Use the following to answer questions 14-21

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Use the following to answer questions 14-21 Powered By Docstoc
					                     Econ 102: Macroeconomics (Section 4)
                             First Midterm Test B
                                Time 2.10-3pm
Multiple Choice Questions

Use the following to answer questions 1-2:

  Hours studying
    per day
           9
            8




                                     8        9    Hours at
                                                  work per day

1.The diagram shows Sven's Production Possibilities for one day. For Sven, the
       opportunity cost of spending one more hour studying
       A) is diminishing with each additional hour.
       B) is increasing with each additional hour.
       C) is exactly one hour of paid work.
       D) is the marginal benefit from studying.
       E) depends on whether Sven looks at the dashed line or the solid line.

2.Sven could move from the bold PPC to the dashed PPC by
       A) finding a job that paid a higher wage.
       B) studying fewer hours but more effectively per hour.
       C) devoting fewer hours to sleeping
       D) spending more time on leisure activities.
       E) spending more time on the activity for which he has a comparative advantage.

Use the following to answer questions 3-10:

         Shoes      Pants
        Per Hour   Per Hour
Jenny      3          2
Craig      4          3

3.According to the data, Jenny has an absolute advantage in
      A) the production of shoes.                  D) both shoe and pants production.
      B) neither shoe nor pants production.      E) pants and possibly shoe production.
      C) the production of pants.
4.Craig possesses an absolute advantage in
       A) the production of shoes.                  D) both shoe and pants production.
       B) neither shoe nor pants production.    E) pants and possibly shoe production.
       C) the production of pants.

5.Jenny's opportunity cost of producing an extra pair of pants is
       A) 2/3 pair of shoes.                        D) 2 pairs of shoes.
       B) 1 pair of shoes.                           E) 2.5 pairs of shoes.
       C) 1.5 pairs of shoes.

6.Jenny's opportunity cost of producing an extra pair of shoes is
       A) .33 pairs of pants.                       D) 1 pair of pants.
       B) .50 pairs of pants.                        E) 1.5 pairs of pants.
       C) .67 pairs of pants.

7.Craig's opportunity cost of producing an extra pair of pants is
       A) .75 pair of shoes.                         D) 1.30 pairs of shoes.
       B) 1 pair of shoes.                           E) 1.33 pairs of shoes.
       C) 1.25 pairs of shoes.

8.Craig's opportunity cost of producing an extra pair of shoes is
       A) .75 pairs of pants.                        D) 1.25 pairs of pants.
       B) .90 pairs of pants.                        E) 1.33 pairs of pants.
       C) 1 pair of pants.

9.The comparative advantage for shoes belongs to __________ and the comparative
       advantage for pants belongs to __________.
       A) Craig; Jenny                            D) Jenny; Jenny
       B) Craig; Craig                            E) insufficient information to say
       C) Jenny; Craig

10.Based on their comparative advantages, Craig should specialize in producing
       __________ while Jenny should specialize in producing __________.
       A) shoes; pants                            D) pants; shoes
       B) both; neither                           E) insufficient information to say
       C) neither; both

11.The supply curve illustrates that firms
       A) increase the supply of a good when its price rises.
       B) increase the quantity supplied of a good when its price rises.
       C) decrease the quantity supplied of a good when input prices fall.
       D) increase the quantity supplied of a good when input prices rise.
       E) decrease the quantity supplied to earn higher profits.
12.As the price of a good rises,
       A) firms earn larger profits.
       B) more firms can cover their opportunity costs of producing the good.
       C) firms find they can raise price by even more.
       D) consumers become more willing to purchase the good.
       E) government regulation becomes more justified.

13.Supply curves are generally _______ sloping because _______________
      A) downward; more consumers will buy the good if the price falls.
      B) upward; of the principle of increasing opportunity costs
      C) downward; it is less expensive to mass produce goods
      D) upward; of inflation
      E) downward; prices fall when firms specialize

14.A market comprised of a downward sloping demand curve that intersects an upward
sloping supply curve is said to be stable because
       A) price will never change.
       B) quantity will never change.
       C) demand will never change.
       D) supply will never change.
       E) at any price other than equilibrium, forces in the market move price towards
           the equilibrium.

15.Which of the following is NOT a characteristic of a market in equilibrium?
      A) Quantity demanded equals quantity supplied.
      B) Excess supply is zero.
      C) All consumers are able to purchase as much as they wish.
      D) Excess demand is zero.
      E) The equilibrium price is stable, i.e., there is no pressure for it to change.

16.A market in disequilibrium would feature
      A) a stable price.
      B) consumers able to purchase all they wish at the market price.
      C) a stable quantity.
      D) either excess supply or excess demand.
      E) firms able to sell all they wish at the market price.

