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ECON 1000M: INTRODUCTION TO MICROECONOMICS

DEPARTMENT OF ECONOMICS
FACULTY OF LIBERAL ARTS AND PROFESSIONAL STUDIES
YORK UNIVERSITY

MIDTERM EXAM
WINTER 2013
Version 1

Course Director: Dr. Sadia Mariam Malik

TOTAL POINTS: 100

TOTAL WORTH: 30%

STUDENT NAME:_____________________________________________________

STUDENT I.D.: ________________________________________________________


INSTRUCTIONS:

1. This exam consists of 40 multiple choice questions. There is only one correct
answer.

2. Circle your final answer for every question on each page of the exam and
carefully mark the selected letter on the computerized Answer Sheet.

3. Use HB pencils only.

4. Time Allowed: 80 minutes

GOOD LUCK!

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Econ 1000M - Winter 2013- Midterm Exam
Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is a microeconomic topic? 1) _______
A) the cause of increasing unemployment
B) the effect of the government budget deficit on inflation
C) the reasons why the labour force in a country decreases
D) the reasons why the average price level in a country falls
E) the reasons why a consumer buys less honey

2) The problem of scarcity exists 2) _______
A) only in economies that have incentives.
B) now but will be eliminated with economic growth.
C) only when people are unemployed.
D) only in economies that lack incentives.
E) in all economies.

3) When a farmer decides to harvest tomatoes using machines instead of migrant workers, the
farmer is answering the ________ question.
3) _______
A) "where" B) "who" C) "how" D) "what" E) "when"

4) Which of the following would an economist classify as capital? 4) _______
A) a computer
B) natural resources
C) a deposit of silver
D) entrepreneurship
E) land

5) Monika will choose to eat a seventh pizza slice if 5) _______
A) the total benefit from all seven slices is greater than their total cost.
B) the marginal benefit from the seventh slice is greater than its marginal cost.
C) the marginal benefit from the seventh slice is less than its marginal cost.
D) she has enough money to pay for it.
E) the total benefit from all seven slices is less than their total cost.

6) Which of the following is an example of a positive statement? 6) _______
A) Increasing the minimum wage results in more unemployment.
B) Canada should cut back on its use of carbon-based fuels such as coal and oil.
C) The Bank of Canada ought to cut the interest rate.
D) Every Canadian should have equal access to health care.
E) Canada should have lower tax rates for wealthier Canadians.

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Use the figure below to answer the following questions.



Figure 2.1.1

7) Complete the following sentence. In Figure 2.1.1, 7) _______
A) some resources must be unused at point C.
B) the concept of decreasing opportunity cost is illustrated.
C) point B is a point of production efficiency.
D) movement from A to B would require a technological advance.
E) movement from C to B would require a technological improvement.

8) Refer to the production possibilities frontier in Figure 2.1.1, which one of the following is true
about point C?
8) _______
A) It is attainable only if we consume less of good X.
B) It is attainable only if we consume more of good X.
C) It is attainable only if we consume more of good Y.
D) It is unattainable.
E) It is attainable only if we consume less of good Y.

9) On a graph of a production possibilities frontier, opportunity cost is represented by 9) _______
A) a point on the vertical axis.
B) the x-axis intercept.
C) the slope of the production possibilities frontier.
D) a ray through the origin.
E) a point on the horizontal axis.

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Use the table below to answer the following questions.

Table 2.1.2
Production Possibilities



10) Refer to Table 2.1.2. In moving from combination B to combination C, the opportunity cost of
producing one additional unit of guns is
10) ______
A) 1/6 kilogram of butter.
B) 2 kilograms of butter.
C) 1/2 kilogram of butter.
D) 6 kilograms of butter.
E) 3 kilograms of butter.

Use the figure below to answer the following questions.


Figure 2.2.1

11) In Figure 2.2.1, when 2,000 bicycles are produced each month 11) ______
A) the marginal benefit from another bicycle is greater than the marginal cost of another
bicycle.
B) more bicycles must be produced to reach the efficient level of output.
C) the economy is efficient at this level of production of bicycles.
D) fewer bicycles must be produced to reach the efficient level of output.
E) both A and B.

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12) With allocative efficiency, for each good produced, 12) ______
A) marginal benefit equals marginal cost.
B) marginal cost exceeds marginal benefit by as much as possible.
C) marginal benefit exceeds marginal cost by as much as possible.
D) marginal cost is at its minimum.
E) marginal benefit is at its maximum.

