Economics 101 Spring 2008 Professor Wallace Economics 101 Midterm Exam #1 February 27, 2008 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 Professor Wallace or one of the TAs. Before you may began the exam everyone must take the following steps. (1) Use the #2 lead pencil to fill in your name on the answer sheet. (2) Fill in your student number on the answer sheet. (3) Fill in your TA Code in column A of the space allotted for “Special Codes” on the answer sheet. a. If your TA is Megan Ritz your TA Code is 1 b. If your TA is Hugette Sun your TA Code is 2. c. If your TA is Hanquing Wang your TA Code is 3. d. If your TA is Rui Wang your TA code is 4. (4) Fill in your Exam Code in column B of the space allotted for “Special Codes” on the answer sheet a. If your exam is green then your Exam Code is 1. b. 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 5:15 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 evening, 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.1. Which of the following will have the effects of shifting a country’s production possibility frontier towards the origin, other things being equal? a. The country experiences a mild recession b. The country’s population starts decreasing c. The country has discovered new oilfields d. There is a breakthrough in computer technology 2. Along the production possibility frontier, trade-off exists because a. Buyers will want to buy less when price goes up, but producers will want to sell more b. At some levels, unemployment or inefficiency exists c. The economy has only a limited quantity of resources to allocate between competing uses d. Even on the frontier itself, not all production levels are efficient 3. Suppose production possibility frontier is of bowed-shaped, bread is on the x-axis, milk is on the y-axis. Then opportunity cost of producing one more unit of bread: a. Decreases as the amount of milk produced increases b. Increases as the amount of milk produced increases c. Remain constant along the curve d. Either of the above can happen 2Using the following information to answer the next 5 questions (4-8) Suppose there are 24,000 workers in country A and 15,000 workers in country B. In country A, 3 workers can produce one car, while 2 workers can produce one computer each day. In country B, 5 workers can produce one car, and 1 worker can produce 1 computer each day. 4. Which of the following statement is true: a. Country A has the absolute advantage in producing both goods b. Country B has the absolute advantage in producing both goods c. Country A has the absolute advantage in producing cars, while country B has the absolute advantage in producing computers. d. Country A has the absolute advantage in producing computers, while country B has the absolute advantage in producing cars 5. What is the opportunity cost of producing a computer in country A? a. ½ of a car b. 1/3 of a car c. 3/2 of a car d. 2/3 of a car 6. Which country has the comparative advantage in producing cars? a. Country A b. Country B c. Neither country has the comparative advantage in producing cars d. We cannot determine who has the comparative advantage from the available information 7. Suppose with free trade, one of the countries will specialize in producing cars. Which country will it be? a. Country A b. Country B c. Either country may specialize in producing cars d. We cannot determine who will specialize in cars from the available information 8. Suppose under free trade, country A consumes 6000 cars and 4000 computers, and country B consumes 3000 cars and 6000 computers. What are the terms of trade? a. 1 car for 2/3 computers b. 1 car for 1 computers c. 1 car for 2 computers d. 1 car for 3 computers 39. Country A and B’s production Possibilities Frontiers are depicted as above. Country A’s PPF expands parallel to the right to the dashed line. Which country should sell wheat and buy corn before and after the expansion of A’s PPF (the first answer is the country that sells wheat before the expansion of A’s PPF and the second answer is the country that buys corn after the expansion of A’s PPF) 2 A B 20 wheat corn 10 6 a. A, A b. A, B c. B, A d. B, B 10. The demand and supply curves for a market are QS = 2p - 2, and QD = 10 - p. The equilibrium quantity of the good is a. 6 b. 7.33 c. 3.33 d. 4 e. 2.67 11. A newspaper story recently reported that the price of new cars has decreased, and the quantity of new cars sold has dropped. The price and quantity changes were probably caused by: a. a decrease in buyers' incomes. b. an increase in buyers' incomes. c. an increase in production costs. d. a decrease in production costs. e. none of the above 412. Suppose the workers’ union has just negotiated higher wages for all employees in the carpet industry. The manufacturers immediately launch an advertising campaign, touting their carpet as being made by highly satisfied, highly paid workers. What is likely to happen in the market for the carpet? a. Equilibrium price and quantity of carpet traded increases. b. Equilibrium price of carpet decreases, but quantity traded increases. c. Equilibrium price and quantity of carpet traded decreases. d. Equilibrium price of carpet increases, but the change in the quantity traded is ambiguous. e. The change in the equilibrium price of carpet is ambiguous, but the quantity traded increases. 13. Suppose pork producers switch to a cheaper pork feed. Consumers, however, think that this new pork feed may endanger their health. The end result of these changes on the market for pork will be a. a decrease in equilibrium price and quantity b. a decrease in equilibrium price; the change in quantity is ambiguous c. a decrease in equilibrium quantity and in increase in price d. a decrease in equilibrium quantity; the change in price is ambiguous e. none of the above 14. If the
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