VERSION 1 Name________________ ECON 2020 Exam #1 Directions: Read each question and EVERY possible answer VERY carefully.

Select the best answer from the alternatives. Good luck! 1. The condition whereby the resources we use to produce goods and services are limited relative to our wants for them is referred to by economists as A. a shortage B. opportunity cost C. unattainable D. inefficiency E. scarcity In a market where the demand is given by the equation Qd = 600 5P and supply is given by the equation Qs = 40 + 3P, find the equilibrium price and equilibrium quantity. A. $80; 200 units B. $80; 280 units C. $70; 250 units D. $280; 880 units E. Yeah, there were horses, and a man on fire, and I killed a guy with a trident. Use the following graph to answer question 3.
Ice cream

2.

80

30

P 30 3. One pair of slacks trades for A. 5 ice creams B. ice cream C. 2 ice creams D. 3 ice creams E. 1 ice cream 40

Slacks

VERSION 1 4. A fall in the price of a mystery good caused a change in the market for burritos that led to a fall in the price of burritos as well. Which of the following could possibly be the mystery good? A. spanish rice (a complement) B. Chinese food (a substitute) C. tortillas (an input) D. A and C only E. B and C only How would a decrease in the price of cat fashions affect the market for cat fashions? A. quantity supplied would decrease and quantity demanded would increase B. quantity supplied would increase and quantity demanded would decrease C. supply would increase and demand would decrease D. supply would decrease and demand would increase E. A and D only Use the following information to answer questions 6 8. Champ can cook 30 pancakes or 15 waffles in an hour. Brick can cook 24 pancakes or 6 waffles in an hour. 6. Bricks opportunity cost of a waffle is A. 24 pancakes B. 9 waffles C. 18 pancakes D. 0.25 pancakes E. 4 pancakes Which of the following statements is TRUE? A. Brick has a comparative advantage in producing pancakes. B. Brick has an absolute advantage in producing pancakes. C. Brick has an absolute advantage in producing waffles. D. Champ has a comparative advantage in producing pancakes. Assume that one waffle trades for 3 pancakes. If Champ and Brick completely specialize, and the waffle producer trades 4 units, which of the following quantities will be consumed? A. Brick will consume 8 pancakes and 3 waffles B. Champ will consume 12 pancakes and 11 waffles C. Brick will consume 12 pancakes and 10 waffles D. Champ will consume 18 pancakes and 4 waffles E. I miss being with you. I miss being near you. I miss your laugh. I miss your scent. I miss
your musk. When this all gets sorted out, I think you and me should get an apartment together.

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Which of the following statements is TRUE? A. Economists believe that price rationing is the least efficient rationing method. B. Price rationing is the allocation of goods among consumers using prices. C. Price rationing allows every consumer that would like the good to have it. D. all of the above E. B and C only According to the Circular Flow diagram, in resource markets ___ supply ___ to ___ in exchange for money. A. households, resources, firms B. households , goods and services, firms C. firms, resources, households D. firms, goods and services, households E. Milk was a bad choice. Use the following graph of the supply of coffee to answer questions 11 12.
Price

10.

S1 B A C

P2 P1

S2

Quantity

Qs1 11.

Qs2

Qs3

An increase in the price of beans (an input) would cause a movement from A. point A to point B B. point A to point C C. point B to point A D. point C to point A An increase in the price of coffee would cause a movement from A. point A to point B B. point A to point C C. point B to point A D. point C to point A

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VERSION 1 13. Gas fireplaces are substitutes for wood-burning fireplaces, and natural gas is a complement for gas fireplaces. If the price of natural gas rises, how does that affect the market for wood-burning fireplaces? A. demand increases, causing the price to rise B. demand decreases, causing the price to fall C. supply increases, causing the price to fall D. supply decreases, causing the price to rise E. I have many leather-bound books and my apartment smells of rich mahogany. Frank Vitchard and Wes Mantooth are getting ready for poker night at their apartment. They spent $70 on cigars, $20 on chips and pretzels, and $140 on drinks. If they werent having poker night, then they could have made $600 each working the late night news broadcasts. Which of the following statements about their costs (altogether) is FALSE? A. Their opportunity cost is $1200 B. Their economic costs are $1430 C. Their explicit costs are $230 D. Their implicit cost is $230 Use the following figure to answer questions 15 16. P 14 S

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11

5 D Q/T 40 50 62 Equilibrium occurs in this market at a price of ____ and quantity of _____ units. A. $11, 50 B. $14, 40 C. $5, 50 D. $5, 62 E. $14, 50 A price of $5 in this market would cause a ____ of ____ units. A. surplus, 22 B. surplus, 10 C. shortage, 22 D. shortage, 10

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VERSION 1 17. If consumer income falls, how does that affect the market for an inferior good? A. demand decreases B. initially there is a surplus at the old price C. equilibrium price eventually rises D. equilibrium quantity eventually falls E. LOUD NOISES! Ron Burgundy faces the following production possibilities: Scotch drinks: 100 90 70 40 0 Jazz flutes: 0 1 2 3 4 What is the opportunity cost of producing the 2nd jazz flute? A. 35 scotch drinks B. 20 scotch drinks C. 30 scotch drinks D. 1 scotch drink E. 18 scotch drinks 19. Which of the following statements about Rons economy above is TRUE? A. his opportunity cost of producing jazz flutes stays constant as he produces more flutes. B. his opportunity cost of producing jazz flutes increases as he produces more flutes. C. the PPF is a straight line D. A and C only E. B and C only How do expectations of higher future prices affect the market for Sex Panther cologne today? A. supply decreases and demand increases, causing a rise in equilibrium price and an indeterminate change in quantity B. supply increases and demand decreases, causing a fall in equilibrium price and an indeterminate change in quantity C. supply decreases and demand increases, causing a fall in equilibrium price and a rise in quantity D. supply and demand decrease, causing an indeterminate change in equilibrium price and a fall in quantity E. Sixty percent of the time, it works every time. The signal that tells producers what and how much to produce is called the A. price B. cost C. scarce goods D. I don't know how to put this, but I'm kind of a big deal. E. labor

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VERSION 1 Use the following diagram to answer questions 22 23.

Refrigerators

A B C

PPF1 22.

PPF2
Cheese Wheels

Assume the above economy is on PPF 1 . What would a movement from point C to point B represent? A. an increase in the unemployment rate B. a decrease in the unemployment rate C. a technological improvement D. an increase in the quantity of resources E. B, C, and D only Which of the following could cause a shift from PPF1 to PPF2? A. a technological improvement B. a change in regulation C. an increase in the quantity of resources D. trade with another economy E. all of the above Which of the following will NOT shift the demand curve? A. change in the price of a complement B. change in the price of a substitute C. change in the price of an input D. change in tastes and preferences E. changes in all of the above WILL shift demand Economics is the social science concerned with A. Im Ron Burgundy? B. political agendas C. coconuts and fish D. profit E. how individuals, institutions, and society make optimal choices under conditions of scarcity

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