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Principles of Economics Midterm Exam: A Comprehensive Review of Key Concepts - Prof. Bonni, Exams of Economics

Saint Louis University (SLU)Economics
Prof. Bonnie E. Wilson

Material Type: Exam; Professor: Wilson; Class: Principles of Economics; Subject: Economics; University: Saint Louis University; Term: Fall 2006;

Typology: Exams

2009/2010

Uploaded on 02/24/2010

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“Midterm” Exam I
Friday, October 6, 2006
ECON-190 Principles of Economics
The exam consists of two sections. The first section consists of 9 multiple choice questions (27 points).
The second section contains 5 short answer questions (48 points). All of your responses should reflect the
perspective of an economist and the course material.
Please be reminded: by enrolling in this course, you have assumed the responsibilities of an active participant
in Saint Louis University’s scholarly community. In this community, academic work and behavior are held
to the highest standards of honesty and integrity. Cheating, fabrication, plagiarism, and helping others to
commit these acts are all forms of academic dishonesty and are not acceptable. Academic misconduct may
result in disciplinary action, including but not limited to, suspension or dismissal.
Good luck!
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Download Principles of Economics Midterm Exam: A Comprehensive Review of Key Concepts - Prof. Bonni and more Exams Economics in PDF only on Docsity!

“Midterm” Exam I Friday, October 6, 2006 ECON-190 Principles of Economics

The exam consists of two sections. The first section consists of 9 multiple choice questions (27 points). The second section contains 5 short answer questions (48 points). All of your responses should reflect the perspective of an economist and the course material.

Please be reminded: by enrolling in this course, you have assumed the responsibilities of an active participant in Saint Louis University’s scholarly community. In this community, academic work and behavior are held to the highest standards of honesty and integrity. Cheating, fabrication, plagiarism, and helping others to commit these acts are all forms of academic dishonesty and are not acceptable. Academic misconduct may result in disciplinary action, including but not limited to, suspension or dismissal.

Good luck!

Section I: Multiple Choice. Please circle the most appropriate answer.

  1. Economics is the study of a. how to avoid tradeoffs. b. how to help business maximize profits. c. how society manages its scarce resources. d. the government’s role in society.
  2. Last year Jeremy could grow 10 bushels of corn or 20 bushels of wheat on each acre of land that he farmed. Over the winter, he discovered a new hybrid wheat seed that will allow him to double the amount of wheat he can grow on each acre. How has Jeremy’s opportunity cost of growing corn in terms of wheat changed with this discovery? a. The opportunity cost of a bushel of corn has increased. b. The opportunity cost of a bushel of corn has decreased. c. The opportunity cost of a bushel of corn stays the same because the discovery will let Jeremy produce more of both goods. d. The opportunity cost of making corn has stayed the same because the discovery does not affect the amount of wheat that Jeremy can produce.
  3. For each good produced in a competitive market, demand and supply determine a. the price of the good, but not the quantity. b. the quantity of the good, but not the price. c. both price and quantity. d. neither price nor quantity is determined by demand and supply, because prices are ultimately set by producers.
  4. Other things equal, when the price of a good rises, the a. quantity demanded of the good increases. d. demand decreases. b. supply increases. c. quantity supplied of the good rises.
  5. Suppose that the market for ice cream is out of equilibrium, and that quantity demanded exceeds quantity supplied. There is a and according to the “law” of supply and demand, price will to clear the market. a. shortage; rise. b. shortage; fall. c. surplus; rise. d. surplus; fall.
  6. Long-run price elasticities of supply are generally larger than short-run price elasticities of supply. Therefore, long-run supply curves are generally steeper than short-run supply curves. a. True. b. False.
  7. If the income elasticity of demand of good X is 1.5, and if incomes increase by 5%, the demand for good X will increase by and good X is. a. 1.5 x 5% = 7.5%; normal. b. 1.5 x 5% = 7.5%; inferior. c. 5%/1.5 = 3.3%; normal. d. 5%/1.5 = 3.3%; inferior.
  1. On Tuesday, October 2, a fire in Yakima, Washington destroyed roughly 4% if America’s yield of hops. (Hops are used as flavoring in the brewing of beer and ale.) a. Suppose that 4% is a sufficiently large share of the hops market as to impact the market. Analyze graphically and indicate in words the impact of the fire on the market for hops. b. Given your answer in part (a), analyze graphically and indicate in words the impact of the fire on the market for beer. c. Analyze the impact of the fire on the revenue of beer producers. Include a graph in your response. d. Given your answer in part (b), analyze graphically and indicate in words the impact of the fire on the market for wine. Include reference to the size and sign of cross-price elasticity of demand between beer and wine.
  1. Hurricane Katrina pummeled the gulf coast in late August. The storm destroyed or disabled a number of oil refineries and oil pipelines. In response, prices in the market for gasoline rose dramatically. A number of people argued that gasoline prices were unfairly high, and called for the imposition of a price ceiling. If legislators had stepped in and imposed a binding price ceiling, how would the market for gasoline have been affected? Include a graph in your response. Do you think people would have been satisfied with the results of such a policy? Explain.
  2. Gary Becker has proposed that drugs be legalized and then taxed. Suppose that drugs are legal. Suppose further that a tax is imposed on drug dealers. a. What impact do you expect the tax to have on the consumption and sale of drugs? Include a graph in your response. b. Will the tax impose a burden on drug dealers? Explain and include a graph in your response.