Economics 101
Economics 101 The Economic Way of Thinking Dr. Stock Fall 2011 Midterm 1 – Section 3 Instructions: Answer all of the following 33 questions (each worth 3 points). Using pencil, mark your answers on the answer sheet provided. Mark the test version number in the "date" space of the answer sheet (the version number is found at the bottom of this page). Print your name and student number clearly on the answer sheet. Fill in the bubbles corresponding to your student number, leaving the top box blank (or inserting a dash there) and filling in the "0" bubble in the top row. Keep this copy of the test - turn in only the answer sheet. No calculators are allowed in the exam and your answers to the test should consist entirely of your own work. Cheating will result in an "F" grade for the entire class and as much public humiliation as is permissible by law. Answers will be posted on the class web site as soon as possible. GOOD LUCK!
Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
1. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. At equilibrium, producer surplus is _____ per semester. a. ½ * 1600 * $60 = $48,000 b. ½ * 1600 * $20 = $16,000 c. ½ * 1600 * $40 = $32,000 d. $40 * 1600 = $64,000 e. Unknown, since the price of sweatshirts is unknown 2. Ceteris paribus, a decrease in the price of Macaroni &Cheese could be caused by, a. a decrease in the supply of Macaroni &Cheese b. an increase in the supply of Macaroni &Cheese c. an increase in the demand for Macaroni &Cheese d. a decrease in consumer incomes, assuming that Macaroni &Cheese is an inferior good e. an increase in consumer tastes and preferences for Macaroni &Cheese
Econ 101 Section 3– Midterm 1 Version 1 – Page 1
3. Drinks at Spectator’s Bar and drinks at the Rockin’ R Bar are substitute goods. Ceteris paribus, if the price of drinks at the Rockin’ R Bar rises, what can we expect to happen? a. the demand for drinks at Spectator’s Bar will decrease b. the demand for drinks at the Rockin’ R Bar will decrease c. the demand for drinks at Spectator’s Bar will increase d. the supply of drinks at the Rockin’ R Bar will decrease e. b and c are both true Price (per plate of Nachos) 4 4 5 5
Quantity of Nachos demanded (plates per month) 20 40 10 30
Price (per taco) 1 2 1 2
4. The table above shows demand data for nachos at El Matador restaurant. At different times, El Matador’s owner charged different prices for tacos at the restaurant. According to these data, the quantity of nachos demanded a. is unrelated to the price of tacos b. is negatively related to the price of tacos c. is positively related to the price of tacos d. is positively related to the price of nachos Quantity Marginal Benefit ($) 1 525 2 475 3 450 4 400 5 375 5. Anna is a famous tennis player. She is interested in obtaining one or more new tennis rackets to wow her fans and potential sponsors. Her marginal willingness to pay (i.e., her marginal benefit) for tennis rackets is detailed in the table above. What is Anna’s total willingness to pay for three tennis rackets? a. $(475-450) = $25 b. $525 c. $450 d. $(525+475+450) = $1450 e. not enough information since the price of tennis rackets is not given
Econ 101 Section 3– Midterm 1 Version 1 – Page 2
Country
Production per month
Mozambique
400 million units of cassava or 200 million units of maize
South Africa
900 million units of cassava or 300 million units of maize
6. The table above shows the production possibilities for two countries, Mozambique and South Africa, which produce cassava and maize. Based on this information and assuming constant opportunity costs for simplicity, the opportunity cost of producing one unit of cassava in Mozambique is a. 2 units of maize b. 1 unit of maize c. 1/2 unit of maize d. 2 units of cassava 7. Netflix subscriptions and Hulu Plus subscriptions are substitutes. Ceteris paribus, if the price of Netflix subscriptions rises, a. the demand for Hulu Plus subscriptions increases b. the demand for Netflix subscriptions increases c. the demand for Netflix subscriptions decreases d. the demand for Hulu Plus subscriptions decreases e. a and c are both true Quantity Demanded Price Quantity Supplied Per Month Per Month 700 8 100 600 9 300 500 10 500 400 11 700 300 12 900 8. The table above shows the demand and supply of sushi rolls at Dave’s Sushi restaurant. At what price would this market be in equilibrium? a. P = $8 b. P = $9 c. P = $10 d. P = $11 e. P = $12 Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
