point or points are inefficient?
a. A, B, C
b. E, F
c. B
d. D
17. The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as
a. the amount of the other good which must be given up.
b. the market price of the additional amount produced.
c. the amount of resources which must be devoted to its production.
d. the number of dollars which must be spent to produce it.
18. On the production possibilities frontier shown, the opportunity cost to the economy of getting 10 additional roller blades by
moving from point A to point B is
a. 15 bikes.
b. 10 bikes.
c. 5 bikes.
d. It is impossible to know the opportunity cost without knowing the cost of the resources used to produce the additional roller
blades.
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19. On the production possibilities frontier shown, the opportunity cost of getting 5 additional bikes by moving from point A to point C
is
a. 15 roller blades.
b. 10 roller blades.
c. 5 roller blades.
d. It is impossible for the economy to move from point A to point C.
20. On the production possibilities frontier shown, the opportunity cost of getting 20 additional roller blades by moving from point D
to point A is
a. 15 bikes.
b. 10 bikes.
c. 5 bikes.
d. 0.
21. According to the graph, the shift of the production possibilities frontier from frontier A to frontier B was most likely caused by
which of the following?
a. an improvement in the technology of producing capital goods.
b. an improvement in the technology of producing consumer goods.
c. a general improvement in technology.
d. a reduction in the availability of resources.
22. In the graph shown, the movement from frontier A to B can best be described as
a. economic growth.
b. a disaster for society.
c. an improvement in income distribution.
d. an improvement in the allocation of resources.
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23. In the production possibilities frontier shown, what is the opportunity cost to society of the movement from point D to point B?
a. 750 pretzels
b. 500 pretzels
c. 250 pretzels
d. 150 pretzels
Production Possibilities for Tuneland
Cars Toys
50
0
40
250
30
450
20
600
10
700
0
750
24. The reference table shows the production possibilities for Tuneland. What is the opportunity cost to Tuneland of increasing the
production of cars from 30 to 40?
a. 200 toys
b. 250 toys
c. 450 toys
d. It is impossible to tell what the opportunity cost is without knowing production costs for cars and toys.
25. In the table showing the production possibilities for Tuneland, what is the opportunity cost of increasing the production of toys
from 450 to 600?
a. 30 cars
b. 20 cars
c. 10 cars
d. It is impossible to tell what the opportunity cost is without knowing production costs for cars and toys.
26. Based on the table showing the production possibilities for Tuneland, what is the most accurate statement about the opportunity
cost of producing an additional 10 cars in Tuneland?
a. The opportunity cost of an additional 10 cars is 100 toys.
b. The opportunity cost of an additional 10 cars is 200 toys.
c. It is impossible to determine the opportunity cost of an additional 10 cars.
d. The opportunity cost of an additional 10 cars increases as more cars are produced.
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27. Which of the following is an example of a positive statement?
a. If welfare payments increase, the world will be a better place.
b. Prices rise when the government prints too much money.
c. Inflation is more harmful to the economy than unemployment.
d. The benefits to the economy of improved equity are greater than the costs of reduced efficiency.
28. Which of the following is an example of a normative statement?
a. If the price of a product decreases, quantity demanded increases.
b. Reducing tax rates on the wealthy would be good for the country.
c. If the national saving rate were to increase, so would the rate of economic growth.
d. All of the above are normative statements.
29. In the graph shown, the movement from point A to point B is
a. a shift of the curve.
b. a change in preferences.
c. a movement along the curve.
d. all of the above
30. In the graph shown, the slope of the curve between points A and B is
a. -2
b. -1/2
c. 1/2
d. 2
31. A rancher can produce only hamburgers, and a farmer can produce only french fries. The rancher and the farmer both like both
foods. They
a. cannot gain from trade.
b. could gain from trade under certain circumstances, but not always.
c. could gain from trade because each would enjoy a greater variety of food.
d. could gain from trade only if each were indifferent between hamburgers and french fries.
ECO201: Midterm 1 Sample Questions
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Labor Hours Needed to Make 1 Pound of: Pounds produced in 20 hours:
Meat Potatoes
Meat Potatoes
Farmer
10
5
2
4
Rancher
4
1
5
20
32. Refer to the tables shown. For the Farmer, the opportunity cost of 1 pound of meat is
a. 8 hours of labor.
b. 4 hours of labor.
c. 2 pounds of potatoes.
d. 1/2 pound of potatoes.
33. Refer to the tables shown. For the Rancher, the opportunity cost of 1 pound of meat is
a. 5 hours of labor.
b. 1 hour of labor.
c. 1/4 pound of potatoes.
d. 4 pounds of potatoes.
