Douglas, Fall 2006 ( A )
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Econ 201 Midterm 1
Figure 2-6
1. Refer to Figure 2-6. A movement from point C to point D would be the likely result of
a. unemployment.
b. a reduction in the demand for bananas.
c. an improvement in the technology for producing baseballs.
d. an increase in productive efficiency.
2. Refer to Figure 2-6. If the economy moves from point A to point B, on average:
a. The opportunity cost of each additional banana produced is 0.25 baseballs.
b. The economy has experienced economic growth.
c. The opportunity cost of each additional banana produced is 50 baseballs.
d. The opportunity cost of each additional banana produced is 4 baseballs.
Figure 6-14.
3. Refer to Figure 6-14. The per-unit burden of the tax on buyers is
a. $16.
b. $14.
c. $8.
d. $6.
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Econ201 Exam 1, Fall 2006
Douglas (A)
4. Refer to Figure 6-14. The effective price that buyers will pay, including the tax, is
a. $24.
b. $16.
c. $10.
d. $8.
5. A price ceiling will be binding only if it is set
a. equal to equilibrium price.
b. above equilibrium price.
c. below equilibrium price.
d. none of the above; a price ceiling is never binding.
6. What will happen to the equilibrium price of pens if the price of pencils rises, at the same time that wages of
workers in the pen industry rise?
a. Price will rise.
b. Price will fall.
c. Price will stay exactly the same.
d. The supply and demand model does not make a firm prediction about the price change.
Table 3-6
England
Spain
Labor hours needed to make one
unit of
Cheese
Bread
15
5
12
8
7. Refer to Table 3-6. The opportunity cost of 1 unit of cheese in England is
a. 3 units of bread.
b. 5 units of bread.
c. 1/3 unit of bread.
d. 1/5 unit of bread.
8. Refer to Table 3-6. Which of the following prices for a unit of cheese would result in a trade that benefits
both England and Spain?
a. 2 units of bread.
b. 4 units of bread.
c. 1 unit of bread.
d. 1/2 unit of bread.
9. Refer to Table 3-6. England has a comparative advantage in
a. bread and Spain has a comparative advantage in cheese.
b. cheese and Spain has a comparative advantage in bread.
c. both goods and Spain has a comparative advantage in neither good.
d. neither good and Spain has a comparative advantage in both goods.
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Econ201 Exam 1, Fall 2006
Douglas (A)
Figure 4-7
10. Refer to Figure 4-7. At what price would there be an excess demand amounting to 200 units of the good?
a. $15
b. $20
c. $30
d. $35
11. Refer to Figure 4-7. At a price of $35,
a. a shortage would exist and the price would tend to fall from $35 to a lower price.
b. a surplus would exist and the price would tend to rise from $35 to a higher price.
c. a surplus would exist and the price would tend to fall from $35 to a lower price.
d. an excess demand would exist and the price would tend to fall from $35 to a lower price.
12. In a market economy, who makes the decisions that guide most economic activity?
a. firms only
b. households only
c. firms and households
d. government
13. Although lawmakers legislated a fifty-fifty division in the payment of the FICA tax,
a. the actual tax incidence is determined by elasticities of labor supply and demand.
b. the employer now is required by law to pay more than 50 percent of the tax.
c. the employee now is required by law to pay more than 50 percent of the tax.
d. employers are no longer required by law to pay any portion of the tax.
14. Suppose that a tax is placed on DVDs. If the sellers end up bearing most of the tax burden, we know that the
a. demand is more inelastic than supply.
b. supply is more inelastic than demand.
c. government actually sends the tax bill to the buyers.
d. government actually sends the tax bill to the sellers.
15. A minimum wage that is set above a market's equilibrium wage will result in
a. an excess demand for labor, that is, unemployment.
b. an excess demand for labor, that is, a shortage of workers.
c. an excess supply of labor, that is, unemployment.
d. an excess supply of labor, that is, a shortage of workers.
