Class: Microeonomics--Andron (MW and/or TTh sections)
Exam 1 Exam Dates: Monday, 9-23-2002 or Tuesday, 9-24-2002
Instructions:
I) On your Scantron card you must
print three things:
1) Print your full name clearly;
2) Print the day and time of your
section (for example MW 1:25);
3) Print the number I have written
in ink on the upper right corner of
your copy of this test. (This
number tells me which version of the
test you have. Without it your
test cannot be graded properly and
you get no credit for your answers.)
II) Answer on your Scantron card, using a #2
pencil.
III) Warning:
SOME QUESTIONS MUST BE ANSWERED SEVERAL
TIMES!
Such questions will begin with a phrase such as this:
Repeat your answer on Scantron
lines 37, 38 and 39.
Remember to do it!
Questions:
1. (Repeat your answer on Scantron lines
26 and 27.) Unlike an increase
in the "quantity demanded" of a good, an increase in demand for a
good
A) can be caused by a reduction in the price of
an input used to produce the good.
B) can be caused by a decline in the "own
price" of that good.
C) can be caused by an increase or decrease in
the incomes of customers.
D) can be caused by a change in the price of a
substitute for the good.
E) both c. and d.
2. In general, the smaller the price elasticity:
A) the smaller the responsiveness of price to
changes in quantity.
B) the smaller the responsiveness of quantity to
changes in price.
C) the larger the responsiveness of price to
changes in quantity.
D) the larger the responsiveness of quantity to
changes in price.
3. (Repeat your answer on Scantron lines
28 and 29.) If the price of a good goes up by 5% and, in response, the
quantity demanded falls by 20%, the price elasticity of demand would be:
A) .05.
B) 4.
C) .25.
D) .20.
4. (Repeat your answer on Scantron line
30.) Income elasticity is
________ for luxuries.
A) positive but less than one
B) greater than 1.
C) negative.
D) equal to 1.
5. (Repeat your answer on Scantron line
31.) For complements, cross
price elasticity of demand is:
A) negative.
B) positive.
C) between zero and one only.
D) zero.
6. (Repeat your answer on Scantron line
32.) An increase in price and
indeterminate change in quantity can only be caused by _______ shift in demand
and _______ shift in supply.
A) a leftward, no
B) no shift, a leftward
C) a leftward, a rightward
D) a rightward, a leftward
7. Suppose excess supply causes price to
fall. As price falls:
A) the quantity demanded and supplied will fall.
B) the quantity demanded and supplied will rise.
C) the quantity demanded will rise and the
quantity supplied will fall.
D) the quantity demanded will fall and the
quantity supplied will rise.
8. (Answer here and also on Scantron lines 33
and 34.) Suppose the sunk cost of
obtaining your college degree is already $200,000, the marginal opportunity
cost is $100,000 and the marginal benefit is $150,000. Then definitely you:
A) should complete your degree.
B) should not complete your degree since the
total cost will be $300,000 and the benefit $150,000.
C) should complete your degree only if the
marginal cost is equal to or less than $200,000.
D) obtain more information before making a
decision.
9. NAFTA:
A) is an organization that loans money to
countries in financial crises.
B) is the body that governs international trade
and resolves international trade disputes.
C) is the free trade agreement that governs
trade among the 15 members of the European Union.
D) reduces barriers to international trade within
North America
10. (Repeat your answer on Scantron lines
35 and 36.) Which of the
following would be expected to cause an increase in the supply of fax machines?
A) An increase in the number of business firms
demanding fax machines.
B) An increase in the price of fax machines.
C) A decrease in the cost of manufacturing fax
machines.
D) Both B and C.
Use the
following to answer question 11:
Current prices in two countries, Europa and Goofonia
(The money of Goofonia is called the goofus, and the money of
Europa is called the euro. Prices in
each country are expressed in its local currency.)
Good
1 Good 2 Good 3 Good
4
Europa prices (in euros)
20 40 6 4
Goofonia prices (in goofuses)
10 10 2 4
11. (Repeat your answer on Scantron lines
37, 38 and 39.) The numbers in
the table represent current prices of four goods in two different nations,
Europa and Goofonia. (If you care (and
I hope you don't), each price is expressed in the local currency, which is the
"euro" in Europa and the "goofus" in Goofonia.)
