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

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	B
C	C and D
D	A
E	C

Question 2

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

Question 3

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

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

Question 3 Explanation: 

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

Question 4

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

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

Question 5

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	Market failure due to Alberta's monopoly on the beef industry.
D	Endogenous variables causing the market demand for beef to drop.
E	An example of the "invisible hand" in action.

Question 6

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

Question 7

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

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

Question 7 Explanation: 

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

Question 8

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

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

Question 9

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

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

Question 10

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

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

Question 11

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	1.55
B	2.31
C	2.00
D	1.79
E	0.55

Question 11 Explanation: 

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

Question 12

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

Question 12 Explanation: 

(57.5 - 20) X 20 = 750

Question 13

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

Question 14

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

Question 15

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

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

Question 16

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

Question 17

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	A
C	B and C
D	B
E	C and D

Question 18

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 C
B	Graph D
C	Graph B
D	Graph A

Question 19

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

A	False
B	True

Question 20

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

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

Question 20 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 21

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

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

Question 22

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 lost time and money from a full time job is the capital cost of obtaining an education.
B	The time spent on studying and attending classes is the opportunity cost of obtaining an education.
C	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.
D	The lost time and money from a full time job is the opportunity cost of obtaining an education.
E	The time spent on studying and attending classes is the capital cost of obtaining an education.

Question 23

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

A	False
B	True

Question 24

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	...neither good 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 Jam.
D	...Jam and USA has an absolute advantage in Cheese.
E	...Cheese and USA has an absolute advantage in Jam.

Question 25

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

Question 26

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

Question 27

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

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

Question 28

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	$700
B	$350
C	$1500
D	$800

Question 28 Explanation: 

40 x (40-0) x 0.5 = 800

Question 29

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

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

Question 30

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

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

Question 31

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

Question 32

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	550 capital goods
C	150 capital goods
D	550 consumer goods

Question 33

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

Question 34

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

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

Question 35

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

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

Question 36

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

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

Question 36 Explanation: 

According to the principles of "related items".

Question 37

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

Question 37 Explanation: 

40 X 40 = 1600

Question 38

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

Question 39

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

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

Question 40

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

Question 41

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

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

Question 42

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

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

Question 43

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

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

Question 44

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	$3000
B	$350
C	$1500
D	$700

Question 44 Explanation: 

40 x (75-40) x 0.5 = 700

Question 45

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

Question 46

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	$35.5
B	$375
C	$53.5
D	$710

Question 47

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

Question 48

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	individual property rights.
C	market power.
D	private sector regulations.
E	government intervention.

Question 49

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

Question 50

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 determining the inflation rate and its relationship to the unemployment rate.
D	It is a mathematical model used for calculating the per unit opportunity cost for a given item.
E	It is a graphical representation of the maximum output obtain from a given unlimited resource base.

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