Use the information below to answer the following questions.

Fact 2.4.2

Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y
in an hour.

13) Refer to Fact 2.4.2. Which one of the following statements is true? 13) ______
A) Agnes has a comparative advantage in the production of Y.
B) Brenda has a comparative advantage in the production of X.
C) Agnes will not gain from trade.
D) Brenda will not gain from trade.
E) Brenda has an absolute advantage over Agnes in the production of both goods.

14) Complete the following sentence. Given Fact 2.4.2, 14) ______
A) there will be gains from trade only if Agnes becomes faster at producing X.
B) there will be no gains from trade because Agnes has an absolute advantage.
C) there will be gains from trade only if Agnes specializes in the production of Y and Brenda
in X.
D) there will be gains from trade, no matter what Brenda and Agnes specialize in, as long as
they specialize.
E) there will be gains from trade if Agnes specializes in the production of X and Brenda in Y.

Use the table below to answer the following questions.

Table 3.1.1



15) Refer to Table 3.1.1. In 2009, the relative price of coffee in terms of cola is 15) ______
A) 1.00.
B) 1.25.
C) 0.67.
D) 1.56.
E) unknown without more information.

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Use the figure below to answer the following questions.


Figure 3.2.2

16) Which one of the following would result in the demand curve shifting from D
1
to D
2
in Figure
3.2.2?
16) ______
A) a rise in the price of hamburgers, a substitute for pizza
B) a rise in the price of pizza
C) a rise in the price of Coke, a complement of pizza
D) a fall in the price of pizza
E) an increase in the supply of pizza

17) Refer to Figure 3.2.2. Which one of the following represents a decrease in quantity demanded? 17) ______
A) a shift from D
1
to D
2
B) a movement from B to A
C) a movement from A to B
D) a shift from D
2
to D
1
E) none of the above

18) Which one of the following will shift the supply curve of good X leftward? 18) ______
A) a decrease in the wages of workers employed to produce X
B) a situation where quantity demanded exceeds quantity supplied
C) an increase in the cost of machinery used to produce X
D) a technological improvement in the production of X
E) a decrease in the cost of capital used to produce X

19) The price of good A rises, and the demand curve for good B shifts leftward. We can conclude
that
19) ______
A) B is an inferior good.
B) A and B are substitutes in cnsumption.
C) A and B are complements in production.
D) B is a normal good.
E) A and B are complements in consumption.
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Use the figure below to answer the following questions.


Figure 3.4.1

20) At price P
3
in Figure 3.4.1, 20) ______
A) there is a tendency for the price to rise.
B) this market is in equilibrium.
C) equilibrium quantity is Q
5
.
D) there is a surplus in the amount of Q
5
- Q
1
.
E) there is a shortage in the amount of Q
5
- Q
1
.

21) If demand decreases and supply increases, then the 21) ______
A) effect on both equilibrium price and quantity is unknown.
B) equilibrium quantity decreases but the effect on the equilibrium price is unknown.
C) equilibrium price rises but the effect on equilibrium quantity is unknown.
D) equilibrium quantity increases but the effect on the equilibrium price is unknown.
E) equilibrium price falls but the effect on equilibrium quantity is unknown.

22) If a 10 percent rise in price leads to an 8 percent decrease in quantity demanded, the price
elasticity of demand is
22) ______
A) 0.125. B) 80. C) 1.25. D) 0.8. E) 8.

23) A fall in the price of a good from $10.50 to $9.50 results in an increase in the quantity demanded
from 18,800 to 21,200 units. The price elasticity of demand is
23) ______
A) 0.8. B) 2.4. C) 8.0. D) 1.25. E) 1.2.

24) For which one of the following is demand likely to be most inelastic? 24) ______
A) insulin for a diabetic
B) books
C) gasoline
D) potatoes
E) diamonds
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25) If a price decrease results in an increase in total revenue, then demand is 25) ______
A) equal to supply.
B) inelastic.
C) elastic.
D) unit elastic.
E) perfectly inelastic.

26) If the demand for good Z is perfectly inelastic, then the demand curve for good Z is 26) ______
A) horizontal.
B) downward sloping.
C) vertical.
D) initially upward sloping and then downward sloping.
E) upward sloping.

