Economics 201 is the Principles of Microeconomics class. Depending on the Professor, the exams format may or may not be multiple choice.

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Economics (ECON 201-UCAL) Midterm Exam

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Question 1

When the production of goods are inadequate to fulfill the needs of a society, the economy is... (ID-MI1-02)

A	a failure.
B	expanding.
C	experiencing scarcity.
D	most likely a Capitalist one.
E	most likely a Socialist one.

Question 2

In order to obtain a degree at the University of Calgary, you decided to give up your full time job. What is the best statement that describe your situation from Economics point of view? (ID-MI1-08)

A	The time spent on studying and attending classes is the capital cost of obtaining an education.
B	The lost time and money from a full time job is the opportunity cost of obtaining an education.
C	The lost time and money from a full time job is the capital cost of obtaining an education.
D	The cost of obtaining an education is always beneficial compared to having a low paying full time job. Hint: This may be true in most cases. But this is not applicable in all situations. For example; Bill Gates, Mark Zuckerberg, etc.
E	The time spent on studying and attending classes is the opportunity cost of obtaining an education.

Question 3

The absolute advantage is measured primarily by what factor? (ID-MI1-22)

A	The number of items produced.
B	The added costs such as taxes and transportation fees.
C	The all inputs needed to produce an item.
D	The capital needed to produce an item.

Question 3 Explanation: 

Tricky question because you must know the exact definition of absolute advantage (AA); lowest inputs needed to produce one unit of an item.

Question 4

What would be the most likely result of rent control? (ID-MI1-46)

A	Lower rent with higher quality housing.
B	Higher rent with higher quality housing.
C	Higher rent with lower quality housing.
D	Lower rent with lower quality housing.

Question 5

Which of the following product will have the most inelastic demand? (ID-MI1-27)

A	Automobiles
B	Penicillin antibiotics
C	University education
D	Oranges and bananas

Question 5 Explanation: 

Drugs such as Penicillin based antibiotics often have inelastic demand because they are essential ingredients in treating certain medical conditions.

Question 6

Which of the following scenario will increase both the equilibrium price and quantity of an inferior good? (ID-MI1-45)

A	Increase in the number of substitution products.
B	Decrease in consumer demand.
C	Decrease in consumer income.
D	Increase in consumer income.
E	Decrease in the number of substitution products.

Question 7

Based on the following table, Canada has a comparative advantage in... (ID-MI1-42)

...	Hours needed for 1 unit		Amount procuded in 24 hours
	Cheese	Jam	Cheese	Jam
Canada	6	2	4	12
USA	3	4	8	6

A	...neither and USA has a comparative advantage in Jam.
B	...neither and USA has a comparative advantage in Cheese.
C	...Cheese and USA has a comparative advantage in Jam.
D	...Jam and USA has a comparative advantage in Cheese.

Question 8

What is market failure? (ID-MI1-50)

A	It is a situation in which wrong products and services in the wrong market results in low demand and eventual failure.
B	It is a situation in which a firm exits a market due to financial failure.
C	It is a situation in which market on its own fails to allocate resources efficiently.
D	It is a situation in which a product or a service failed to generate enough demand to be successful.

Question 9

Based on the following table, what is the opportunity cost of moving from D to E? (ID-MI1-13)

Situation	Capital Goods	Consumer Goods
A	0	2000
B	150	1750
C	300	1500
D	550	1050
E	700	500
F	950	0

A	1050 consumer goods
B	150 capital goods
C	550 consumer goods
D	550 capital goods

Question 10

What is the best definition for producer surplus? (ID-MI1-29)

A	The amount a buyer would gain before the tax being paid.
B	The value of everything that a producer earns as a result of selling an item.
C	The difference between what the buyer's willingness to pay minus the amount the buyer actually pays.
D	The amount a seller is paid by the buyer for a given item minus the seller's cost.