Econ 101 Section 3– Midterm 1 Version 1 – Page 3
9. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. Suppose the county commission restricts the sales of MSU hoody sweatshirts to NO more 800 per semester. The deadweight loss from this restriction would be _____ per semester. a. ½ * 800 * $30 = $12,000 b. ½ * 800 * $20 = $8,000 c. ½ * 800 * $10 = $4,000 d. ½ * 1600 * $60 = $48,000 e. (.5 * 800 * $20) + (.5 * 800 * $20) + ($40 * 800) = $48,000
10. The price of lighting fixtures in Bozeman increased recently. Some home builders suggest that the price rose because Bozeman Lighting, a lighting supply store, went out of business in Bozeman. Other home builders attributed the rise in the price of lighting fixtures more to the increasing population in Bozeman. How can we determine which home builders are right? a. it depends on whether the demand curve or the supply curve changed first b. if the equilibrium quantity of lighting fixtures sold decreased, then the dominant cause must have been Bozeman Lighting going out of business c. if the equilibrium quantity of lighting fixtures decreased, then the dominant cause must have been population growth in Bozeman d. if the equilibrium quantity of lighting fixtures increased, then the dominant cause must have been Bozeman Lighting going out of business Number of Hot Dogs 1 2 3 4 5
Total Benefit
Hot Dog
Marginal Benefit
$7.00 $13.00 $18.00 $22.00 $25.00
1st 2nd 3rd 4th 5th
$7.00 ? ? ? $3.00
11. Pauley loves hot dogs. The left side of the table above shows Pauley’s total benefits (or total willingness to pay) associated with eating hot dogs during a night. The right side of the table shows Pauley’s marginal benefit. Suppose that hot dogs are priced at $3.50. How many hot dogs will Pauley choose to buy in a night? a. 1 b. 2 c. 3 d. 4 e. 5 12. Flash drives and memory cards are substitute goods for computer users. If the price of flash drives decreases, the a. demand for memory cards will increase. b. supply of memory cards will decrease. c. quantity supplied of flash drives will increase. d. quantity demanded of flash drives will increase. 13. Hot dogs and chili are complements. A rise in the price of hot dogs will ___________the demand for chili. As a result, the equilibrium quantity of chili will ______________. a. increase; increase b. increase; decrease c. decrease; decrease d. decrease; increase Econ 101 Section 3– Midterm 1 Version 1 – Page 4
Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
14. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. Suppose that the price of sweatshirts is initially $50 each. At this price ___ sweatshirts would be sold per semester. As the market adjusts to equilibrium, the quantity of sweatshirts sold will ___ and the price will ____. a. 2000; fall; fall b. 800; fall; fall c. 2000; fall; rise d. 800; rise; rise e. 800; rise; fall Quantity Marginal Benefit ($) 1 525 2 475 3 450 4 400 5 375 15. Anna is a famous tennis player. She is interested in obtaining one or more new tennis rackets to wow her fans and potential sponsors. Her marginal willingness to pay (i.e., her marginal benefit) for tennis rackets is detailed in the table. If the local tennis shop has their rackets on sale for $425 each, how many will Anna want to purchase? a. 1 b. 2 c. 3 d. 4 e. 5 16. For some people Macaroni &Cheese is an inferior good. Ceteris paribus, if these people's incomes increase, you predict that the a. demand Macaroni &Cheese will decrease and the price of Macaroni &Cheese will fall. b. demand for Macaroni &Cheese will increase and the price Macaroni &Cheese will fall. c. demand for Macaroni &Cheese will decrease and the price of Macaroni &Cheese will rise. d. demand for Macaroni &Cheese will increase and the price of Macaroni &Cheese will rise.
