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

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

Question 2

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 capital needed to produce an item.
D	The all inputs needed to produce an item.

Question 2 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 3

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	6.75% increase
D	67.5% increase

Question 4

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

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

Question 5

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	$3000
C	$350
D	$1500

Question 5 Explanation: 

40 x (75-40) x 0.5 = 700

Question 6

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

Question 7

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

Question 8

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	550 consumer goods
D	150 capital goods

Question 9

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 10

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

Question 11

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

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

Question 12

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

Question 13

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

Question 13 Explanation: 

(57.5 - 20) X 20 = 750

Question 14

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

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

Question 14 Explanation: 

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

Question 15

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

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

Question 16

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

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

Question 17

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 18

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 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.
C	The time spent on studying and attending classes is the opportunity cost of obtaining an education.
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 19

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

A	It is the area under the Supply curve and above the market price.
B	It is the area under the Demand 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 20

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

Question 21

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	1.55
D	0.55
E	2.00

Question 21 Explanation: 

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

Question 22

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	International trade agreements between Canada and other first world nations, such as NAFTA.
C	Proper Government regulations on the free market economy.
D	Mark Joseph Carney, the Governor of the Bank of Canada.

Question 23

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 24

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

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

Question 25

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

Question 26

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

Question 27

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

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

Question 28

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

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

Question 29

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

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

Question 29 Explanation: 

According to the principles of "related items".

Question 30

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

Question 31

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

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

Question 32

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	$710
C	$53.5
D	$35.5

Question 33

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

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

Question 33 Explanation: 

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

Question 34

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

A	False
B	True

Question 35

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 36

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

Question 37

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 A
D	Graph B

Question 38

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

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

Question 39

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
C	C and D
D	A
E	B and C

Question 40

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

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

Question 41

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 supply due to change in market competition.
C	...change in price due to change in quantity demanded.
D	...change in price due to change in market demand.
E	...change in supply due to change in market prices.

Question 42

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

Question 43

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

Question 44

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

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

Question 45

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	...increase the usage fees.
D	...decrease the management costs.

Question 46

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	$1500
B	$800
C	$700
D	$350

Question 46 Explanation: 

40 x (40-0) x 0.5 = 800

Question 47

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

A	False
B	True

Question 48

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

Question 48 Explanation: 

40 X 40 = 1600

Question 49

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 will increase as the Apples market is experiencing a scarcity.
D	The price of Orange and Apples will decrease.
E	The price of Orange and Apples will increase.

Question 50

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