Economics 53
Introductory Microeconomics
Practice Midterm 1
NAME:________________________
Answer all the questions. Allocate your time according to the points that each question is worth.
There are 100 points in the exam. You should plan on spending 100 minutes to complete the
exam.
Part I Multiple Choice (44 Points, 2 Points each question)
Write the letter corresponding to the correct answer in the space next to the question
1. Making decisions “at the margin” means that people
A) make those decisions that do not impose a marginal cost
B) evaluate how easily a decision can be reversed if problems arise
C) compare the marginal costs and marginal benefits of each decision?
D) always calculate the dollar costs for each decision
1.________
2. The concept of trade-offs would become irrelevant if
A) we were dealing with a very simple, one-person economy.
B) poverty was eliminated.
C) scarcity was eliminated.
D) capital was eliminated
2._________
3. According to the theory of comparative advantage, specialization and free trade
3._________
will benefit
A) only that trading party that has both an absolute advantage and a comparative
advantage in the production of all goods.
B) all trading parties, even when some are absolutely more efficient producers than others.
C) only that trading party that has an absolute advantage in the production of all goods.
D) only that trading party that has a comparative advantage in the production of all goods.
Figure 1
Figure 1 shows various points on three different production possibilities frontiers for a nation.
4. Refer to Figure 1. A movement from X to Y
4. _________
A) could be due to a change in consumers' tastes and preferences.
B) could occur because of an influx of immigrant labor.
C) is the result of advancements in food production technology only, with no change in the technology
for plastic production.
D) is the result of advancements in plastic production technology only, with no change in
food production technology.
5. Refer to Figure 1. Consider the following movements:
1.
from point V to point W
2.
from point W to point Y
3.
from point Y to point Z
5. _________
Which of the movements listed above represents economic growth?
A) 1, 2, and 3
B) 2 and 3 only
C) 1 only
D) 2 only
6. The Great Depression of the 1930s with a large number of workers and
6._________
factories unemployed would be represented in a production possibilities frontier graph by
A) a point inside the PPF.
B) a point outside the PPF.
C) a point on the PPF.
D) an intercept on either the vertical or the horizontal axis.
7. A movement along the demand curve for toothpaste would be caused by
A) a change in the price of toothbrushes.
B) a change in consumer income.
C) a change in the price of toothpaste.
D) a change in population.
7. _________
8. Lead is an important input in the production of crystal. If the price of lead decreases,
other things equal, we would expect the supply of
A) crystal to be unaffected.
B) crystal to decrease.
C) crystal to increase.
D) lead to increase
8._______
9. Which of the following events could shift both the demand curve and the supply curve 9._______
for a good?
A) A technological advance pertaining to the production of the good is observed.
B) Incomes of all buyers of the good increase.
C) The number of sellers of the good increases.
D) Everyone revises upward their expectation of next month’s price of the good.
10. Which of the following events would cause the price of oranges to fall?
10._______
a. There is a shortage of oranges.
b. An article is published in which it is claimed that tangerines cause a serious disease, and
oranges and tangerines are substitutes.
c. The price of land throughout Florida decreases, and Florida produces a significant
proportion of the nation’s oranges.
d. All of the above are correct
11. Among the methods of non-price rationing are
A) coupons.
B) favored customers.
C) waiting in line.
D) all of the above
11._______
12. You are in charge of the local city-owned golf course. You need to increase the
12._______
revenue generated by the golf course in order to meet expenses. The mayor advises you
to increase the price of a round of golf. The city manager recommends reducing the price
of a round of golf. You realize that
A) the mayor thinks demand is elastic and the city manager thinks demand is inelastic.
B) both the mayor and the city manager think that demand is elastic.
C) both the mayor and the city manager think that demand is inelastic.
D) the mayor thinks demand is inelastic and the city manager thinks demand is elastic.
13. Suppose that 50 candy bars are demanded at a particular price. If the price of candy 13._______
bars rises from that price by 5percent, the number of candy bars demanded falls to 48.
Using the midpoint approach to calculate the price elasticity of demand, it follows that the
A) demand for candy bars in this price range is elastic.
B) price increase will decrease the total revenue of candy bar sellers.
C) price elasticity of demand for candy bars in this price range is about 1.22.
D) price elasticity of demand for candy bars in this price range is about 0.82.
14. Muriel's income elasticity of demand for football tickets is 1.50. All else equal,
this means that if her income increases by 20 percent, she will buy
A) 150 percent more football tickets.
B) 50 percent more football tickets.
C) 30 percent more football tickets.
D) 20 percent more football tickets.
14._______
15. Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, 15._______
then the substitution effect will
A) cause the consumer to buy more of good Y and less of good X.
B) cause the consumer to buy more of good X and less of good Y.
C) not affect the amount of goods X and Y that the consumer buys.
D) result in an upward-sloping demand for good Y if the substitution effect is positive.
16. The consumer's optimal choice is the one in which the marginal utility per dollar
spent on good X
A) is equal to the marginal utility per dollar saved on good X.
B) is greater than the marginal utility per dollar spent on good Y.
C) is equal to the marginal utility per dollar spent on good Y.
D) is less than the marginal utility per dollar spent on good Y.
16._______
17. The goal of the consumer is to
A) maximize utility.
B) be on the highest indifference curve.
C) maximize satisfaction.
D) All of the above are the goals of the consumer.
17._______
18. An example of an explicit cost of production would be
18._______
A) the cost of forgone labor earnings for an entrepreneur.
B) the lost opportunity to invest in capital markets when the money is invested in one's business.
C) lease payments for the land on which a firm’s factory stands.
D) Both a and c are correct.
19. The marginal product of labor is equal to the
A) incremental cost associated with a one unit increase in labor.
B) incremental profit associated with a one unit increase in labor.
C) increase in labor necessary to generate a one unit increase in output.
D) increase in output obtained from a one unit increase in labor.
19.______
20. Suppose a certain firm is able to produce 165 units of output per day when
20.______
15 workers are hired. The firm is able to produce 176 units of output per day when
16 workers are hired (holding other inputs fixed). Then the marginal product of the 16th worker is
A) 10 units of output.
B) 11 units of output.
C) 16 units of output.
D) 176 units of output.
21. Refer to Table 6.2. The total utility of five candy bars per day is
A) 115.
C) 130
B) 120.
D) indeterminate from this information
21.______
22. Refer to Table 6.2. If the price of a candy bar is $1, the price of a hot dog is $2,
and Aaron has $6 of income, Aaronʹs utility maximizing combination of candy bars
and hot dogs per day is
A) 1 candy bar and 2 hot dogs.
B) 4 candy bars and 1 hot dog.
C) 2 candy bars and 1.5 hot dogs.
D) indeterminate from this information.
22.______