A) Europa should definitely export good 1, and
Goofonia should definitely export good 2.
B) Europa should definitely export good 3 and
Goofonia should definitely export good 1.
C) As trade builds, opportunity costs in the two
countries will tend to become more and more equal, and therefor international
trade will expand only so far.
D) Both C and A are correct.
E) Both C and B are correct.
12. (Repeat your answer on Scantron lines
40 and 41.) As discussed in
lecture, the pattern of international trade among nations, and the pattern of
specialization and the division of labor among people, are best explained
A) by recognizing that differences in opportunity
cost create the opportunity of mutual gain through specialization and exchange
whether you are talking about a person, a region or a nation.
B) by recognizing that more productive nations
will tend to export more because they are more competitive, and more productive
people will tend to earn higher incomes because their work is more valuable.
C) by recognizing that international trade among
nations is governed by the principle of absolute advantage, while
specialization and the division of labor among people is best explained by
differences in opportunity cost.
D) both A and B.
E) both B and C.
13. Firms set the level of production in a way that:
A) maximizes market share.
B) gives consumers what they want.
C) satisfies the government.
D) maximizes profits.
14. A primary goal of the World Bank is to
A) promote economic negotiations and cooperation
among industrialized countries.
B) foster economic growth in developing
countries.
C) protect the interests of the U.S. abroad.
D) negotiate trade agreements between nations.
15. In January of 1999, 11 members of the
European Union adopted a single currency called:
A) the Eurodollar.
B) the Euromark.
C) the Euro.
D) the Eurocredit.
16. Which of the following statements is FALSE?
A) Government owns the means of production in a
socialist economy while individuals own the means of production in a capitalist
economy.
B) Production is planned in a socialist economy
but not in a capitalist economy.
C) The government allocates jobs in a socialist
economy while individuals determine employment in a capitalist economy.
D) The government determines prices in a
socialist economy while markets determine prices in a capitalist economy.
17. __________ came into existence in the
mid-1700s while ________________ came into existence in the early 1900s.
A) Mercantilism, capitalism
B) Socialism, capitalism
C) Capitalism, socialism
D) Mercantilism, socialism
Use the
following to answer question 18:
18. (Repeat your answer on Scantron line
42.) Refer to the graph
above. The graph indicates that the
marginal opportunity cost of producing eggs is:
A) increasing.
B) constant.
C) decreasing.
D) not defined.
Use the
following to answer question 19:
19. (Repeat your answer on Scantron lines
43 and 44.) Refer to the graph
above. Suppose a country is plagued by
political unrest and strikes which disrupt all sectors of its economy. If the political unrest and strikes end,
which of the following shifts explains what would most likely happen to the
country's production possibility curve?
A) A
B) B
C) C
D) D
20. Suppose the marginal cost of dating Sandy is
40 while the marginal benefit is 30. Following economic reasoning you should:
A) date Sandy.
B) not date Sandy.
C) determine what your sunk costs are.
D) determine what your total benefits and total
costs are.
21. (Repeat your answer on Scantron lines
45, 46 and 47.) Deion Sanders
is a two sport athlete who plays both pro football and baseball. He could earn
$5,000,000 playing either. Troy Aikman is also a two sport athlete who plays
both football and auto racing. He could earn $6,000,000 playing football or
$1,000,000 racing cars. Garo Yepremian can play both football and soccer. He
could earn $1,000,000 playing football or $500,000 playing soccer. Assuming
that all three men have only two options for work, and can only pursue one
sport full-time, who has the highest opportunity cost of not playing football?
A) Deion Sanders
B) Troy Aikman
C) Garo Yepremian
D) their opportunity costs are the same
22. If it takes you two hours to make a rational
decision, and the opportunity cost of each hour is $100, then:
A) you will always make rational decisions.
B) you will make rational decisions only if the
benefit from doing so exceeds $100.
C) you will make rational decisions only if the
benefit from doing so exceeds $200.
D) you will never make rational decisions.