Econ 101 Section 3– Midterm 1 Version 1 – Page 5
17. The War on Terror has increased the need for FBI agents. At the same time, shows like "24" that depict the intense lives of counter-terrorist agents have discouraged people from pursuing careers as FBI agents. What can we clearly predict about the labor market for FBI agents as a result of these two events? a. the equilibrium salaries of FBI agents will rise, but the effect on the number of FBI agents employed is unknown b. the number of FBI agents employed will rise, but the effect on equilibrium salaries of FBI agents is unknown c. the equilibrium salaries of FBI agents will fall, but the number of FBI agents employed will rise d. the equilibrium salaries of FBI agents will rise, but the number of FBI agents employed will fall e. the equilibrium salaries of FBI agents will fall, and the number of FBI agents employed will fall 18. Last year Martha could grow 20 bushels of basil or 25 bushels of cilantro on each acre of land that she farmed. This spring, she discovered a free organic fertilizer that allows her to double the amount of basil that she can grow on each acre, ceteris paribus. How has Martha's opportunity cost changed with this discovery? a. The opportunity cost of basil stays the same because the discovery will allow Martha to produce more of both goods. b. The opportunity cost of cilantro stays the same because the discovery does not change the amount of cilantro that Martha can produce. c. The opportunity cost of cilantro has increased d. The opportunity cost of cilantro has decreased Price (per plate of Nachos) 4 4 5 5
Quantity of Nachos demanded (plates per month) 20 40 10 30
Price (per taco) 1 2 1 2
19. The table above shows demand data for nachos at El Matador restaurant. At different times, El Matador’s owner charged different prices for tacos at the restaurant. According to these data, tacos and nachos are a. Complement goods b. Substitute goods c. Inferior goods d. Normal goods e. Unrelated goods 20. Suppose there is a surplus in the market for Hula-Hoops. Ceteris paribus, we would expect to observe ___ as the market moved to equilibrium. a. the price of Hula-Hoops rising b. the price of Hula-Hoops falling c. the demand for Hula-Hoops falling d. the quantity of Hula-Hoops supplied falling e. b and d are both correct
Econ 101 Section 3– Midterm 1 Version 1 – Page 6
Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
21. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. If the cost of shipping sweatshirts to Bozeman rises, a possible new equilibrium price and quantity of sweatshirts could be a. P = $50; Q = 2000 b. P = $50; Q = 800 c. P = $40; Q = 1600 d. P = $30; Q = 1200 e. P = $30; Q = 2400 Country
Production per month
Mozambique
400 million units of cassava or 200 million units of maize
South Africa
900 million units of cassava or 300 million units of maize
22. The table above shows the production possibilities for two countries, Mozambique and South Africa, which produce cassava and maize. Based on this information and assuming constant opportunity costs for simplicity, ________ has a comparative advantage in producing cassava and __________ has a comparative advantage in producing maize. a. Mozambique; South Africa b. South Africa; South Africa c. Mozambique; Mozambique d. South Africa; Mozambique 23. Lake Powell is located in Southern Utah and Northern Arizona. It has over 2,000 miles of shoreline, warm water, and some of the most spectacular scenery in the west. The Lake Powell Marina is working to predict the demand for houseboat rentals during the upcoming vacation season. Their analyst notices that when the price of airline flights rises, the demand for houseboat rentals falls. This implies that a. airline flights are normal goods b. airline flights are substitutes for Lake Powell houseboat rentals c. Lake Powell houseboat rentals are normal goods d. airline flights are complements to Lake Powell houseboat rentals
Econ 101 Section 3– Midterm 1 Version 1 – Page 7
24. You observe that the price of Bozone amber beer has increased and the quantity sold has decreased. Ceteris paribus, this could result from a. A decrease in the demand for Bozone amber beer. b. An increase in the supply of Bozone amber beer. c. A decrease in the supply of Bozone amber beer. d. An increase in the demand for Bozone amber beer. e. Either a or c could be the cause.
