TEAR THIS PAGE FROM YOU BOOKLET FILL IT AND TURN IT IN WITH YOUR SCANTRON YOU CAN KEEP THE REST OF THE BOOKLET Econ 202 Principles of Microeconomics Section 1 University of Mississippi Prof David Fragoso Gonzalez Last Name First Name ID Instructions Practice Midterm 1 TIME You have 50 minutes to complete the 30 questions plus 1 extra credit question No extra time will be allowed The value of each question is noted in the statement of the question SCANTRON Please place your answers on a scantron form no 16485 the Purple form which you provide Be sure to fill in your name and ID number No further information is necessary CALCULATOR You may use a simple calculator with no storage function You may not use your phone as a calculator SCRAP PAPER You may use the empty space in the margins of the test booklet for scrap paper as well as the last sheet of the booklet Do not use your own scrap paper If you need more scrap paper raise your hand and wait in your seat APPEALS If you believe that a question is ambiguous that there are no correct answers for some question or that there more than one answer is correct briefly state so in the lines provided below these instructions FINISH When you are done return this page and your scantron to me CONDUCT Please abide by the University s policy on Academic Conduct and Discipline Cheating will be severely punished GOOD LUCK Appeals Extra Credit Question up to 7 points I ADVISE YOU TO LEAVE THIS QUESTION FOR LAST AND DO IT ONLY IF YOU HAVE TIME The higher education market has been affected by a variety of events over the last few years Using the three step method explain how the following events affect outcomes in this market 1 The appearance of online universities which provided a substitute for traditional classes 2 The rising costs with faculty staff and administrators 3 The improvement of infrastructure on campus better libraries more and better gyms student unions etc You should explain for each event which curve is affected and in which direction You should also include a diagram combining all of the relevant shifts You should clearly state if a change in equilibrium price or quantity is ambiguous and justify your statement For maximum credit you should also use your knowledge of the determinants of the price elasticity of demand and supply to justify potential changes in elasticity and therefore the slope introduced by the events mentioned above Use the space in this sheet to answer this question I will provide more paper if you need it 1 3 points For which of the following individuals would the opportunity cost of going to college be highest A a promising young mathematician who will command a high salary once she earns her college degree B a student with average grades who has never held a job C a famous highly paid actor who wants to take time away from show business to finish college and earn a degree D a student who is the best player on his college basketball team but who lacks the skills necessary to play professional basketball 2 3 points For a college student who wishes to calculate the true costs of going to college the costs of room and board A should be counted in full regardless of the costs of eating and sleeping elsewhere B should be counted only to the extent that they are more expensive at college than elsewhere C usually exceed the opportunity cost of going to college D plus the cost of tuition equals the opportunity cost of going to college 3 4 points Betty s Bakery bakes fresh bread every morning Bread not sold by the end of the day must be thrown away A loaf of bread costs Betty 2 00 to produce and she usually prices loaves of bread at 3 50 per loaf Suppose that near the end of the day Betty still has 12 loaves of bread on hand Which of the following is correct A Betty should only sell the remaining bread if she can charge the regular price 3 50 per loaf Otherwise she should throw the bread away B Betty should only sell the remaining bread if she can charge at least the cost of making a loaf 2 00 Otherwise she should throw the bread away C Betty should sell the remaining bread for any price that she can get above 0 per loaf D Betty should only sell the remaining bread if she can charge a price equal to the profit she makes on regularly priced loaves 1 50 4 3 points Which of the following is not an example of a group responding to an incentive A Students attend class because of an attendance policy that reduces their grade for absences B Consumers buy more of a product when it is on sale at a reduced price C Employees work harder to earn higher commissions D Universities offer fewer online classes when they generate more revenue than traditional classes 5 3 points Which of the following concepts cannot be illustrated by the production possibilities frontier A Efficiency B opportunity cost C Equality D trade offs 6 4 points Consider the graph of the daily PPF of a computer manufacturer At what point is the opportunity cost of producing a desktop higher A A B B C C D D E The opportunity cost is constant along the curve 7 3 points Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B A a decrease in unemployment B a technological advance in the consumer goods industries C a general technological advance D an increase in the availability of capital producing resources 8 4 points Perry is a writer Given the PPF in the graph below what is his opportunity cost of writing a poem A 1 6 novels B 6 novels C 2 novels D 1 12 novels 9 3 points Assume for the United States that the opportunity cost of each airplane is 100 cars Which of these pairs of points could be on the United States production possibilities frontier A 200 airplanes 5 000 cars and 150 airplanes 4 000 cars B 200 airplanes 10 000 cars and 150 airplanes 20 000 cars C 300 airplanes 15 000 cars and 200 airplanes 25 000 cars D 300 airplanes 25 000 cars and 200 airplanes 40 000 cars 10 3 points Consider the graph below It represents the PPFs of two regions of a country East and West Each region is able to produce bananas and oil Fill in the gaps region has an absolute advantage in producing bananas region has an absolute advantage producing oil and region holds a comparative advantage in the production of Bananas A East West East B East East West C West East East D East West West BananasOilWestEastgoodsgoodsABconsumercapital 11 3 points For two individuals who engage in the same two productive activities it