ECON 111 (07) Midterm A KEY Fall2022

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University of Saskatchewan *

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111

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Economics

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Feb 20, 2024

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1. An economy in which religious norms dictate the who, what, and how questions is _______? a. socialist b. communist *c. traditional d. command 2. Suppose peanut butter and jam are complements. If the state of Georgia had an exceptionally large crop of peanuts, what would happen in the market for jam? a. There would be no change in the demand for jam. b. The supply for jam would decrease. *c. The demand for jam would increase. d. The supply for jam would increase. 3. Jill raises tomatoes in her garden and sells them to a local restaurant that uses them in salads and sandwiches. Which of the following economic terms best describes Jill’s garden? *a. Factor market b. natural resource c. taxable d. product market 4. Kim views beer and pizza as complements to one another. If the price of pizza decreases, we would expect _________. *a. Kim's demand for beer to increase. b. Kim's demand for pizza to increase. c. Kim's quantity of pizza demanded to decrease. d. Kim's demand for pizza to decrease. 5. Refer to the Figure 3.10. What does area F tell us? a. the equilibrium price in the market was greater than what many

of the producers were willing to accept *b. the equilibrium price in the market was less than what many of the consumers were willing to pay. c. the equilibrium price in the market was less than what many of the producers were willing to accept d. the equilibrium price in the market was greater than what many of the consumers were willing to pay. 6. When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being _______. a. prudent monetary policy *b. low inflation c. assuring competition between firms d. balanced budget 7. Refer to Figure 2-4. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: a. A to B b. G to F c. B to E *d. C to F 8. Suppose an economy produces two goods: beef and chicken. This economy always produces on its production possibilities frontier. Last year, it produced 100 Kg of beef and 600 chickens. This year, it is producing 120 Kg of beef and 800 chickens. Which of the following would explain the increase in output? a. an increase in preference for chicken *b. an increase in the labour force c. a decrease in worker productivity d. an increase in preference for beef

9. Refer to Figure 1.7. The figure is a circular flow diagram of a stylized economy. The flow represented by A and B represent ___________ . *a. the market for goods and services b. Financial Markets c. how GDP is generated d. the market for labour and other inputs 10. Which of the following would increase the supply of autos? a. lower fuel prices used to operate automobiles b. an increase in the price of autos. *c. lower wage rates for the workers that assemble autos d. higher fuel prices used to operate automobiles 11. Refer to Figure 5.3. A dance studio is faced with demand C. To raise total revenue, what should the studio do? a. The studio should not change the price of its membership. b. The studio should increase its number of membership. *c. The studio should raise the price of its membership.

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d. The studio should lower the price of its membership. 12. Which of the following is an example of a normative statement? a. If the national saving rate was to increase, so would the rate of economic growth. b. If the price of a product decreases, quantity demanded increases. *c. Reducing tax rates on the wealthy would be good for the country. d. An increase in minimum wages will increase unemployment. 13. Suppose an economy produces two goods: coffee and donuts. This economy always produces on its production possibilities frontier. Last year, it produced 100 coffee and 60 donuts. This year, it is producing 120 coffee and 50 donuts. Which of the following would explain the change in output? a. a decrease in the labour force b. an increase in unemployment *c. an increase in preference for coffee d. a decrease in worker productivity 14. Consider Table 2.9. Suppose this individual would not consume 6 units of gummies, what is the possible reason? *a. because the total utility is declining. b. because the total utility is positive. c. because the marginal utility is positive. d. because the marginal utility is diminishing. 15. The law of diminishing returns says that, as additional increments of resources to producing a good or service are added, ___________, *a. the marginal benefit from those additional increments will decline. b. the marginal benefit from those additional increments will increase. c. the marginal cost from those additional increments will decline. d. the marginal benefit from those additional increments will not change.

16. Adult smoking seems to be more __________ than youth smoking—that is, the quantity of adult smoking will fall by a smaller percentage than the quantity of youth smoking in response to a given percentage increase in price. a. cross-price elastic *b. inelastic c. unitary elastic d. elastic 17. Higher prices are a method of telling consumers about scarcity. In these cases, consumers typically respond in which way? a. shopping elsewhere *b. adjusting their consumption c. buying in bulk d. demanding lower prices 18. Refer to Figure 19.3. The figure shows how quickly Erin and Kim can paint a house with different speeds inside and outside the house. We can conclude that ____________ a. Kim has a comparative advantage in exterior painting. *b. Erin has a comparative advantage in exterior painting. c. Kim has an absolute advantage in interior painting. d. Kim has an absolute advantage in exterior painting. 19. If fishing and hiking are good substitutes for consumers, then it is likely that ________. a. their price elasticities of demand are less than one. b. their price elasticities of supply are less than one . c. their income elasticities are less than zero. *d. their cross-price elasticities are greater than zero. 20. South Korea produces electronics with less labour than any other country; it therefore

