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

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

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

Question 1 Explanation: 

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

Question 2

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

A	True
B	False

Question 3

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

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

Question 3 Explanation: 

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

Question 4

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

Question 5

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	most likely a Capitalist one.
D	experiencing scarcity.
E	most likely a Socialist one.

Question 6

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

Question 7

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

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

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	$1600
C	$800
D	$710
E	$575

Question 9 Explanation: 

40 X 40 = 1600

Question 10

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	$35.5
C	$710
D	$53.5

Question 11

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

Question 12

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	...inelastic.
C	...elastic.
D	...distorted.

Question 13

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

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

Question 14

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

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

Question 15

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

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

Question 16

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

Question 17

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 18

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

Question 19

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

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

Question 20

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

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

Question 21

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

Question 22

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

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

Question 23

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	1.79
B	2.31
C	2.00
D	0.55
E	1.55

Question 23 Explanation: 

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

Question 24

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	C
C	A
D	B
E	C and D

Question 25

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

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

Question 26

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

Question 27

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

Question 28

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

Question 29

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

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

Question 30

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

Question 31

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	$1500
D	$700

Question 31 Explanation: 

40 x (40-0) x 0.5 = 800

Question 32

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

Question 33

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

Question 34

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 B
B	Graph A
C	Graph C
D	Graph D

Question 35

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

A	True
B	False

Question 36

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

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	$1500
B	$350
C	$3000
D	$700

Question 37 Explanation: 

40 x (75-40) x 0.5 = 700

Question 38

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

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

Question 39

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

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

Question 40

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

Question 41

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

Question 41 Explanation: 

(57.5 - 20) X 20 = 750

Question 42

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

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

Question 43

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

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

Question 43 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 44

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

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

Question 45

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

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

Question 46

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

Question 47

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

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

Question 47 Explanation: 

According to the principles of "related items".

Question 48

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

A	It is a mathematical model used for determining the inflation rate and its relationship to the unemployment rate.
B	It is a graphical representation of the relationship between the output of products and the limited resources available to produce the products.
C	It is a mathematical model used for determining the inflation rate and its relationship to the economic growth.
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.

Question 49

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

Question 50

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	human resources
D	non-renewable resources

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