Question 11

The supply of Oranges exceeds the demand while the supply of Apples are hindered due to weather. Which of the following statement is true about this particular market? (ID-MI1-06)

A	The price of Orange will increase as the Apples market is experiencing a scarcity.
B	The price of Orange will decrease as the Apples market is experiencing a s scarcity.
C	The price of Orange and Apples will decrease.
D	The price of Orange and Apples will increase.
E	The inflation rate will increase due to the shortage of Apples.

Question 12

If the entire Production Possibility Frontier shifted to higher values, it is most likely caused by... (ID-MI1-26)

A	...decrease in demand for the two products.
B	...technological breakthrough in both goods.
C	...increased in spending.
D	...technological breakthrough in one of the two goods.
E	...decrease in demand for one product over the other.

Question 13

Based on the following table, Canada has the absolute advantage in... (ID-MI1-38)

...	Hours needed for 1 unit		Amount procuded in 24 hours
	Cheese	Jam	Cheese	Jam
Canada	6	2	4	12
USA	3	4	8	6

A	...Jam and USA has an absolute advantage in Cheese.
B	....(cannot be answered due to lack of information).
C	...neither good and USA has an absolute advantage in Cheese.
D	...neither good and USA has an absolute advantage in Jam.
E	...Cheese and USA has an absolute advantage in Jam.

Question 14

An effective ceiling price will result in... (ID-MI1-40)

A	...will help the customers.
B	...abundance of good and decrease in demand.
C	...shortage of good decrease in demand.
D	...shortage of goods and increase in demand.

Question 15

The fall in total surplus as a result of market distortion is known as... (ID-MI1-31)

A	...elasticity loss.
B	...deadweight loss.
C	...efficiency loss.
D	...a tax revenue loss.

Question 16

Canada was one of the few (if not only) countries to weather the financial crisis of 2007–08. What is the primary reason for Canada's success? (ID-MI1-09)

A	Mark Joseph Carney, the Governor of the Bank of Canada.
B	Proper Government regulations on the free market economy.
C	Controls put in placed by the free market "invisible hand".
D	International trade agreements between Canada and other first world nations, such as NAFTA.

Question 17

Refer to the following diagram. The tax imposed is indicated by the neon-green vertical line. What is the producer surplus without the tax? (ID-MI1-19)

A	$350
B	$800
C	$700
D	$1500

Question 17 Explanation: 

40 x (40-0) x 0.5 = 800

Question 18

Based on the following table, what is the opportunity cost of moving from C to B? (ID-MI1-17)

Situation	Capital Goods	Consumer Goods
A	0	2000
B	150	1750
C	300	1500
D	550	1050
E	700	500
F	950	0

A	300 Capital Goods
B	1/2 Consumer Goods
C	300 Consumer Goods
D	150 Capital Goods

Question 19

What should be the unemployment rate of a sustainable and healthy Economy? (ID-MI1-11)

A	4 - 6%
B	30 - 35%
C	15 - 20%
D	40 - 45%
E	0%

Question 19 Explanation: 

Ideally, 0% is the best option. Piratically no Economy (country) can maintain an unemployment rate of 0%.

Question 20

There are several points posted on the following Production Possibility Frontier (PPF) graph. The situation(s) that is/are impossible to attain, indicated by which letter(s)? (ID-MI1-16)

A	A and B
B	B and C
C	B
D	A
E	C and D

Question 21

In Circular Flow Diagram of physical and monetary flow, what is the input and output of firms? (ID-MI1-04)

A	Input: commodities and costs Output: revenue and resource services
B	Input: income and resource services Output: commodities and consumption
C	Input: revenue and resource services Output: commodities and costs
D	Input: commodities and consumption Output: income and resource services
E	Input: commodities and consumption Output: revenue and resource services

Question 22

The Alberta beef market to shrunk as during the Mad Cow Disease crisis. This is an example of what Economic property? (ID-MI1-10)

A	Externality causing the market to shrink during a crisis.
B	Exogenous variables causing the market demand for beef to drop.
C	An example of the "invisible hand" in action.
D	Endogenous variables causing the market demand for beef to drop.
E	Market failure due to Alberta's monopoly on the beef industry.

