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

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 and Apples will decrease.
C	The inflation rate will increase due to the shortage of Apples.
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 2

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

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

Question 3

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

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

Question 4

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	$710
B	$375
C	$35.5
D	$53.5

Question 5

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	private sector regulations.
D	government intervention.
E	individual property rights.

Question 6

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 6 Explanation: 

According to the principles of "related items".

Question 7

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	6.75% increase
C	67.5% increase
D	4.5% increase

Question 8

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	$1500
C	$700
D	$350

Question 8 Explanation: 

40 x (75-40) x 0.5 = 700

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

Question 10

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 and B
C	B
D	A
E	D

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	1.79
B	0.55
C	2.31
D	2.00
E	1.55

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

Question 12 Explanation: 

(57.5 - 20) X 20 = 750

Question 13

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 one of the two goods.
C	...decrease in demand for the two products.
D	...technological breakthrough in both goods.
E	...increased in spending.

Question 14

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

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

Question 15

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

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

Question 16

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

Question 17

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

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

Question 18

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

Question 19

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

Question 20

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

A	True
B	False

Question 21

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

Question 22

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 22 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 23

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

Question 24

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 25

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

A	False
B	True

Question 26

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	$700
C	$800
D	$350

Question 26 Explanation: 

40 x (40-0) x 0.5 = 800

Question 27

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

Question 28

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 28 Explanation: 

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

Question 29

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

A	...change in supply due to change in market prices.
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 producer's ability to fulfill the market demand.

Question 30

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

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

Question 31

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 B
C	Graph A
D	Graph D

Question 32

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

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

Question 33

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	$575
C	$1150
D	$710
E	$800

Question 33 Explanation: 

40 X 40 = 1600

Question 34

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

Question 35

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

Question 36

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	...inelastic.
C	...artificial.
D	...elastic.

Question 37

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

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

Question 37 Explanation: 

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

Question 38

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

Question 39

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

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

Question 40

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 higher quality housing.
D	Lower rent with lower quality housing.

Question 41

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

Question 42

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

Question 43

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 44

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

Question 45

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

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

Question 46

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	Market failure due to Alberta's monopoly on the beef industry.
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	Externality causing the market to shrink during a crisis.

Question 47

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

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

Question 48

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

Question 49

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

Question 50

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

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