Number of Hot Dogs 1 2 3 4 5
Total Benefit
Hot Dog
Marginal Benefit
$7.00 $13.00 $18.00 $22.00 $25.00
1st 2nd 3rd 4th 5th
$7.00 ? ? ? $3.00
25. Pauley loves hot dogs. The left side of the table above shows Pauley’s total benefits (or total willingness to pay) associated with eating hot dogs during a night. The table on the right shows Pauley’s marginal benefit. Suppose that hot dogs are priced at $5.50. How many hot dogs will Pauley choose to buy in a night? a. 1 b. 2 c. 3 d. 4 e. 5 26. Assume that Guarana Antarctica soda is a normal good. Ceteris paribus, when the incomes of Guarana Antarctica buyers increase, a. the demand for Guarana Antarctica decreases b. the demand for Guarana Antarctica increases c. the quantity of Guarana Antarctica demanded decreases d. the quantity of Guarana Antarctica demanded increases Quantity Demanded Price Quantity Supplied Per Month Per Month 700 8 100 600 9 300 500 10 500 400 11 700 300 12 900 27. The table above shows the demand and supply of sushi rolls at Dave’s Sushi restaurant. If the price of a sushi roll is $12, there is a a. shortage of sushi rolls and the price will rise as the market moves to equilibrium. b. surplus of sushi rolls and the price will rise as the market moves to equilibrium. c. shortage of sushi rolls and the price will fall as the market moves to equilibrium. d. surplus of sushi rolls and the price will fall as the market moves to equilibrium.
Econ 101 Section 3– Midterm 1 Version 1 – Page 8
Country
Production per month
Mozambique
400 million units of cassava or 200 million units of maize
South Africa
900 million units of cassava or 300 million units of maize
28. The table above shows the production possibilities for two countries, Mozambique and South Africa, which produce cassava and maize. Based on this information and assuming constant opportunity costs for simplicity, which of the following trades would be possible and would make both countries better off? a. Mozambique trades away 100 units of cassava for 250 units of maize from South Africa b. South Africa trades away 300 units cassava for 200 units of maize from Mozambique c. South Africa trades away 250 units of cassava for 100 units of maize as from Mozambique d. South Africa trades away 100 units cassava for 100 units of maize gas from Mozambique
Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
29. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. Given this information, the maximum amount that consumers are willing to pay for the 800th sweatshirt per semester is _____. a. $60 b. $50 c. $60-$50 = $10 d. $60-$40 = $20 e. Unknown, since the price of sweatshirts is unknown 30. In one day, Jane Smith, a professional assassin, can blow up three buildings or kill six bad guys. Her partner John can blow up four buildings or kill nine bad guys in one day. John and Jane can gain from specialization and trade if Jane _______ and John _______. a. kills bad guys; blows up buildings b. kills bad guys; kills bad guys c. blows up buildings; kills bad guys d. blows up buildings; blows up buildings e. none of the above, Jane should do everything since she is better at being an assassin than John is
Econ 101 Section 3– Midterm 1 Version 1 – Page 9
31. Suppose that the government removes import limits on sugar (i.e., more sugar is imported into the country). As a result, the prices of products that use sugar (soda, for example) will _____. In addition, the demand for complements for soda will _____, ceteris paribus. a. fall; rise b. rise; rise c. rise; fall d. fall; fall e. not enough information Quantity Marginal Benefit ($) 1 525 2 475 3 450 4 400 5 375 32. Anna is a famous tennis player. She is interested in obtaining one or more new tennis rackets to wow her fans and potential sponsors. Her marginal willingness to pay (i.e., her marginal benefit) for tennis rackets is detailed in the table. Based on this information, how much is Anna willing to pay for the fourth tennis racket? a. $450 b. $400 c. $(525+475+450+400) = $1850 d. $(450-400) = $50 e. not enough information since the price of tennis rackets is not given
Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
33. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. At equilibrium, consumer surplus is _____ per semester. a. ½ * 1600 * $60 = $48,000 b. ½ * 1600 * $20 = $16,000 c. ½ * 1600 * $40 = $32,000 d. $40 * 1600 = $64,000 e. Unknown, since the price of sweatshirts is unknown
Econ 101 Section 3– Midterm 1 Version 1 – Page 10
Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
1. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. At equilibrium, producer surplus is _____ per semester. a. ½ * 1600 * $60 = $48,000 b. ½ * 1600 * $20 = $16,000 c. ½ * 1600 * $40 = $32,000 d. $40 * 1600 = $64,000 e. Unknown, since the price of sweatshirts is unknown 2. Ceteris paribus, a decrease in the price of Macaroni &Cheese could be caused by, a. a decrease in the supply of Macaroni &Cheese b. an increase in the supply of Macaroni &Cheese c. an increase in the demand for Macaroni &Cheese d. a decrease in consumer incomes, assuming that Macaroni &Cheese is an inferior good e. an increase in consumer tastes and preferences for Macaroni &Cheese
Econ 101 Section 3– Midterm 1 Version 1 – Page 1
3. Drinks at Spectator’s Bar and drinks at the Rockin’ R Bar are substitute goods. Ceteris paribus, if the price of drinks at the Rockin’ R Bar rises, what can we expect to happen? a. the demand for drinks at Spectator’s Bar will decrease b. the demand for drinks at the Rockin’ R Bar will decrease c. the demand for drinks at Spectator’s Bar will increase d. the supply of drinks at the Rockin’ R Bar will decrease e. b and c are both true Price (per plate of Nachos) 4 4 5 5
Quantity of Nachos demanded (plates per month) 20 40 10 30
Price (per taco) 1 2 1 2
4. The table above shows demand data for nachos at El Matador restaurant. At different times, El Matador’s owner charged different prices for tacos at the restaurant. According to these data, the quantity of nachos demanded a. is unrelated to the price of tacos b. is negatively related to the price of tacos c. is positively related to the price of tacos d. is positively related to the price of nachos Quantity Marginal Benefit ($) 1 525 2 475 3 450 4 400 5 375 5. Anna is a famous tennis player. She is interested in obtaining one or more new tennis rackets to wow her fans and potential sponsors. Her marginal willingness to pay (i.e., her marginal benefit) for tennis rackets is detailed in the table above. What is Anna’s total willingness to pay for three tennis rackets? a. $(475-450) = $25 b. $525 c. $450 d. $(525+475+450) = $1450 e. not enough information since the price of tennis rackets is not given
Econ 101 Section 3– Midterm 1 Version 1 – Page 2
Country
Production per month
Mozambique
400 million units of cassava or 200 million units of maize
South Africa
900 million units of cassava or 300 million units of maize
6. The table above shows the production possibilities for two countries, Mozambique and South Africa, which produce cassava and maize. Based on this information and assuming constant opportunity costs for simplicity, the opportunity cost of producing one unit of cassava in Mozambique is a. 2 units of maize b. 1 unit of maize c. 1/2 unit of maize d. 2 units of cassava 7. Netflix subscriptions and Hulu Plus subscriptions are substitutes. Ceteris paribus, if the price of Netflix subscriptions rises, a. the demand for Hulu Plus subscriptions increases b. the demand for Netflix subscriptions increases c. the demand for Netflix subscriptions decreases d. the demand for Hulu Plus subscriptions decreases e. a and c are both true Quantity Demanded Price Quantity Supplied Per Month Per Month 700 8 100 600 9 300 500 10 500 400 11 700 300 12 900 8. The table above shows the demand and supply of sushi rolls at Dave’s Sushi restaurant. At what price would this market be in equilibrium? a. P = $8 b. P = $9 c. P = $10 d. P = $11 e. P = $12 Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
