P R A C T I C E E X A M # 1 Fall 2010Economics 101 Professor TurchiMidterm Examination on Thursday, September 23, 2010 in Class ****Review Session, To Be Announced For Exam: Students are responsible for text material (Chapters 1-6, [including all assigned appendixes] and Ch. 11, + pp.596-606 (or 609-617 in paperback)), relevant lecture material, and all handouts.There are more multiple choice questions here than will be on the exam. Expect to see around 20 mc questionson the actual exam.Bring to Exam: (1) #2 pencil with functioning eraser, (2) calculator (for numerical calculations only). No other electronicdevices are permitted. Bring 4 Blank Scantrons____________________________________________________________________________________________________1. Suppose a farmer produces 50 bushels of corn and 10 bushels of peanuts. According to the table below, what is the opportunitycost of 10 more bushels of peanuts?040283042205010550Corn(Bushels)Peanuts(Bushels)a. 8 bushels of corn. c. 50 bushels of corn.b. 42 bushels of corn. d. Impossible to determine from the information given.2. Opportunity cost is thea. cost incurred when one fails to take advantage of an opportunity.b. cost incurred in order to increase the availability of attractive opportunities.c. cost of the best option foregone as a result of choosing an alternative.d. drudgery of the undesirable aspects of an option.3. All of the points inside a production possibilities frontier are ________; all of the points outside the productionpossibilities frontier are ________.a. efficient; inefficient c. optimal; irrationalb. attainable; unattainable d. unattainable; efficient4. The demand curve for a good connects points describing how much consumersa. actually bought at different prices during a particular period. b. actually bought at different prices in different periods.c. would have been willing and able to buy at different prices during a particular period.d. would have been willing and able to buy at different prices in different periods.5. The slope of a demand curve is almost always ________, becausea. positive; when people buy more of a good the cost of producing it will rise.b. positive; the more money a person has, the more of a particular good will be bought.c. negative; when people buy more of a good, the cost of producing it will fall.d. negative; with everything else equal, people will buy more of a good when its price is lower.6. Which of the following statements correctly describes a market equilibrium?a. At equilibrium, demand equals supply.1b. At equilibrium, quantity demanded equals quantity supplied.c. At equilibrium, market forces are no longer at work.d. Equilibrium is the best combination of price and quantity.7. An increase in supply and an increase in demand willa. increase price and increase the quantity exchanged.b. decrease price and decrease the quantity exchanged.c. affect price in an indeterminate way and decrease the quantity exchanged.d. affect price in an indeterminate way and increase the quantity exchanged.8. The major drawback of an effective price ceiling is:a. it causes a surplus. c. it causes overinvestment in the industry.b. it causes a shortage. d. there is no drawback.9. A rise in the price of hamburger buns will cause which of the following changes in the market for hamburger patties?a. decrease in equilibrium quantity, increase in equilibrium price.b. increase in equilibrium quantity, increase in equilibrium price.c. decrease in equilibrium quantity, decrease in equilibrium price.d. increase in equilibrium quantity, decrease in equilibrium price.10. Which of the following will not shift the demand curve for Spam to the left (°)?a. increased media attention paid to cholesterol c. increased popularity of vegetarianismb. rise in the price of hamburger d. falling consumer incomes11. A rise in the price of ink willa. decrease the quantity demanded and the supply of pensb. decrease demand and the quantity supplied of pensc. decrease the quantity supplied and the quantity demanded of pensd. decrease the demand and supply of pens12. In the figure above, there would be an excess supply of T-shirts ifa. the price was $10. c. the price was $6.b. the price was $8. d. the quantity supplied was 70.13. In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart. In February, 3,000 quarts of ice cream aresold at $2.50 a quart. This change in quantity sold and price may have been caused bya. a reduction of the population in the Boston area.b. the introduction of labor-saving automated ice cream-packing machinery.c. the release of a medical study showing that ice cream consumption improves mental health.2d. a decrease in the price of flavorings used in the production of ice cream.14. The government of Economia announces that it will purchase its farmers' surplus of milk. From this announcement,you can infer that Economia hasa. a price ceiling below the equilibrium price for milk. c. a price floor above the equilibrium price for milk.b. a price ceiling above the equilibrium price for milk. d. a price floor below the equilibrium price for milk.15. Which of the following will cause a shift in demand for Toyota Camrys?a. a change in the price of steel. c. a new Toyota dealership opening in town.b. a change in the price of Honda Accords (a similar model). d. a more efficient welding process.16. The basic problem of economics is to:a. resolve the desire for meaning c. eliminate the tendency of the economy to stagnateb. resolve the problem of scarcity d. equilibrate wants and needs17. Opportunity cost is the value of:a. all other possible options the decision maker could have chosenb. what is gained from the alternative which is chosenc. the next best alternative that the decision forces one to give upd. the alternative cost which the decision maker would choose if more resources were available18. Using the PRODUCTION POSSIBILITY FRONTIER above, what is the optimal bundlea. point y b. point p c. point x d. cannot be determined19. According to the above picture, the opportunity cost of one more pound of potatoes isa. higher at y than at p c. equal at y and pb. lower at y than at p d. impossible to determine20. The shape of the PRODUCTION POSSIBILITY FRONTIER above implies thata. some resources are better suited for producing wheat than potatoesb. the opportunity cost of producing wheat falls as wheat production risesc. the farmer’s technology is not subject to the