34. Refer to the tables shown. For the Farmer, the opportunity cost of 1 pound of potatoes is
a. 8 hours of labor.
b. 4 hours of labor.
c. 2 pounds of meat.
d. 1/2 pound of meat.
35. Refer to the tables shown. For the Rancher, the opportunity cost of 1 pound of potatoes is
a. 4 hours of labor.
b. 2 hours of labor.
c. 1/4 pound of meat.
d. 4 pounds of meat.
36. Refer to the tables shown. The Farmer has an absolute advantage in __________ and the Rancher has an absolute advantage in
__________.
a. meat, potatoes
b. potatoes, meat
c. meat, meat
d. neither good, both goods
37. Refer to the tables shown. The Rancher has a comparative advantage in __________ and the Farmer has a comparative advantage in
__________.
a. potatoes, meat
b. both goods, neither good
c. meat, potatoes
d. neither good, both goods
38. Refer to the tables shown. The Farmer and Rancher both could benefit by the Farmer specializing in __________ and the Rancher
specializing in ___________.
a. meat, potatoes
b. potatoes, meat
c. neither good, meat
d. They cannot benefit by specialization and trade.
ECO201: Midterm 1 Sample Questions
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These figures illustrate the production possibilities frontiers for Robinson Crusoe and Friday with 12 hours of labor.
39. Refer to the graphs given. For Robinson Crusoe the opportunity cost of 1 pound of fish is
a. 2 pounds of coconuts.
b. 1/2 pound of coconuts.
c. 4 pounds of coconuts.
d. 1/4 pound of coconuts.
40. Refer to the graphs given. For Robinson Crusoe the opportunity cost of 1 pound of coconuts is
a. 2 pounds of fish.
b. 1/2 pound of fish.
c. 4 pounds of fish.
d. 1/4 pound of fish.
41. Refer to the graphs given. Robinson Crusoe has a comparative advantage in __________ and Friday has a comparative advantage in
___________.
a. fish, coconuts
b. coconuts, fish
c. fish, fish
d. fish, neither good
For the following question(s), use the accompanying table.
Labor Hours needed to make one unit of: Amount produced in 120 hours:
Perfume
Cloth
Perfume Cloth
(bottles) (yards)
(bottles) (yards)
Nancy
6
8
20
15
Roger
5
10
24
12
42. Refer to the tables shown. The opportunity cost of 1 bottle of perfume for Nancy is
a. 4/3 yards of cloth.
b. 3/4 yard of cloth.
c. 1 yard of cloth.
d. 1/4 yard of cloth.
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43. Refer to the tables shown. Nancy and Roger both could benefit by Nancy specializing in __________ and Roger specializing in
__________.
a. perfume, cloth
b. cloth, perfume
c. perfume, perfume
d. cloth, cloth
Hours needed to make one unit of: Amount produced in 2400 hours:
Cars Airplanes
Cars Airplanes
U.S. 40
160
60
15
Japan 50
150
48
16
44. Refer to the tables shown. The U.S. and Japan could benefit by the U.S. specializing in __________ and Japan specializing in ___________.
a. airplanes, airplanes
b. cars, airplanes
c. airplanes, cars
d. neither good, cars
45. Which of the following would NOT be a determinant of demand?
a. the price of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good
46. If a good is "normal," then an increase in income will result in
a. no change in the demand for the good.
b. a decrease in the demand for the good.
c. an increase in the demand for the good.
d. a lower market price.
47. If the price of a substitute to good X increases, then
a. the demand for good X will increase.
b. the market price of good X will decrease.
c. the demand for good X will decrease.
d. the demand for good X will not change.
48. Suppose you like banana cream pie made with vanilla pudding. Assuming all other things are constant, you notice that the price of
bananas is higher. How would your demand for vanilla pudding be affected by this?
a. It would decrease.
b. It would increase.
c. It would be unaffected.
d. There is insufficient information given to answer the question.
49. A higher price for batteries would tend to
a. increase the demand for flashlights.
b. decrease the demand for electricity.
c. increase the demand for electricity.
d. increase the demand for batteries.
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50. Holding all else constant, a higher price for ski lift tickets would be expected to
a. increase the number of skiers.
b. decrease ski sales.
c. decrease the demand for other winter recreational activities.
d. decrease the supply of ski resorts.
51. A demand schedule is a
a. table showing the relationship between the price of a good and the quantity supplied.
b. table showing the relationship between income and the quantity of the good demanded.
c. table showing the relationship between the price of a good and the quantity buyers are willing and able to purchase.
d. table showing the relationship between the determinants of demand and the quantity demanded.