Econ 101 Section 3– Midterm 1 Version 1 – Page 3
9. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. Suppose the county commission restricts the sales of MSU hoody sweatshirts to NO more 800 per semester. The deadweight loss from this restriction would be _____ per semester. a. ½ * 800 * $30 = $12,000 b. ½ * 800 * $20 = $8,000 c. ½ * 800 * $10 = $4,000 d. ½ * 1600 * $60 = $48,000 e. (.5 * 800 * $20) + (.5 * 800 * $20) + ($40 * 800) = $48,000
10. The price of lighting fixtures in Bozeman increased recently. Some home builders suggest that the price rose because Bozeman Lighting, a lighting supply store, went out of business in Bozeman. Other home builders attributed the rise in the price of lighting fixtures more to the increasing population in Bozeman. How can we determine which home builders are right? a. it depends on whether the demand curve or the supply curve changed first b. if the equilibrium quantity of lighting fixtures sold decreased, then the dominant cause must have been Bozeman Lighting going out of business c. if the equilibrium quantity of lighting fixtures decreased, then the dominant cause must have been population growth in Bozeman d. if the equilibrium quantity of lighting fixtures increased, then the dominant cause must have been Bozeman Lighting going out of business Number of Hot Dogs 1 2 3 4 5
Total Benefit
Hot Dog
Marginal Benefit
$7.00 $13.00 $18.00 $22.00 $25.00
1st 2nd 3rd 4th 5th
$7.00 ? ? ? $3.00
11. Pauley loves hot dogs. The left side of the table above shows Pauley’s total benefits (or total willingness to pay) associated with eating hot dogs during a night. The right side of the table shows Pauley’s marginal benefit. Suppose that hot dogs are priced at $3.50. How many hot dogs will Pauley choose to buy in a night? a. 1 b. 2 c. 3 d. 4 e. 5 12. Flash drives and memory cards are substitute goods for computer users. If the price of flash drives decreases, the a. demand for memory cards will increase. b. supply of memory cards will decrease. c. quantity supplied of flash drives will increase. d. quantity demanded of flash drives will increase. 13. Hot dogs and chili are complements. A rise in the price of hot dogs will ___________the demand for chili. As a result, the equilibrium quantity of chili will ______________. a. increase; increase b. increase; decrease c. decrease; decrease d. decrease; increase Econ 101 Section 3– Midterm 1 Version 1 – Page 4
Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
14. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. Suppose that the price of sweatshirts is initially $50 each. At this price ___ sweatshirts would be sold per semester. As the market adjusts to equilibrium, the quantity of sweatshirts sold will ___ and the price will ____. a. 2000; fall; fall b. 800; fall; fall c. 2000; fall; rise d. 800; rise; rise e. 800; rise; fall Quantity Marginal Benefit ($) 1 525 2 475 3 450 4 400 5 375 15. Anna is a famous tennis player. She is interested in obtaining one or more new tennis rackets to wow her fans and potential sponsors. Her marginal willingness to pay (i.e., her marginal benefit) for tennis rackets is detailed in the table. If the local tennis shop has their rackets on sale for $425 each, how many will Anna want to purchase? a. 1 b. 2 c. 3 d. 4 e. 5 16. For some people Macaroni &Cheese is an inferior good. Ceteris paribus, if these people's incomes increase, you predict that the a. demand Macaroni &Cheese will decrease and the price of Macaroni &Cheese will fall. b. demand for Macaroni &Cheese will increase and the price Macaroni &Cheese will fall. c. demand for Macaroni &Cheese will decrease and the price of Macaroni &Cheese will rise. d. demand for Macaroni &Cheese will increase and the price of Macaroni &Cheese will rise.
