Sample Midterm Exam 1_AK

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Sample Midterm Exam ECON 1100 Fall 2023 1) Which of the following statements provides the best definition of economics ? A) The study of the most equitable distribution of scarce resources. B) The study of the use of scarce resources to satisfy unlimited human wants. C) The study of the production of goods and services. D) The study of the productive capacity of a nation's factors of production. E) The study of production and increasing its efficiency. Answer: B 2) Society's resources are often divided into broad categories. They are A) goods and services. B) factors of consumption. C) land, labour, and capital. D) population and natural resources. E) tangible commodities and intangible commodities. Answer: C 3) Which of the following is NOT considered a "factor of production" in economics? A) the espresso machine at your local cafe B) the barista who makes the coffee C) the espresso drink you purchase D) the coffee beans that the barista uses E) the land on which the cafe sits Answer: C 4) Suppose there are only three alternatives to attending a "free" social event: read a novel (you value this at $10), go to work (you could earn $20), or watch videos with some friends (you value this at $25). The opportunity cost of attending the social event is A) $10. B) $20. C) $25. D) $45. E) $55. Answer: C 5) A small landscaping firm purchases a tractor that, in one day, is capable of drilling 60 fence- post holes or removing 12 tree stumps (or some intermediate combination). For this landscaper, what is the opportunity cost of removing one extra tree stump? A) 1/12th of the cost of the tractor B) 1/5 of the cost of the tractor C) drilling 12 fence-post holes D) drilling 5 fence-post holes E) There is no opportunity cost.

Answer: D 6) It has been observed that university enrollment in Canada is higher during periods of high unemployment. A possible explanation for this is that A) when prospects for getting a job are poor, the opportunity cost of getting a job is lower. B) when prospects for getting a job are poor, the opportunity cost of doing nothing is higher. C) during periods of high unemployment, the opportunity cost of going to university is higher. D) during periods of high unemployment, the opportunity cost is no longer relevant. E) when prospects for getting a job are poor, the opportunity cost of going to university is lower. Answer: E 7) An insight first fully developed by Adam Smith is that A) without benevolence production would not occur. B) all individuals are motivated solely by self-interest. C) self-interest, not benevolence, is the foundation of economic order. D) self-interest undermines effective economic order. E) individual self-interest is the only necessary force for social order. Answer: C 8) A positive statement is one that states A) what is, was, or will be. B) what is and what should be. C) what should be but is not. D) what is desirable. E) non-negative numbers. Answer: A 9) Which of the following is a normative statement? A) The higher is the level of taxes, the lower is consumption spending. B) The higher is the level of taxes, the higher are wage demands. C) A reduction in export taxes on petroleum would result in higher wages. D) Tuition fees should be waived for low-income students. E) A free-trade agreement between two countries will result in an increase in trade. Answer: D 10) An assertion about the desirability of reducing unemployment by lowering payroll taxes is most likely A) a theory. B) a testable proposition. C) a hypothesis. D) a normative statement. E) a positive statement. Answer: D

11) The statement that introducing a policy of legislated rent controls will lead to a housing shortage is an example of a(n) A) assumption. B) prediction. C) theory. D) normative statement. E) model. Answer: B 12) The "law of demand" hypothesizes that other things being equal, A) the lower the price, the greater the demand. B) price and demand vary inversely. C) the higher the price, the lower the quantity demanded. D) the higher the income, the higher the quantity demanded. E) price and quantity demanded are positively related. Answer: C 13) Consider butter and margarine, which are substitutes. When the price of butter falls, the demand curve for margarine is likely to A) shift to the right. B) shift to the left. C) remain stationary. D) remain stationary, although its price will fall. E) remain stationary, although its price will rise. Answer: B 14) If the price of tea falls and, consequently, the demand for sugar rises, then tea and sugar are A) substitute goods. B) complementary goods. C) luxury goods. D) neutral goods. E) independent goods. Answer: B 15) In which statement is the term "demand" used correctly? (1) An increase in the price of eggs will lead to a decrease in the demand for eggs. (2) An increase in the price of eggs will lead to a decrease in the demand for bacon. A) neither statement B) the first statement only C) the second statement only D) both statements E) more information is needed Answer: C

16) Suppose new medical research suggests that consuming 200 grams of tofu every day helps to prevent heart disease. How is the widespread knowledge of this research, other things being equal, likely to have what impact on the market for tofu? A) shift the whole demand curve to the right B) shift the whole demand curve to the left C) movement along the demand curve to the right D) movement along the demand curve to the left E) there would likely be no effect Answer: A Questions 17 - 20 are based on the Figure 3-1 below. FIGURE 3-1 17) Refer to Figure 3-1. If demand is given by the curve D, the ________ energy-efficient light bulbs is 200 000 at a price of $9. A) demand for B) quantity purchased of C) demand schedule for D) quantity demanded of E) quantity sold of Answer: D

18) Refer to Figure 3-1. The movement along the demand curve, D , from point v to point x , could be caused by A) a change in preferences away from ordinary light bulbs to energy-efficient light bulbs. B) a change in the price of energy-efficient light bulbs. C) an increase in household income, which allows consumers to purchase more light bulbs. D) a change in the price of ordinary light bulbs. E) an expectation that new, government regulations will require the use of energy-efficient light bulbs only. Answer: B 19) Refer to Figure 3-1. A shift of the demand curve for energy-efficient light bulbs from D to D 2 could be caused by A) an increase in the price of ordinary light bulbs. B) a change in preferences away from ordinary bulbs to energy-efficient bulbs. C) an expectation that new government regulation will require the use of energy-efficient light bulbs only. D) a decrease in the price of energy-efficient light bulbs. E) a news bulletin stating that energy-efficient light bulbs emit a harmful gas. Answer: E 20) Refer to Figure 3-1. A shift of the demand curve for energy-efficient light bulbs from D to D 1 could be caused by A) a decrease in the price of ordinary light bulbs. B) a news bulletin stating that energy-efficient light bulbs emit a harmful gas. C) a decrease in the price of energy-efficient light bulbs. D) an expectation that government regulation will soon prohibit the use of ordinary light bulbs. E) a change in preferences toward ordinary light bulbs. Answer: D 21) The positive slope of a supply curve indicates that A) as price goes up, quantity supplied will decrease. B) consumers will want to buy less at higher prices. C) as price goes up, quantity supplied will increase. D) if the costs of production increase, the quantity supplied will increase. E) as price goes up, quantity supplied will remain constant. Answer: C 22) Suppose there is a decrease in the quantity supplied of copper at each price. This change would imply A) a shift to the left of the supply curve. B) a shift to the right of the supply curve. C) a movement up the supply curve. D) a movement down the supply curve. Answer: A

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