23. (Repeat your answer on Scantron lines
48 and 49.) Applying the
concept of opportunity cost to the clean up of an oil spill, an economist would
probably conclude that:
A) all the oil should be cleaned up, regardless
of cost.
B) none of the oil should be cleaned up,
regardless of benefit.
C) the oil should be cleaned up as long as the
clean-up produces some benefits.
D) the oil should be cleaned up as long as the
benefit from any additional clean-up exceeds the opportunity cost.
24. (Repeat your answer on Scantron line
50.) The Wealth of Nations
was written by:
A) Adam Smith
B) J.S. Marshall
C) Leon Walras
D) Karl Marx.
Use the
following to answer question 25:
25. Refer to the graph above. The slope of the line is:
A) 0.
B) 1.
C) 3.
D) infinity.
Answer Key -- Microecon Exam 1 MW 1:25
1. E both
c. and d.
LO: (None)
Page: (None)
Origin: Cool Questions Micro For Ex1....38
2. B the
smaller the responsiveness of quantity to changes in price.
LO: 6-1
Page: 133
Origin: Cool Questions Micro For Ex1....2
3. B 4.
LO: 6-2
Page: 133
Origin: Cool Questions Micro For Ex1....7
4. B greater
than 1.
LO: 6-6
Page: 147
Origin: Cool Questions Micro For Ex1....11
5. A negative.
LO: 6-6
Page: 148
Origin: Cool Questions Micro For Ex1....14
6. D a
rightward, a leftward
LO: 5-2
Page: 108
Origin: Cool Questions Micro For Ex1....16
7. C the
quantity demanded will rise and the quantity supplied will fall.
LO: 4-8
Page: 95
Origin: Cool Questions Micro For Ex1....22
8. A should
complete your degree.
LO: (None)
Page: (None)
Origin: Cool Questions Micro For Ex1....41
9. D reduces
barriers to international trade within North America
LO: (None)
Page: (None)
Origin: Cool Questions Micro For Ex1....48
10. C A
decrease in the cost of manufacturing fax machines.
LO: (None)
Page: (None)
Origin: Cool Questions Micro For Ex1....52
11. C As
trade builds, opportunity costs in the two countries will tend to become more
and more equal, and therefor international trade will expand only so far.
LO: (None)
Page: (None)
Origin: Cool Questions Micro For Ex1....53
12. A by
recognizing that differences in opportunity cost create the opportunity of
mutual gain through specialization and exchange whether you are talking about a
person, a region or a nation.
LO: (None)
Page: (None)
Origin: Cool Questions Micro For Ex1....55
13. D maximizes
profits.
LO: 3-1
Page: 57
Origin: Cool Questions Micro For Ex1....58
14. B foster
economic growth in developing countries.
LO: 3-8
Page: 74
Origin: Cool Questions Micro For Ex1....67
15. C the
Euro.
LO: 3-7
Page: 73
Origin: Cool Questions Micro For Ex1....69
16. B Production
is planned in a socialist economy but not in a capitalist economy.
LO: 2-2
Page: 29
Origin: Cool Questions Micro For Ex1....77
17. C Capitalism,
socialism
LO: 2-3
Page: 30
Origin: Cool Questions Micro For Ex1....78
18. A increasing.
LO: 2-4
Page: 38
Origin: Cool Questions Micro For Ex1....81
19. C C
LO: 2-4
Page: 38
Origin: Cool Questions Micro For Ex1....83
20. B not
date Sandy.
LO: 1-2
Page: 7
Origin: Cool Questions Micro For Ex1....87
21. B Troy
Aikman
LO: 1-3
Page: 8
Origin: Cool Questions Micro For Ex1....90
22. C you
will make rational decisions only if the benefit from doing so exceeds $200.
LO: 1-3
Page: 9
Origin: Cool Questions Micro For Ex1....92
23. D the
oil should be cleaned up as long as the benefit from any additional clean-up
exceeds the opportunity cost.
LO: 1-3
Page: 8
Origin: Cool Questions Micro For Ex1....93
24. A Adam
Smith
LO: 1-4
Page: 10
Origin: Cool Questions Micro For Ex1....97
25. D infinity.
LO: 1-A
Page: 23
Origin: Cool Questions Micro For Ex1....100