Econ 101 Section 3– Midterm 1 Version 1 – Page 5
17. The War on Terror has increased the need for FBI agents. At the same time, shows like "24" that depict the intense lives of counter-terrorist agents have discouraged people from pursuing careers as FBI agents. What can we clearly predict about the labor market for FBI agents as a result of these two events? a. the equilibrium salaries of FBI agents will rise, but the effect on the number of FBI agents employed is unknown b. the number of FBI agents employed will rise, but the effect on equilibrium salaries of FBI agents is unknown c. the equilibrium salaries of FBI agents will fall, but the number of FBI agents employed will rise d. the equilibrium salaries of FBI agents will rise, but the number of FBI agents employed will fall e. the equilibrium salaries of FBI agents will fall, and the number of FBI agents employed will fall 18. Last year Martha could grow 20 bushels of basil or 25 bushels of cilantro on each acre of land that she farmed. This spring, she discovered a free organic fertilizer that allows her to double the amount of basil that she can grow on each acre, ceteris paribus. How has Martha's opportunity cost changed with this discovery? a. The opportunity cost of basil stays the same because the discovery will allow Martha to produce more of both goods. b. The opportunity cost of cilantro stays the same because the discovery does not change the amount of cilantro that Martha can produce. c. The opportunity cost of cilantro has increased d. The opportunity cost of cilantro has decreased Price (per plate of Nachos) 4 4 5 5
Quantity of Nachos demanded (plates per month) 20 40 10 30
Price (per taco) 1 2 1 2
19. The table above shows demand data for nachos at El Matador restaurant. At different times, El Matador’s owner charged different prices for tacos at the restaurant. According to these data, tacos and nachos are a. Complement goods b. Substitute goods c. Inferior goods d. Normal goods e. Unrelated goods 20. Suppose there is a surplus in the market for Hula-Hoops. Ceteris paribus, we would expect to observe ___ as the market moved to equilibrium. a. the price of Hula-Hoops rising b. the price of Hula-Hoops falling c. the demand for Hula-Hoops falling d. the quantity of Hula-Hoops supplied falling e. b and d are both correct
Econ 101 Section 3– Midterm 1 Version 1 – Page 6
Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
21. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. If the cost of shipping sweatshirts to Bozeman rises, a possible new equilibrium price and quantity of sweatshirts could be a. P = $50; Q = 2000 b. P = $50; Q = 800 c. P = $40; Q = 1600 d. P = $30; Q = 1200 e. P = $30; Q = 2400 Country
Production per month
Mozambique
400 million units of cassava or 200 million units of maize
South Africa
900 million units of cassava or 300 million units of maize
22. The table above shows the production possibilities for two countries, Mozambique and South Africa, which produce cassava and maize. Based on this information and assuming constant opportunity costs for simplicity, ________ has a comparative advantage in producing cassava and __________ has a comparative advantage in producing maize. a. Mozambique; South Africa b. South Africa; South Africa c. Mozambique; Mozambique d. South Africa; Mozambique 23. Lake Powell is located in Southern Utah and Northern Arizona. It has over 2,000 miles of shoreline, warm water, and some of the most spectacular scenery in the west. The Lake Powell Marina is working to predict the demand for houseboat rentals during the upcoming vacation season. Their analyst notices that when the price of airline flights rises, the demand for houseboat rentals falls. This implies that a. airline flights are normal goods b. airline flights are substitutes for Lake Powell houseboat rentals c. Lake Powell houseboat rentals are normal goods d. airline flights are complements to Lake Powell houseboat rentals
Econ 101 Section 3– Midterm 1 Version 1 – Page 7
24. You observe that the price of Bozone amber beer has increased and the quantity sold has decreased. Ceteris paribus, this could result from a. A decrease in the demand for Bozone amber beer. b. An increase in the supply of Bozone amber beer. c. A decrease in the supply of Bozone amber beer. d. An increase in the demand for Bozone amber beer. e. Either a or c could be the cause.
