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

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

Question 2

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

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

Question 3

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

Question 4

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	$35.5
C	$750
D	$57.5
E	$20

Question 4 Explanation: 

(57.5 - 20) X 20 = 750

Question 5

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

A	It is a graphical representation of the maximum output obtain from a given unlimited resource base.
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 mathematical model used for determining the inflation rate and its relationship to the unemployment rate.

Question 6

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

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

Question 6 Explanation: 

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

Question 7

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

Question 8

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

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

Question 9

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

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

Question 10

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

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 decrease as the Apples market is experiencing a s scarcity.
B	The price of Orange will increase as the Apples market is experiencing a 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

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

Question 13

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	2.00
E	0.55

Question 13 Explanation: 

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

Question 14

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	300 Capital Goods
C	300 Consumer Goods
D	150 Capital Goods

Question 15

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 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 demand.
D	Increase in consumer income.
E	Decrease in consumer income.

Question 17

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

A	True
B	False

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

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

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

Question 19 Explanation: 

According to the principles of "related items".

Question 20

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

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

Question 21

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 22

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	$1150
C	$1600
D	$800
E	$575

Question 22 Explanation: 

40 X 40 = 1600

Question 23

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 23 Explanation: 

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

Question 24

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: income and resource services Output: commodities and consumption
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 25

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

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

Question 26

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

Question 27

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

Question 28

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	D
C	B
D	A
E	A and B

Question 29

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 difference between what the buyer's willingness to pay minus the amount the buyer actually pays.
D	The amount a buyer would gain before the tax being paid.

Question 30

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

Question 31

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

Question 32

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	...reduce the quality of pools and facilities.
D	...increase the usage fees.

Question 33

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

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 D
B	Graph C
C	Graph B
D	Graph A

Question 35

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

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

Question 36

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

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

Question 37

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

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

Question 37 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 38

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	$700
D	$1500

Question 38 Explanation: 

40 x (75-40) x 0.5 = 700

Question 39

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	$53.5
C	$710
D	$375

Question 40

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

Question 41

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

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

Question 42

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

A	False
B	True

Question 43

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

A	...change in supply due to change in market prices.
B	...change in price due to change in quantity demanded.
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 competition.

Question 44

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 44 Explanation: 

40 x (40-0) x 0.5 = 800

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

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

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

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

Question 48

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

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

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

Question 50

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

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

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