Question 23

The concept of "invisible hand" best applies to what kind of economies? (ID-MI1-44)

A	Traditional economies.
B	Mixed economies.
C	Command economies.
D	Free economies.
E	Market economies.

Question 24

In Economics, the term capital is used to describe... (ID-MI1-03)

A	the amount of money grained from profits.
B	the amount of money invested.
C	the main City in a country which produces the most goods.
D	the amount of created resources.

Question 25

Refer to the following diagram. The tax imposed is indicated by the neon-green vertical line. If the demand line is steeper(let's say the intercepts are 75 and 40 instead of 75 and 85), then the demand is said to be more... (ID-MI1-32)

A	...artificial.
B	...elastic.
C	...distorted.
D	...inelastic.

Question 26

Based on the following table, what is the opportunity cost of producing a unit of Jam for USA? (ID-MI1-37)

...	Hours needed for 1 unit		Amount procuded in 24 hours
	Cheese	Jam	Cheese	Jam
Canada	6	2	4	12
USA	3	4	8	6

A	4 Cheese
B	4/3 Cheese
C	1/3 Cheese
D	1/3 Cheese
E	3/4 Cheese

Question 27

Which of the following best describes Microeconomics? (ID-MI1-01)

A	The study of household centered economic systems.
B	The study of behavior of individual agents and markets.
C	The study of overall production and consumption.
D	The study of small industries and companies.

Question 28

Refer to the following diagram. The tax imposed is indicated by the neon-green vertical line. What is the total tax revenue? (ID-MI1-20)

A	$57.5
B	$650
C	$20
D	$750
E	$35.5

Question 28 Explanation: 

(57.5 - 20) X 20 = 750

Question 29

There are several points posted on the following Production Possibility Frontier (PPF) graph. The most inefficient points are indicated by which letter(s)? (ID-MI1-15)

A	A and B
B	A
C	C and D
D	B
E	D

Question 30

If the number of hours you studied for Economics 201 increases your confusion of concepts, you can say that studying have a... (ID-MI1-41)

A	...neutral correlation.
B	...random correlation.
C	...negative correlation.
D	...no correlation.
E	...positive correlation.

Question 31

The price elasticity of supply is concerned with... (ID-MI1-39)

A	...change in supply due to producer's ability to fulfill the market demand.
B	...change in price due to change in quantity demanded.
C	...change in supply due to change in market prices.
D	...change in price due to change in market demand.
E	...change in supply due to change in market competition.

Question 32

Positive statements as opposed to normative statements attempt to describe the world as it is. (ID-MI1-33)

A	False
B	True

Question 33

The self-interest of the participants in an economy is guided into promoting economic self-interest by (ID-MI1-49)

A	the invisible hand.
B	market power.
C	government intervention.
D	individual property rights.
E	private sector regulations.

Question 34

Refer to the following diagram. The tax imposed is indicated by the neon-green vertical line. What is the total revenue without tax incidence? (ID-MI1-25)

A	$710
B	$575
C	$1600
D	$800
E	$1150

Question 34 Explanation: 

40 X 40 = 1600

Question 35

Higher price for hotdogs will most likely... (ID-MI1-28)

A	....increase the equilibrium quantity.
B	...decrease the demand for hotdog buns.
C	...increase the demand for bananas.
D	...increase the demand for ketchup.

Question 35 Explanation: 

According to the principles of "related items".

Question 36

What is Production Possibility Frontier or PPF? (ID-MI1-12)

A	It is a graphical representation of the relationship between the output of products and the limited resources available to produce the products.
B	It is a mathematical model used for determining the inflation rate and its relationship to the economic growth.
C	It is a mathematical model used for calculating the per unit opportunity cost for a given item.
D	It is a graphical representation of the maximum output obtain from a given unlimited resource base.
E	It is a mathematical model used for determining the inflation rate and its relationship to the unemployment rate.