17.The equilibrium price and quantity of any good or service is established by
       A) only demanders.                          D) both demanders and suppliers.
       B) only suppliers.                          E) custom and tradition.
       C) government regulations.
Use the following to answer questions 18-23:

You are the Minister of Trade for a small island country in the South Pacific with the
following annual production possibilities curve:

  Coconuts
        500




                              1500 Fish

You are negotiating a deal with a neighboring island that has the following annual PPC:

  Coconuts
        500




                              2500 Fish


18.As soon as you see the other island's PPC you realize
       A) there will be no trade because the other island has the same comparative
          advantage as yours.
       B) there will be no trade because there is no difference in your ability to harvest
          coconuts.
       C) there will be no trade because the other island has an absolute advantage.
       D) gains from trade will be possible because the opportunity cost of fishing is too
          high on the other island.
       E) your island will have to specialize in coconuts if it wants to gain from trade.

19.When the other island's delegate offers to give you 1,000 fish in exchange for 500
      coconuts, you
      A) accept because you will then have a total of 2,500 fish.
      B) refuse because your island cannot produce enough coconuts to trade.
      C) refuse because the trade would leave you at a level of consumption that is less
          than what you could produce on your own.
      D) accept because the trade will leave you at a level of consumption that is more
          than what you could produce on your own.
      E) counter, offering to give them 400 coconuts in exchange for 1,000 fish.
20.You have arrived with 300 coconuts to trade. The minimum number of fish you
would be willing to accept in exchange for those coconuts
      A) depends on whether the islanders prefer fish to coconuts.
      B) is 1500 fish, because that's how many you can catch without trade.
      C) is 1200 fish, because that is just enough to offset the opportunity cost of
          harvesting the coconuts.
      D) is 301 fish, because anything better than a one-for-one trade benefits your
          island.
      E) is 901 fish, because that is just a little more than the opportunity cost of
          harvesting the coconuts.

21.If you offer to give the other island 400 coconuts in exchange for 1500 fish,
        A) they will refuse your offer because it makes them worse off than producing on
           their own.
        B) they will accept your offer because it keeps them on their original PPC, and so
           is efficient.
        C) they will accept your offer because it gives them 800 coconuts, which is more
           than they can make on their own.
        D) they will accept your offer because it allows them to consume a combination
           of fish and coconuts that would be unattainable on their own.
        E) they will accept your offer because they feel sorry for the poor citizens of your
           island.

22.Both countries specialize exclusively in the product for which they have a
       comparative advantage. You have agreed to sell them 350 coconuts in exchange
       for 1300 fish. After the trade your country has a total of _____ coconuts and
       _____fish.
       A) 150; 2800 B) 500; 1300 C) 150; 1300 D) 500; 1500 E) None of the
           above

23.Both countries specialize exclusively in the product for which they have a
       comparative advantage. You have agreed to sell them 350 coconuts in exchange
       for 1300 fish. After the trade the other country has a total of _____ coconuts and
       _____fish.
       A) 850; 1200 B) 500; 1200 C) 350; 1500 D) 350; 1200 E) None of the
           above
Use the following to answer questions 24-30:
Becky’s Clog’s production per hour



                                     4   W



                                                 X
                                     3


                                     2                   Y    U



                                     1                        Z
                                                     t

                                                                     V
                                     0       5       10      15    20
                                         Becky’s Sandals production per hour

24.Becky's maximum production of clogs per hour is represented by point
      A) u. B) t. C) v. D) y. E) w.

25.Becky's maximum production of sandals per hour is represented by point
      A) u. B) t. C) v. D) z. E) w.

26.Point u is a(n) __________ point in relation to the production possibilities curve.
       A) attainable B) efficient C) unattainable D) inefficient E) inefficient and
           attainable

27.Of the labeled points, ______________ are attainable
       A) only t and u                             D) only w, x, y, z, v, and t
       B) only x, y, and z                         E) only w, x, y, z, v, and u
       C) only w, x, y, z, and t

28.Of the labeled points, ______________ are efficient.
       A) only t and u                             D) only w, x, y, z, v, and t
       B) only x, y, and z                         E) only w, x, y, z, and v
       C) only w, x, y, z, and t

29.Point t is __________ while point u is __________.
       A) unattainable; inefficient               D) efficient; inefficient
       B) inefficient; unattainable               E) efficient; unattainable
       C) inefficient; efficient
30.Point y ___________________________ Point v
       A) is more efficient than   D) illustrates a comparative advantage over
       B) is less efficient than  E) illustrates an absolute advantage over
       C) is equally efficient as

				
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