52. A demand curve is
a. the downward-sloping line relating the price of the good with the quantity demanded.
b. the upward-sloping line relating price with quantity supplied.
c. the curve that relates income with quantity demanded.
d. None of the above answers is correct.
53. The movement from point A to point B on the graph would be caused by
a. an increase in price.
b. a decrease in price.
c. a decrease in the price of a substitute good.
d. an increase in income.
54. When we move up or down a given demand curve,
a. only price is held constant.
b. all nonprice determinants of demand are assumed to be constant.
c. income and the price of the good are held constant.
d. all determinants of quantity demanded are held constant.
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55. A market demand curve reflects
a. the fact that the level of income is inversely related to quantity demanded.
b. how quantity demanded changes when the number of buyers changes.
c. how much all buyers are willing and able to buy at each possible price.
d. when the buyers are willing to buy the most.
The table shows individual demand schedules for a market.
Quantities Demanded
Price of the Good John Sally Jane
$0.00
25
22
10
5
0.50
20
20
6
4
1.00
15
18
2
3
1.50
10
16
0
2
2.00
5
14
0
1
2.50
0
12
0
0
Billy
56. Refer to the table shown. When the price of the good is $1.00, the quantity demanded in this market would be
a. 38 units.
b. 18 units.
c. 15 units.
d. 5 units.
57. Refer to the table shown. If the price increases from $1.00 to $1.50,
a. the market demand increases by 20 units.
b. the quantity demanded in the market decreases by 10 units.
c. individual demands will increase.
d. the quantity demanded in the market increases by 5 units.
58. Suppose that the American Medical Association announces that men who shave their heads are less likely to die of heart failure.
We could expect
a. the current demand for razors to decrease.
b. the current demand for combs to increase.
c. the current demand for razors to increase.
d. the demand for hair dye for men to increase.
59. When the price of a good or service changes,
a. there is a movement along a stable demand curve.
b. demand shifts in the opposite direction.
c. demand shifts in the same direction.
d. supply shifts in the opposite direction.
60. An increase in the number of scholarships issued for college education would
a. increase the supply of education.
b. decrease the supply of education.
c. increase the demand for education.
d. decrease the demand for education.
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61. On the graph, the movement from D to D1 is called
a. a decrease in demand.
b. an increase in demand.
c. a decrease in quantity demanded.
d. an increase in quantity demanded.
62. On the graph, the movement from D to D1 could be caused by
a. an increase in price.
b. a decrease in the price of a complement.
c. an increase in technology.
d. a decrease in the price of a substitute.
63. Suppose you make jewelry. If the price of gold falls, we would expect
a. you to be willing and able to produce more jewelry than before at each possible price.
b. you to be willing and able to produce less jewelry than before at each possible price.
c. you will face a greater demand for your jewelry.
d. you will face a weaker demand for your jewelry.
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64. The movement from point A to point B on the graph would be caused by
a. an increase in the price of the good.
b. a decrease in the price of the good.
c. an increase in technology.
d. an increase in input prices.
65. Suppose that there is an increase in input prices. We would expect
a. supply to increase.
b. supply to decrease.
c. supply could increase or decrease.
d. supply to remain unchanged.
66. Wheat is the main input in the production of flour. If the price of wheat increases, all else equal, we would expect
a. the supply of flour to be unaffected.
b. the supply of flour to decrease.
c. the supply of flour to increase.
d. the demand for flour to decrease.
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67. On the graph, the movement from S to S1 could be caused by
a. a decrease in the price of the good.
b. an increase in income.
c. an improvement in technology.
d. an increase in input prices.
68. The price where quantity supplied equals quantity demanded is called
a. the equilibrium price.
b. the monopoly price.
c. the coordinating price.
d. All of the above are correct.
69. If, at the current price, there is a shortage of a good,
a. the price is below the equilibrium price.
b. the market can be in equilibrium.
c. sellers are producing more than buyers wish to buy.
d. All of the above answers are correct.
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70. According to the graph, equilibrium price and quantity are
a. $7, 20.
b. $7, 60.
c. $5, 40.
d. $3, 60.
71. According to the graph, at a price of $7,
a. there would be a shortage of 40 units.
b. there would be a surplus of 40 units.
c. there would be a surplus of 20 units.
d. the market would be in equilibrium.
72. According to the graph, at a price of $3,
a. there would be a shortage of 40 units.
b. there would be a surplus of 40 units.
c. there would be a surplus of 20 units.
d. the market would be in equilibrium.