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Econ201 Exam 1, Fall 2006
Douglas (A)
16. Which of the following statements is not correct?
a. Trade allows for specialization.
b. Trade has the potential to benefit all nations.
c. Trade allows nations to consume beynd their production possibilities frontiers.
d. Absolute advantage determines who trades what with whom.
17. Which of the following events will definitely cause equilibrium quantity to fall?
a. demand increases and supply decreases
b. demand and supply both decrease
c. demand decreases and supply increases
d. demand and supply both increase
18. The supply of a good is negatively related to the
a. price of inputs used to make the good.
b. demand for the good by consumers.
c. price of the good itself.
d. amount of profit a firm can expect to receive from selling the good.
19. Which of the following would cause a movement along a fixed supply curve for tomatoes?
a. The number of sellers of tomatoes increases.
b. There is an advance in technology that reduces the cost of producing tomatoes.
c. The price of fertilizer decreases, and fertilizer is an input in the production of tomatoes.
d. The price of tomatoes rises.
20. When demand is perfectly inelastic, the demand curve will be
a. negatively sloped, because buyers decrease their purchases when the price rises.
b. vertical, because buyers purchase the same amount whether the price is high or low.
c. positively sloped, because buyers buy more of the good when price rises.
d. horizontal, because perfect substitutes for the good are easily available to buyers.
21. If the demand for donuts is elastic, then a decrease in the price of donuts will
a. increase total revenue of donut sellers.
b. decrease total revenue of donut sellers.
c. not change total revenue of donut sellers.
d. decrease the quantity sold of donuts. .
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Econ201 Exam 1, Fall 2006
Douglas (A)
Figure 7-1
22. Refer to Figure 7-1. When the price is P1, consumer surplus is
a. A.
b. A + B.
c. A + B + C.
d. A + B + D.
23. If a decrease in the price of good X results in fewer units of good Y being sold, then X and Y are
a. complementary goods.
b. normal goods.
c. inferior goods.
d. substitute goods.
24. Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $350. His consumer surplus is
a. $50.
b. $150.
c. $350.
d. $400.
25. A tax imposed on the sellers of a good will
a. raise the price paid by buyers and lower the quantity sold.
b. raise the price paid by buyers and raise the quantity sold.
c. raise the price kept by sellers and raise the quantity sold.
d. raise the price kept by sellers and lower the quantity sold.
26. Which of the following changes would not shift the demand curve for cable TV?
a. a change in income
b. a change in the price of cable TV
c. a change in consumer expectations about future income
d. a change in the price of satellite TV
27. Consumer surplus is equal to the
a. Value to buyers - Amount paid by buyers.
b. Amount paid by buyers - Costs of sellers.
c. Value to buyers - Costs of sellers.
d. Value to buyers - Willingness to pay of buyers.
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Econ201 Exam 1, Fall 2006
Douglas (A)
Figure 2-8
28. Refer to Figure 2-8. What is the opportunity cost of moving from point A to point B?
a. 8 bathtubs
b. 20 barrels
c. the gain in well-being that the society experiences as a result of the move
d. the loss of well-being that the society experiences as a result of the move
29. Refer to Figure 2-8. Which of the following combinations can this economy not produce?
a. 30 barrels and 6 bathtubs
b. 25 barrels and 10 bathtubs
c. 20 barrels and 8 bathtubs
d. 10 barrels and 14 bathtubs
Figure 2-7
30. Refer to Figure 2-7. The shift of the production possibilities frontier from A to B can best be described as
a. a downturn in the economy.
b. economic growth.
c. an enhancement of equity.
d. an improvement in the allocation of resources.
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Econ201 Exam 1, Fall 2006
Douglas (A)
The following table represents the costs of five possible sellers.
Table 7-4
SELLER
COST
DALE
$1,500
JILL
$1,200
DENISE
$1,000
CATHERINE
$750
JACKSON
$500
31. Refer to Table 7-4. Who is a marginal seller when the price is $1,250?
a. only Jill
b. Jill and Dale
c. only Dale
d. Denise, Catherine, Jackson, and Jill
32. Refer to Table 7-4. If the market price is $1100, producer surplus in the market is
a. $400.
b. $2,700.
c. $1050.
d. $2250.