necessarily has __________ *a. an absolute advantage in electronics production b. a comparative advantage in electronics production. c. an absolute advantage and comparative disadvantage in electronics production. d. both a comparative and absolute advantage in electronics production. 21. Refer to Figure 2.11 (from the text). Suppose the economy moves from point R to point D. This movement tells us that __________ a. there is an increase preference for education. b. the economy achieves productive inefficiency. c. the economy cannot produce more health care without reducing the production of education. *d. the economy can produce more education without reducing the production of health care. 22. Consider Table 3.4. If the price were $8, there would be ________? a. A surplus of 400 units and the price would rise. b. A surplus of 250 units and the price would fall. *c. A shortage of 250 units and the price would rise. d. A shortage of 400 units and the price would fall.

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23. Refer to Figure 2.7. At Point C in the production possibilities graph shown, the economy __________. a. cannot produce more food without reducing the production of autos. b. has maximized GDP *c. has resources available for more production of food or autos d. cannot produce more food without reducing the production of autos. 24. Refer to the Figure 5.5. Cost-saving from technological improvement cause supply to shift out to the right from S 0 to S 1 . Which of the following statement is correct? a. If demand is elastic, the result of the cost-saving technological improvement will be substantially lower prices b. If demand is inelastic, the result of the cost-saving technological improvement will be only slightly lower prices *c. If demand is elastic, the result of the cost-saving technological improvement will be substantially greater quantity d. If demand is inelastic, the result of the cost-saving technological improvement will be substantially greater quantity

25. Refer to Figure 3.5. Using the graph above and beginning on D2, a shift to D1 would indicate a(n) __________. *a. Decrease in income and the good is normal. b. Decrease in price of a complementary good. c. Decrease in income and the good is inferior. d. Increase in price of a substitute good. 26. Refer to the Figure 3.9. Which shift represents an increase in the price of a substitute good? a. no shift b. shift 1 *c. shift 2 d. shift 3 27. Taxes on goods with __________ demand curves will tend to raise more tax revenue for the government than taxes on goods with __________ demand curves. a. unit elastic; inelastic *b. inelastic; elastic c. elastic; unit elastic d. elastic; inelastic 28. You are currently working at Canadian tires. You have been offered a job at Co-op making 20 percent more and you have decided to leave your job. What might change your decision?

a. if the marginal benefit of working at Canadian tires decreased *b. if the marginal cost of working at Co-op increased c. if the marginal benefit of working at Co-op decreased d. if the marginal cost of working at Canadian tires increased 29. If the demand curve for a life-saving medicine is perfectly inelastic, then an increase in supply will cause the equilibrium price to ________. a. fall and the equilibrium quantity to fall. b. stay the same and the equilibrium quantity to fall. c. fall and the equilibrium quantity to rise. *d. fall and the equilibrium quantity to stay the same. 30. If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year. We can conclude that _________ a. USA has a comparative advantage in producing wheat and Ireland has a comparative advantage in producing potatoes. *b. Ireland has a comparative advantage in producing wheat and USA has a comparative advantage in producing potatoes. c. USA has a comparative advantage and absolute advantage producing potatoes d. USA has a comparative advantage and absolute advantage of producing wheat 31. As more and more people switch to a vegetarian-only diet, the likely economic effect on the demand curve for meat substitutes is _________. *a. a shift of the demand curve for meat substitutes to the right. b. a shift of the demand curve for meat to the right. c. a movement down along the demand curve for meat substitutes to the right. d. no change; but the supply curve for meat will fall. 32. Joe is a barber. If the demand for a haircut is elastic and he wants to raise total revenue, what should he do? a. He should produce fewer haircut. b. He should raise the price of a haircut. c. He should not change the price of a haircut. *d. He should lower the price of a haircut. 33. Assume that Mexico has a comparative advantage in fruit and Columbia has a comparative advantage in coffee. What will happen if these two countries trade according to their comparative advantage? a. Columbia will specialize in and export fruit.

