Economics 101 Spring 2009 Professor Wallace Economics 101 Midterm Exam #1 February 26, 2009 Instructions Do not open the exam until you are instructed to begin. You will need a #2 lead pencil. If you do not have one you will need to borrow one from a classmate or one of the TAs. Before you may begin the exam everyone must take the following steps. Use the #2 lead pencil to fill in your name on the answer sheet. Fill in your student number on the answer sheet. Fill in your TA Code in column A of the space allotted for “Special Codes” on the answer sheet. If your TA is Mai Seki your TA Code is 1 If your TA is Caleb White your TA Code is 2. If your TA is Hanquing Wang your TA Code is 3. If your TA is Dai Zusai your TA code is 4. If your TA is Yuya Takahashi your TA code is 5. Fill in your Exam Code in column B of the space allotted for “Special Codes” on the answer sheet If your exam is green then your Exam Code is 1. If your exam is white then your Exam Code is 2. The exam consists of 35 multiple-choice questions. All questions are equally weighted and there is a single best answer for each question. The exam is scheduled to end at 12:15 pm. You are encouraged to hold onto the hard copy of your exam so that you can check your answers. An answer key for this exam will be made available sometime later this today, but the tests will not be handed back until next week. In keeping with the previously state policy, we will not except early email request for exam scores. Page 1Use the following to answer question 1: Figure: Guns and Butter 1. (Figure: Guns and Butter) If the economy were producing 8 units of guns and 12 units of butter per period: A) this is a possible choice, but would involve inefficiency. B) the notion of increasing opportunity cost is invalidated. C) the economy is still efficient but has made a decision not to buy as much as it could.D) something must be done to reduce the amount of employment. 2. When building a model, economists: A) simplify reality in order to highlight what really matters. B) attempt to duplicate reality in all its complexity. C) ignore the facts, and instead try to determine what the facts should be. D) are careful to avoid the scientific method. 3. With trade, a country may: A) consume outside its production possibility frontier. B) consume inside its production possibility frontier. C) find that its production possibility frontier will shift outward. D) avoid opportunity costs. Page 24. If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. We know that: A) Laurence's opportunity cost of writing programs is less than that of Carrie Anne. B) Laurence's opportunity cost of writing programs and of making sunglasses is less than that of Carrie Anne. C) Carrie Anne's opportunity cost of writing programs and of making sunglasses is less than that of Laurence. D) Carrie Anne's opportunity cost of writing programs is less than that of Laurence. 5. If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. We know that: A) Laurence has a comparative advantage in programs. B) Laurence has a comparative advantage in both programs and sunglasses. C) Carrie Anne has a comparative advantage in programs. D) Carrie Anne has a comparative advantage in both programs and sunglasses. 6. Economists usually make the assumption that production is subject to increasing opportunity costs because: A) higher production usually results in more inflation. B) all resources are not equally suited to producing every good. C) individuals desire constantly increasing opportunities to make themselves better off.D) if production is efficient, it is not possible to increase the production of all goods simultaneously. Page 3Use the following to answer question 7: 7. (Table: Wheat and Aluminum) The United States and Germany can produce both wheat and aluminum. The table shows the maximum annual output combinations of wheat and aluminum that can be produced. Which of the following choices would represent a possible trade based upon specialization and comparative advantage? A) Germany would trade 2 wheat to the U.S. for 1 aluminum. B) Germany would trade 2 aluminum to the U.S. for .5 wheat. C) The United States would trade 1 wheat to Germany for 1 aluminum. D) The United States would trade 1 wheat to Germany for 1.5 aluminum. 8. The Kansas market for corn is considered a competitive market. This means there are ________ buyers and ________ sellers of corn in Kansas. A) many; few B) few; many C) many; many D) few; few 9. The law of demand states that, other things equal: A) as the price increases, the quantity demanded will increase. B) as the price decreases, the demand curve will shift to the right. C) as the price increases, the demand will decrease. D) as the price increases, the quantity demanded will decrease. 10. If goods A and B are substitutes, a decrease in the price of good B will: A) increase the demand for good A. B) increase the demand for good B. C) decrease the demand for good A. D) increase the demand for good B and decrease the demand for good A. Page 411. A good is normal if: A) when income increases, the demand remains unchanged. B) when income increases, the demand decreases. C) when income increases, the demand increases. D) income and the demand are unrelated. 12. Which of the following will not cause an increase in the supply of cornflakes? A) an increase in the price of cornflakes B) a cost-saving improvement in the technology of corn production C) a reduction in the price of corn D) the expectation by producers that the price of cornflakes will fall in the future, because they anticipate the release of a government report that claims that oat bran is healthier than cornflakes 13. The market equilibrium is found at the: A) price where quantity demanded exceeds quantity supplied. B) price where quantity demanded equals quantity supplied. C) price where quantity supplied exceeds quantity demanded. D) highest price the market will bear. 14. The primary difference between a change in supply and a change in the quantity supplied is
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