First Midterm 02.23.2006 Prof. Kelly Econ 101 Use the following graph to answer the next three questions.1. The above figure shows the PPF for a music processing plant that produces both CDs and cassettes. Between points B and C, the opportunity cost of one cassette is:a. 10 CDsb. 20 CDsc. 15 CDsd. 3 CDs2. Which of the following is definitely attainable for the plant given ONLY the information from the picture. a. 120 CDs and 90 cassettes.b. 179 CDs and 49 cassettes.c. 170 CDs and 80 cassettes.d. 119 CDs and 100 cassettes.3. Which of the following is TRUE given ONLY the information from the picture?a. It is possible for the plant to produce at point E.b. At point A, the plant is under-utilizing its resources.c. As the plant produces more and more CDs, it must give up an increasing amount of cassettes.d. The opportunity cost of producing CDs is constant for this firm.14. What happens to a nation’s imports or exports of a product when the world price of theproduct rises above the domestic price? Holding everything else constant, a. Imports of the product increase.b. Imports of the product stay the same.c. Exports of the product increase.d. Exports of the product decrease.5. Joe usually buys 4 hamburgers at his favorite fast food place. However, today he discovers that the price has changed from $1 per hamburger to $1.40 per hamburger. He responds by buying only 2 hamburgers. What can we say about his price elasticity of demand for hamburgers?a. Joe’s demand is inelastic, causing him to spend less money on hamburgers than before.b. Joe’s demand is inelastic, causing him to spend more money on hamburgers than before.c. Joe’s demand is elastic, causing him to spend less money on hamburgers than before.d. Joe’s demand is elastic, causing him to spend more money on hamburgers than before.6. Assume that petroleum and natural gas are substitutes for each other. Holding everything else constant, if the price of petroleum increases, then in the market for naturalgas:a. the equilibrium quantity will increase and the equilibrium price will decrease.b. the equilibrium quantity will change in an ambiguous way and the equilibrium price will increase.c. the equilibrium quantity will decrease and the equilibrium price will change in an ambiguous way.d. the equilibrium quantity will increase and the equilibrium price will increase.7. Holding everything else constant, when a tariff is imposed on a good imported fromabroad,a. the domestic quantity supplied increases.b. the domestic quantity supplied decreases.c. the foreign quantity supplied increases.d. Both (a) and (c)2Use the following information to answer the next three questions.A small village, Djose, produces and consumes only one good, blitz ball. Their domesticdemand curve for blitz ball is given by the equation: P = 200 – 2Q. The domestic supplycurve for blitz ball is given by the equation: P = 50 + Q. The equilibrium world price iscurrently at $70.8. Given the above information, if Djose opens to trade with the world, which of thefollowing statements is true?a. The domestic price will still be at $50.b. The world price will fall to $50.c. Djose village will export 45 blitz balls.d. Djose village will import 45 blitz balls.9. Suppose that Djose village is open for international trade. What will happen if Wakka,a leader of Djose village, decides to impose a tariff of $20 on each blitz ball imported?Holding everything else constant, a. The new equilibrium domestic price will be at $70.b. After imposition of the tariff, no international trade occurs.c. Djose village will export 15 blitz balls.d. Djose village will import 15 blitz balls. 10. Disregard the information provided in the preceding question.. Suppose that Djosevillage is open for international trade. What will happen if Wakka decides to impose animport quota limit of 50 blitz balls? Holding everything else constant, a. The new equilibrium domestic price will be at $80.b. Djose village will import 45 blitz balls.c. Djose village will import 50 blitz balls.d. Djose village will export 50 blitz balls.11. Nations use barriers to international trade (tariffs and/or quotas) to benefit theeconomic positions of __________. These barriers __________ economic efficiency andtrade among nations.a. consumers/ increaseb. consumers/ decreasec. domestic producers/ increased. domestic producers/ decrease312. Joe consumes two goods, potatoes and pasta. Holding everything else constant, whenJoe’s income increases, he buys less potatoes and more pasta. Which of the following is correct?a. Pasta and potatoes are complements.b. Pasta and potatoes are substitutes.c. Pasta is an inferior good.d. Potatoes are an inferior good. Use the information displayed in the graph below to answer the next question.13. PPF1 represents a Production Possibility Frontier of a country today on which two points A and B are indicated. Two additional points, C and D, are also marked on the above graph. PPF2 and PPF3 represent the possible Production Possibility Frontiers of the country’s economy ten years from now. The economy is more likely to have the production possibilities described by curve PPF3 instead of PPF2 if today the economy chooses:a. Point A on PPF1.b. Point B on PPF1.c. Point C inside PPF1.d. Point D outside PPF1.14. Consider the wooden table market. Suppose that the price of wooden chairs increases and simultaneously the price of wood decreases. The equilibrium price in the market for wooden tables will ____ and the equilibrium quantity will ________.a. fall, not be determinedb. rise, not be determinedc. not be determined, rised. not be determined, fall415. Both Maryland and Wonderland produce DVDs and hard disks with each country having linear PPFs and the same level of resources. Maryland has a comparative advantage over Wonderland in producing DVDs. Which of the following statements is true?a. The opportunity cost (O.C.) of producing 1 unit of DVDs is lower in Maryland than in Wonderland and also the O.C. of producing 1 unit of hard disks is lower inMaryland than in Wonderland. b. The opportunity cost of 1 unit of DVDs is lower in Maryland but the O.C. of 1 unit of hard disks is lower in Wonderland.c. The O.C. of 1 unit of DVDs is lower in Wonderland and the OC of 1unit of hard disks is also lower in Wonderland.d. The OC of 1 unit of DVDs is lower in Wonderland and the OC of 1 unit of hard disks is lower in Maryland.16. Which of the following is a
View Full Document
Unlocking...