73. According to the graph, at the equilibrium price,
a. 20 units would be supplied and demanded.
b. 40 units would be supplied and demanded.
c. 60 units would be supplied and demanded.
d. 60 units would be supplied, but only 20 would be demanded.
74. According to the graph, at a price of $7,
a. a surplus would exist and the price would tend to fall.
b. a surplus would exist and the price would tend to rise.
c. a shortage would exist and the price would tend to fall.
d. the market would be in equilibrium.
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75. When there is a surplus in a market,
a. there is downward pressure on price.
b. there is upward pressure on price.
c. the market could still be in equilibrium.
d. there are too many buyers chasing too few goods.
76. Suppose there is an earthquake that destroys several corn canneries. Which of the following would NOT occur as a direct result of
this event?
a. Sellers would not be willing to produce and sell as much as before at each relevant price.
b. The supply would decrease.
c. Buyers would not be willing to buy as much as before at each relevant price.
d. The equilibrium price would rise.
77. Suppose that the incomes of buyers in a particular market for a normal good declines 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.
b. The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.
c. Both equilibrium price and equilibrium quantity would increase.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
78. Which of the following would result in an increase in equilibrium price and an ambiguous change in equilibrium quantity?
a. an increase in supply and demand
b. an increase in supply and a decrease in demand
c. a decrease in supply and demand
d. a decrease in supply and an increase in demand
True/False
79. Economics is the study of how fairly goods and services are distributed within society.
80. Economists study how individuals make decisions, how they interact with each other, and the factors which affect the economy as
a whole.
81. With careful planning, we can usually get something that we like without having to give up something else that we like.
82. In economic policymaking, there is often a conflict between the goal of efficiency and the goal of equity.
83. If the average cost of transporting a passenger on a night train from Kansas City to St. Louis is $50, it would be irrational for the
railroad to allow any passenger to ever ride for less than $50.
84. A production possibilities frontier is a graph which shows the various combinations of outputs the economy can possibly produce
given its factors of production and technology.
85. An economy can produce at any point on or outside the production possibilities frontier, but it cannot produce at points inside the
frontier.
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86. In the graph shown, points A, B, and C represent feasible or attainable outcomes for society.
87. In the graph shown, the opportunity cost of more art increases as more art is produced.
88. Economic growth causes a production possibilities frontier to shift outward.
89. "If the interest rate were to increase, business investment would decline" is a normative statement, not a positive one.
90. Two individuals or two nations benefit from trade only if it is impossible for each individual or nation to produce the good or
service purchased from the other.
91. Straight line production possibilities frontiers occur when there is a constant tradeoff between the two goods.
92. It takes Barbara 3 hours to make a pie and 4 hours to make a shirt. It takes Gary 2 hours to make a pie and 5 hours to make a shirt.
Barbara should specialize in making shirts and Gary should specialize in making pies. Then they should trade.
93. Robinson Crusoe can produce 20 coconuts or 10 palm leaves in one day. Friday can produce 25 coconuts or 5 palm leaves in one
day. Both individuals will be made better off through trade if Robinson specializes in producing coconuts and Friday specializes
in producing palm leaves.
94. Marilyn can repair the transmission on two large trucks in one day. She can change the oil in 50 automobiles in one day. Her
opportunity cost of repairing one truck transmission is 50 automobile oil changes.
95. It takes Sandy one week to write 3 poems or write a song. The opportunity cost to Sandy of one poem is 1/3 song.
96. Suppose it takes a French worker 2 hours to produce a bottle of perfume, and 80 hours to produce motorcycle. Suppose too that it
takes an American worker 2 hours to produce a bottle of perfume and 90 hours to produce a motorcycle. It will pay for France
to produce extra perfume and export it to the United States in return for imported U.S. motorcycles.
97. If the demand for a good falls when income falls, the good is called an inferior good.
98. When a fall in the price of one good reduces the demand for another good, the two goods are called substitutes.
99. Demand curves are usually upward-sloping.
100. If the Surgeon General of the United States announces that eating oatmeal reduces heart disease, there is likely to be a leftward
shift in the demand curve for Quaker Oats.
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101. If there is an improvement in the technology of producing a product, the supply curve for that product will shift to the left.
102. At the equilibrium price, quantity demanded is equal to quantity supplied.
103. If the market price is below the equilibrium price, there will be a shortage and the price will rise.
104. It is not possible for demand and supply to shift at the same time.
105. If the number of buyers of video tapes increases, other things equal, there will be an increase in the equilibrium price of video
tapes and a decrease in the equilibrium quantity sold.
