SL 151 Bremmer I Name CM March 24 2006 1st In Class Exam Chapters 1 7 pp 569 572 Part I Multiple Choice 3 points each For each of the following questions indicate the best answer in the space provided Figure 1 1 Referring to the production possibilities curves shown in Figure 1 which of the following statements is false A Given production possibilities curve b point Y shows a bundle of goods that is unobtainable given current technology and resources B Given production possibilities curve c point X shows a bundle of goods that can be produced but resources would be unemployed and used inefficiently C The shift from production possibility curve a to production curve b indicates improvement in the technology to produce civilian goods but not war goods D If the production possibilities curve shifts from curve a to curve c society is worse off E If curve a is the current production possibilities curve anywhere along curve a the economy is at full production and full employment Figure 2 2 Referring to the production possibilities curve in Figure 2 which of the following statements is are true A Resources in this economy are not specialized and they can be freely moved between the production of capital and consumer goods B Every thing else held constant there will be more economic growth in the future if the economy chooses point C today rather than point B C As the economy moves from point B to point A the opportunity cost of producing one more unit of capital goods increases D As the production of capital goods increases its opportunity cost remains constant E Both A and D are true 3 A B C D E Which of the following would cause the production possibilities to shift inwards to the left A decrease in the labor supply An increase in the unemployment rate A decrease in the supply of capital All of the above Only A and C 4 Figure 3 shows the demand and supply curves for good X Which of the following would have caused the demand curve to shift from D1 to D2 An increase in the price of good X Consumers expect the future price of good X to increase A rise in income assuming good X is a normal good A fall in the price of good Y assuming goods X and Y are substitutes A fall in the price of good K assuming goods X and K are complements Figure 3 A B C D E 5 A B C D E Again Figure 3 shows the demand and supply curves for good X Which of the following would have caused the supply curve to shift from S1 to S2 An increase in the price of good X A decrease in the number of firms producing good X Producers expect the future price of good X to fall An increase in the price of an input used in the production of good X The government imposes a 1 per unit tax on producers of good X 6 Next year both the demand and supply of cars changes in France You observe that the quantity of cars did not change but the price of cars increased Which of the following occurred A Demand increased while supply remained constant D Demand and supply increased by an equal amount B Demand decreased and supply increased by an equal amount E Demand and supply decreased by an equal amount C Demand increased and supply decreased by an equal amount Page 1 7 A B C If the price elasticity of demand for wheat was less than one a severe drought would cause a decrease in wheat farmers total revenue D the demand curve of wheat to shift to the left an increase in wheat farmers total revenue E the supply curve of wheat to shift to the right no change in wheat farmers total revenue 8 A B C As price falls along a negatively sloped linear demand curve slope is constant and the price elasticity of demand falls D total revenue always decreases slope is constant and the price elasticity of demand increases E total revenue always increases both slope and the price elasticity of demand are constant 9 A B C If a supply curve is a linear positively sloped line that cuts the origin then supply is elastic at all prices and quantities D total revenue remains constant as price increases supply is inelastic at all prices and quantities E Both C and D supply is unitary elastic at all prices and quantities 10 A B C D E Which of the following statements is are correct The The income elasticity of demand for inferior goods is positive The cross elasticity of demand for substitutes is negative The cross elasticity of demand for complements is positive Both B and C are correct None of the above statements are correct 11 The demand for apple pies is perfectly elastic Given a linear upward sloping supply curve if the government taxes apple pies at 1 a pie then A sellers pay the entire tax D price increases exactly by 1 B buyers pay the entire tax E Both B and D C buyers and sellers split the tax equally 12 A B C D E If a price ceiling is set above the equilibrium price a shortage of the product will occur a surplus of the product will occur a black market will evolve neither the equilibrium price nor the equilibrium quantity will be affected Both A and C 13 A B C D E Everything else held constant imposing an effective minimum wage will result in less unemployment the greater the elasticity of the supply of labor will result in an increase in the firms labor cost if the demand for labor was inelastic increases the number of people employed All of the above None of the above Figure 4 14 Which of the following is not characteristic of a product with relatively inelastic demand A Consumers have had only a short period of time to adjust to changes in price B Buyers only spend a small percentage of their total income on the product C There are a large number of good substitutes for the good D The good is regarded by consumers as a necessity E All of the above are characteristics of a product with relatively inelastic demand 15 Referring to the production possibilities curves shown in Figure 4 which of the following statements is true A Both Country A and Country B exhibit the law of increasing cost B With free trade Country A should export steel C In Country B the opportunity cost of 1 ton of steel is ton of chemicals D Both Country A and Country B have specialized resources E None of the above statements is true Page 2 Part II Short Answer Questions 55 points total For each of the following questions give a concise but complete answer When appropriate use math graphs or equations to help explain your answer Completely label all graphs If you require more space right on the back of each …