27) If a turnip is an inferior good then 27) ______
A) a small decrease in income decreases the quantity of turnips demanded at the current price
by a large amount.
B) turnips taste awful.
C) an increase in income increases the quantity demanded at the current price.
D) an increase in income decreases the quantity demanded at the current price.
E) a large decrease in income decreases the quantity of turnips demanded at the current price
by a small amount.

28) If a rise in the price of good A from $9 to $11 results in an increase from 9,500 to 10,500 units
supplied, then
28) ______
A) supply is inelastic.
B) supply is unit elastic.
C) demand is elastic.
D) supply is elastic.
E) supply is perfectly inelastic.

29) Short-run supply is 29) ______
A) as elastic as either the momentary or the long-run supply.
B) less elastic than both momentary and long-run supply.
C) less elastic than momentary supply but more elastic than long-run supply.
D) more elastic than both momentary and long-run supply.
E) more elastic than momentary supply but less elastic than long-run supply.

30) When a market price allocates a scarce resource 30) ______
A) only those who show interest can use the resource.
B) everyone in the economy can use the resource.
C) willingness-to-pay is not an issue.
D) only those who are willing and able to pay get the resource.
E) ability to pay for the resource is less important than willingness-to-pay.

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31) A used truck has a sticker price of $21,000. Arthur decided that he would pay no more than
$19,500 for this truck. He bought the truck for $19,250. Arthur obtained a consumer surplus of
31) ______
A) $19,250. B) $250. C) $19,500. D) $21,000. E) $1,750.

Use the figure below to answer the following questions.


Figure 5.2.2

32) Refer to Figure 5.2.2 If the price is P
1
, consumer surplus is 32) ______
A) A.
B) B plus C.
C) A plus B plus C.
D) A plus B plus C plus D plus E.
E) D plus E.

33) The marginal cost for Morgan's Marvellous Movies is given in the following table:

Table 5.3.2



If the firm sells the fifth movie at a price of $7, what is the producer surplus on that movie?
33) ______
A) $7 B) $3 C) $6 D) $1 E) $28

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Use the figure below to answer the following questions.


Figure 5.4.1

34) Refer to Figure 5.4.1. If the quantity produced is 200, 34) ______
A) a deadweight loss exists.
B) deadweight loss is minimized.
C) the sum of consumer surplus and producer surplus is zero.
D) the sum of consumer surplus and producer surplus is maximized.
E) production is efficient.

35) Guy has an income (Y) of $50 with which he can purchase DVDs (D) at $10 each and haircuts (H)
at $20 each. Which one of the following represents Guy's budget line?
35) ______
A) Y = 10Q
D
- 20Q
H
B) 50 = Q
D
+ Q
H
C) 20Y = Q
D
+ 10Q
H
D) 50 = 10Q
D
+ 20Q
H
E) Y = 50 + Q
D
+ Q
H

36) If the price of the good measured on the horizontal axis increases, the budget line 36) ______
A) shifts leftward and becomes steeper.
B) shifts leftward and parallel to the original budget line.
C) shifts rightward and parallel to the original budget line.
D) becomes flatter.
E) becomes steeper.

37) Sara's income is $12 a week. The price of popcorn is $3 a bag, and the price of a smoothie is $3.
The opportunity cost of a smoothie is ________.
37) ______
A) $3
B) $1
C) 1.0 bag of popcorn
D) 4 bags of popcorn
E) 1.00 smoothie
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Use the figure below to answer the following question.


Figure 9.2.2

38) Figure 9.2.2 shows three indifference curves for Brenda. Which one of the following is not true? 38) ______
A) Brenda prefers consuming at point D to consuming at point A.
B) Brenda prefers consuming at point B to consuming at point A.
C) The marginal rate of substitution is higher at point C than at point B.
D) Brenda would be equally happy consuming at either point B or point C.
E) Brenda prefers consuming at point D to consuming at either point B or point C.

39) At the best affordable point, which statement is true? 39) ______
A) Other points on the same indifference curve are affordable but not preferred.
B) The slope of the indifference curve equals the slope of the budget line.
C) Some income is not spent.
D) The marginal rate of substitution between two goods equals their absolute price.
E) The highest affordable indifference curve has the same intercept as the budget line.

40) If Sam is producing at a point on his production possibilities frontier, then he 40) ______
A) can produce more of both goods.
B) cannot produce any more of either good.
C) can increase the production of one good only by decreasing the production of the other.
D) is unaffected by costs and technology.
E) is not subject to scarcity.