Number of Hot Dogs 1 2 3 4 5
Total Benefit
Hot Dog
Marginal Benefit
$7.00 $13.00 $18.00 $22.00 $25.00
1st 2nd 3rd 4th 5th
$7.00 ? ? ? $3.00
25. Pauley loves hot dogs. The left side of the table above shows Pauley’s total benefits (or total willingness to pay) associated with eating hot dogs during a night. The table on the right shows Pauley’s marginal benefit. Suppose that hot dogs are priced at $5.50. How many hot dogs will Pauley choose to buy in a night? a. 1 b. 2 c. 3 d. 4 e. 5 26. Assume that Guarana Antarctica soda is a normal good. Ceteris paribus, when the incomes of Guarana Antarctica buyers increase, a. the demand for Guarana Antarctica decreases b. the demand for Guarana Antarctica increases c. the quantity of Guarana Antarctica demanded decreases d. the quantity of Guarana Antarctica demanded increases Quantity Demanded Price Quantity Supplied Per Month Per Month 700 8 100 600 9 300 500 10 500 400 11 700 300 12 900 27. The table above shows the demand and supply of sushi rolls at Dave’s Sushi restaurant. If the price of a sushi roll is $12, there is a a. shortage of sushi rolls and the price will rise as the market moves to equilibrium. b. surplus of sushi rolls and the price will rise as the market moves to equilibrium. c. shortage of sushi rolls and the price will fall as the market moves to equilibrium. d. surplus of sushi rolls and the price will fall as the market moves to equilibrium.
Econ 101 Section 3– Midterm 1 Version 1 – Page 8
Country
Production per month
Mozambique
400 million units of cassava or 200 million units of maize
South Africa
900 million units of cassava or 300 million units of maize
28. The table above shows the production possibilities for two countries, Mozambique and South Africa, which produce cassava and maize. Based on this information and assuming constant opportunity costs for simplicity, which of the following trades would be possible and would make both countries better off? a. Mozambique trades away 100 units of cassava for 250 units of maize from South Africa b. South Africa trades away 300 units cassava for 200 units of maize from Mozambique c. South Africa trades away 250 units of cassava for 100 units of maize as from Mozambique d. South Africa trades away 100 units cassava for 100 units of maize gas from Mozambique
Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
29. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. Given this information, the maximum amount that consumers are willing to pay for the 800th sweatshirt per semester is _____. a. $60 b. $50 c. $60-$50 = $10 d. $60-$40 = $20 e. Unknown, since the price of sweatshirts is unknown 30. In one day, Jane Smith, a professional assassin, can blow up three buildings or kill six bad guys. Her partner John can blow up four buildings or kill nine bad guys in one day. John and Jane can gain from specialization and trade if Jane _______ and John _______. a. kills bad guys; blows up buildings b. kills bad guys; kills bad guys c. blows up buildings; kills bad guys d. blows up buildings; blows up buildings e. none of the above, Jane should do everything since she is better at being an assassin than John is
Econ 101 Section 3– Midterm 1 Version 1 – Page 9
31. Suppose that the government removes import limits on sugar (i.e., more sugar is imported into the country). As a result, the prices of products that use sugar (soda, for example) will _____. In addition, the demand for complements for soda will _____, ceteris paribus. a. fall; rise b. rise; rise c. rise; fall d. fall; fall e. not enough information Quantity Marginal Benefit ($) 1 525 2 475 3 450 4 400 5 375 32. Anna is a famous tennis player. She is interested in obtaining one or more new tennis rackets to wow her fans and potential sponsors. Her marginal willingness to pay (i.e., her marginal benefit) for tennis rackets is detailed in the table. Based on this information, how much is Anna willing to pay for the fourth tennis racket? a. $450 b. $400 c. $(525+475+450+400) = $1850 d. $(450-400) = $50 e. not enough information since the price of tennis rackets is not given
Price ($ per sweatshirt)
70
S
60 50 40 30
D
20 10 0
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
Quantity (number of sweatshirts per semester)
33. The graph above shows the demand and supply of MSU hoody sweatshirts sold in Bozeman per semester. At equilibrium, consumer surplus is _____ per semester. a. ½ * 1600 * $60 = $48,000 b. ½ * 1600 * $20 = $16,000 c. ½ * 1600 * $40 = $32,000 d. $40 * 1600 = $64,000 e. Unknown, since the price of sweatshirts is unknown
Econ 101 Section 3– Midterm 1 Version 1 – Page 10