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b. Columbia will produce more fruit than if there is no trade c. Mexico will specialize in and export coffee. *d. Columbia will produce more coffee than if there is no trade. 34. Which of the following would most likely shift the production possibilities curve inward? a. an increase in the production of capital goods b. an increase in the number of hours factories are in use *c. a shift to a shorter working day d. an advance in technology 35. The longer the time period considered, the more the elasticity of demand tends to ________. a. decrease b. remain constant *c. increase d. converge to zero 36. When quantity demanded decreases but there has been no change in price _________. *a. the demand curve shifts to the left. b. there is a movement up along the demand curve. c. the demand curve shifts to the right. d. there is a movement down along the demand curve. 37. Refer to the Figure 5.7. An excise tax introduces a wedge between the price paid by consumers (Pc) and the price received by producers (Pp). Which of the following statement is correct? a. When the demand is more elastic than supply, the tax incidence on consumers , Pc – Pe, is larger than the tax incidence on producers, Pe – Pp *b. When the supply is more elastic than demand, the tax incidence on consumers, Pc – Pe, is larger than the tax incidence

on producers, Pe – Pp. c. When the supply is more elastic than demand, the tax incidence on consumers, Pc – Pe, is lower than the tax incidence on producers, Pe – Pp. d. When the supply is more inelastic than demand, the tax incidence on consumers, Pc – Pe, is larger than the tax incidence on producers, Pe – Pp. 38. Refer to Table 2.11. What is the opportunity cost to Husky Ville of increasing the production of basket balls from 1000 to 3000? a. 4000 volley balls *b. 1500 volley balls c. 3000 volley balls d. 2000 volley balls 39. The opportunity cost of producing an airplane in Canada is 500 cars, while in Japan, it is 200 cars. As a result, ___________ a. Japan has a comparative advantage over Canada in the production of cars. *b. there can be mutual gains from trade to the two countries if Canada exports cars to Japan in exchange for airplane. c. there can be mutual gains from trade to the two countries if the Canada exports airplane to Japan in exchange for cars. d. Canada has a comparative advantage over Japan in the production of airplane. 40. Refer to Figure 3.8. A change from Point A to Point E could have resulted from ________: a. a fall in costs of production.

*b. a rise in production costs. c. entry of firms into the industry. d. a rise in demand. 41. Refer to the Figure 3.10. What happens to the market in which the current level of production is 30 million? *a. A loss in both consumer and producer surplus. b. The gain in producer surplus is greater than the loss in consumer surplus c. The gain in consumer surplus is greater than the loss in producer surplus d. Social surplus is maximized 42. If some current manufacturers exit the video game industry, then (ceteris paribus) _________. *a. the supply curve shifts to the left. b. the manufacturers that stay in the industry will be worse off. c. the demand curve shifts to the left. d. the supply curve shifts to the right. 43. Intra-industry trade between similar trading partners allows the gains from ____________ that arise when firms and workers specialize in the production of a certain product. a. relative advantage b. creating the value chain c. comparative advantage *d. learning and innovation

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44. Refer to Figure 3.6. Using the graph above and beginning at point D, a shift from D2 to D1 would result in a ________ and the price is expected to _________. a. Shortage; rise b. Surplus; rise c. Shortage; fall *d. Surplus; fall 45. Refer to Figure 5-1. Graph B represents a demand curve that is relatively __________. Total expenditures __________ as the price decreases from $10 to $5. a. elastic; increases b. inelastic; increases *c. inelastic; decreases d. elastic; decreases

46. Refer to the Figure 5.6. Higher taxes cause supply to shift to the left. Which of the following statement is correct? a. Consumers suffer in either case, from a lower quantity at a higher price, but the suffering is greater when demand is elastic b. Consumers benefit in either case, from a greater quantity at a lower price, but the benefit is greater when demand is inelastic *c. Consumers suffer in either case, from a lower quantity at a higher price, but the suffering is greater when demand is inelastic d. Consumers benefit in either case, from a greater quantity at a lower price, but the benefit is greater when demand is elastic 47. Assume that one day's labour in Argentina can produce either 20 units of cloth or 2 units of wine, while in Chile one day's labour can produce either 24 units of cloth or 12 units of wine. If the terms of trade are established as 1 unit of wine for 2 units of cloth, then ___________ *a. there are no incentives for Chile to engage in international specialization and trade with Argentina. b. it is in the interest of both countries to specialize and trade with one another. c. it is in the interest of Chile to produce wine and trade for cloth. d. it is in the interest of Argentina to produce wine and trade for cloth 48. The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. To boost ticket revenues, an economist would advise ________. a. decreasing the price of game tickets because demand is elastic. b. not changing the price of game tickets because demand is unit elastic. *c. increasing the price of game tickets because demand is inelastic. d. increasing the price of game tickets because demand is elastic.

49. If the government sets prices for wheat or corn that guarantee farmers a specific price for that product, the most probable result would be _________. a. the equilibrium price will fall. *b. over production. c. more buyers would leave the market. d. the market would suffer shortages. 50. How do demand and supply for apple pie change if the price of apples increased? a. Demand increases, and supply does not change. *b. Demand does not change, and supply decreases. c. Demand decreases, and supply increases. d. Both demand and supply decrease.

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ECON 111 (07) Midterm A KEY Fall2022

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