Short Answer
APPLICATION/SCENARIO
106. Stan buys a 1966 Mustang with the intention of repairing, restoring and selling it. He anticipates that it will cost him $10,000 to
purchase, repair and restore the car, and that he can sell the finished car for $13,000. When he has spent a total of $10,000 on
the project, he discovers that he needs to replace the engine. It will cost Stan $4,000 to replace the engine. He can sell the car
without the new engine for $9,000. What should he do?
107. Draw a production possibilities frontier for the production of hamburgers and pizzas. On the graph, identify the area of feasible
outcomes and the area of infeasible outcomes. Now find an efficient point "A" and an inefficient point "B."
108. Draw a production possibilities frontier representing the economy's possible production of milk and eggs. Now, show what will
happen to the frontier or the production point under each of the following circumstances. Use a separate graph to illustrate each
situation.
a. The outcome for the economy is efficient, with society choosing approximately equal amounts of milk and eggs.
b. A recession causes a significant percentage of the labor force to become unemployed.
c. Some cows are found to be infected with Mad Cow Disease, and many of the cows must be destroyed.
d. Chickens are infected with a rare disease and egg-laying is reduced.
e. Improvements in animal nutrition raise the general productivity of cows and chickens.
f. The cow and chicken populations increase.
g. The Surgeon General announces that drinking milk prolongs life.
109. Which of the following statements are positive, and which are normative?
a. The minimum wage creates unemployment among young and unskilled workers.
b. The minimum wage ought to be abolished.
c. If the price of a product in a market decreases, other things equal, quantity demanded will increase.
d. A little bit of inflation is worse for society than a little bit of unemployment.
e. There is a tradeoff between inflation and unemployment in the short run.
f. If consumer income increases, other things equal, the demand for automobiles will increase.
g. The U.S. income distribution is not equitable.
h. U.S. workers deserve more liberal unemployment benefits.
i. If interest rates increase, investment will decrease.
j. If welfare benefits were reduced, the country would be better off.
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110. Julia can produce 15 apple pies or 1 dozen croissants in one day. Jacque can produce 2 apple pies or 10 dozen croissants in one
day.
a. Draw the production possibilities frontiers for Julia and Jacque.
b. What pattern of specialization and trade will benefit both Julia and Jacque?
111. Explain the difference between absolute advantage and comparative advantage.
112. Explain the following statement: International trade can make some individuals worse off, even as it makes the country as a whole
better off.
113. Given the following information about three consumers' monthly demand, construct a market demand curve for potato chips.
What would happen to demand if Ryan decided to buy popcorn and not buy chips? Show this change on your graph.
Price per bag
$.25
.50
.75
1.00
1.25
1.50
Ryan's Demand
7
10
6
8
5
6
4
4
3
2
2
0
Rusty's Demand
6
5
4
3
2
1
Regan's Demand
114. What is the difference between a "change in demand" and a "change in quantity demanded"? Graph your answer.
115. Given the following table, graph the demand and supply curves for flashlights. Make certain to label equilibrium price and
equilibrium quantity.
Price/flashlight Quantity Demanded/month Quantity Supplied/month
$5
2,000
12,000
4
4,000
10,000
3
7,000
7,000
2
11,000
4,000
1
15,000
1,000
116. Given the following table for 19" color TVs, graph both the demand and supply curves. Label equilibrium price and quantity. Now
assume that a TV is a normal good and income rises. Consumers are now willing and able to purchase 500 more TVs per month
at every price. Show this change on your graph and explain what has happened to equilibrium price and quantity as a result.
Price of TVs
$200
180
160
140
120
100
Quantity Demanded/month
1,000
2,500
1,200
2,200
1,400
1,900
1,600
1,600
1,800
1,300
2,000
1,000
Quantity Supplied/month
117. Graph each of the following changes and explain what would happen to equilibrium price and quantity.
1. Demand increases and Supply increases
2. Demand increases and Supply decreases
3. Demand decreases and Supply decreases
4. Demand decreases and Supply increases
ECO201: Midterm 1 Sample Questions
Page 20
118. Suppose we are analyzing the market for hot chocolate. What will be the impact on the equilibrium price and quantity of each of
the following events affecting the hot chocolate market?
a. winter starts and the weather turns sharply colder
b. the price of coffee falls
c. the price of whipped cream falls
d. the price of cocoa beans increases
e. consumer income falls because of a recession
f. the Surgeon General of the U.S. announces that hot chocolate cures acne
g. population increases
h. a better method of harvesting cocoa beans is introduced