33. Total surplus in a market is the total area
a. below the demand curve and above the price.
b. below price and up to the point of equilibrium.
c. below the demand curve and above the supply curve, up to the equilibrium quantity.
d. below the demand curve and above the horizontal axis, up to the equilibrium quantity.
34. For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which
of the following statements is probably true of this good?
a. There is a price ceiling on this good.
b. The good is a necessity.
c. Consumers would pay most of any new tax on this good.
d. There are many close substitutes for this good.
Table 7-1
BUYER
MIKE
SANDY
JONATHAN
HALEY
WILLINGNESS TO PAY
$50.00
$30.00
$20.00
$10.00
35. Refer to Table 7-1. If the table represents the willingness to pay of four buyers and the price of the product is
$18, then their total consumer surplus is
a. $38.
b. $42.
c. $46.
d. $72.
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Econ201 Exam 1, Fall 2006
Douglas (A)
36. Warren drinks four cups of coffee. The marginal benefit he enjoys from drinking the fourth cup
a. is the additional benefit he gets from drinking the fourth cup.
b. determines Warren’s willingness to pay for the fourth cup.
c. is probably different from the marginal benefit provided to Warren by the third cup.
d. All of the above are correct.
37. Economics deals primarily with the concept of
a. scarcity.
b. poverty.
c. change.
d. power.
Figure 6-4
38. Refer to Figure 6-4. If the government imposes a price ceiling in this market at a price of $5.00, the result
would be a
a. shortage of 20 units.
b. shortage of 10 units.
c. surplus of 20 units.
d. surplus of 10 units.
39. You lose your job and as a result you buy fewer romance novels. This shows that you consider romance
novels to be a(n)
a. luxury good.
b. inferior good.
c. normal good.
d. complementary good.
40. Tires and gasoline are complements. If the price of gasoline increases, producer surplus in the tire market
a. decreases.
b. is unchanged.
c. increases.
d. may increase, decrease, or remain unchanged.
41. A higher price for batteries would result in a(n)
a. increase in the demand for flashlights (a complement).
b. decrease in the demand for flashlights (a complement).
c. increase in the demand for batteries.
d. decrease in the demand for batteries.
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Econ201 Exam 1, Fall 2006
Douglas (A)
42. If the price elasticity of demand for a good is 1.5, then a 3 percent decrease in price results in a
a. 0.5 percent increase in the quantity demanded.
b. 2 percent increase in the quantity demanded.
c. 4.5 percent decrease in the quantity demanded.
d. 4.5 percent increase in the quantity demanded.
43. Other things equal, the demand for a good tends to be more inelastic, the
a. fewer the available substitutes.
b. longer the time period considered.
c. more the good is considered a luxury good.
d. more narrowly defined is the market for the good.
44. If demand is price inelastic, then
a. buyers do not change their purchases of the good much when its price changes.
b. buyers change their purchases of the good substantially when its price changes.
c. buyers do not change their purchases of the good much when their incomes rise.
d. the demand curve is very flat.
45. Suppose the incomes of buyers in a market for a particular normal good decrease and there is an improvement
in technology. What would we expect to occur in this market?
a. The equilibrium price would increase, but the amount sold may either rise or fall.
b. The equilibrium price would decrease, but the amount sold may either rise or fall.
c. Both equilibrium price and equilibrium quantity would increase.
d. Equilibrium quantity would increase, but equilibrium price may either rise or fall.
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ID: A
Econ 201 Midterm 1
Answer Section
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Interpretive
Applicative
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Interpretive
Analytical
Applicative
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Definitional
Interpretive
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Definitional
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Analytical
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Definitional
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Interpretive
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Applicative
Interpretive
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ID: A
44. ANS: A
45. ANS: B
MSC: Definitional
MSC: Applicative
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