Question 37

Refer to the following diagram. The tax imposed is indicated by the neon-green vertical line. What is the consumer surplus without the tax? (ID-MI1-18)

A	$700
B	$1500
C	$3000
D	$350

Question 37 Explanation: 

40 x (75-40) x 0.5 = 700

Question 38

What major limitation is not considered in Circular Flow Diagram of physical and monetary flow? (ID-MI1-05)

A	market fluctuations
B	non-renewable resources
C	capital costs
D	human resources

Question 39

Given that the price elasticity of demand for a good is 4.5, what is the change in quantity demanded if the price is increased by 15%? (ID-MI1-24)

A	67.5% increase
B	0.675% increase
C	6.75% increase
D	4.5% increase

Question 40

Which of the following four graph (A, B, C, D) represents the market for Winter Coats in the middle of Canadian Summer? (ID-MI1-48)

A	Graph D
B	Graph C
C	Graph B
D	Graph A

Question 41

Refer to the following diagram. The tax imposed is indicated by the neon-green vertical line. What is the deadweight loss (DL) due to tax incidence? (ID-MI1-21)

A	$375
B	$53.5
C	$35.5
D	$710

Question 42

Challenging a current market system with a new idea which may be better for the future can be considered as a... (ID-MI1-34)

A	...economic projection.
B	...market projection.
C	...negative statement.
D	...positive statement.
E	...normative statement.

Question 43

Price control will most likely result in... (ID-MI1-43)

A	...helping the producers by generating more revenuer.
B	...creating more competition hence reducing monopolies.
C	...hurting the consumers that needed the most help.
D	...creating a fair and balanced economies.

Question 44

Based on the following table, what is the opportunity cost of producing a unit of Jam for Canada? (ID-MI1-36)

...	Hours needed for 1 unit		Amount procuded in 24 hours
	Cheese	Jam	Cheese	Jam
Canada	6	2	4	12
USA	3	4	8	6

A	4/3 Cheese
B	3 Cheese
C	1/3 Cheese
D	6 Cheese
E	1 Cheese

Question 45

How do you calculate the consumer surplus on a Supply-Demand graph? (ID-MI1-35)

A	It is the area under the Demand curve and above the market price.
B	It is the area under the Supply curve and above the market price.
C	It is the area above the Supply curve and under the market price.
D	It is the area above the Demand curve and under the market price.

Question 46

There are several points posted on the following Production Possibility Frontier (PPF) graph. The most efficient points are indicated by which letter(s)? (ID-MI1-14)

A	A and B
B	A
C	C and D
D	C
E	B

Question 47

What will eventually happen to an economy when resources are not allocated properly? (ID-MI1-07)

A	It will result in slow rate of inflation growth.
B	It will result in larger income gaps between the rich and poor.
C	It will experience a rapid growth.
D	It will experience scarcity.
E	It will result in a market failure.

Question 48

Increase in price of bread from $2.50 to $3.20 will increase the supply from 800 to 1250 units. Using midpoint (arc) method, what is the elasticity of supply? (ID-MI1-23)

A	2.31
B	1.79
C	2.00
D	0.55
E	1.55

Question 48 Explanation: 

midpoint (arc) = [(change in Q)/(change in P)] X [(sum of P)/sum of Q)]

Question 49

If the City of Calgary has a problem with overuse of public swimming pools, the best solution to protect infrastructure is to... (ID-MI1-47)

A	...reduce the quality of pools and facilities.
B	...decrease the management costs.
C	...increase the usage fees.
D	...increase the maintenance budget.

Question 50

A government welfare system will increase the equity. (ID-MI1-30)

A	False
B	True

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Credits: Based on the excellent class notes provided by, Dr. Ronald Schlenker during Summer 2014.
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