Eco 101 : Mid

NAME: Student ID

Total points: 31

IMPORTANT: Write your response in your notebook. Take pictures of your response and merge the
pictures into “1” single file. Name your file “Your Name.” Make sure your response is in sequential
order.

1) That which we forgo, or give up, when we make a choice or a decision is known as
A) equity. B) causation.
C) correlation. D) opportunity cost.

2) Which of the following is a question answered with positive economic analysis?

A) Should the college offers free parking for students?
B) Should the college provide more financial aid assistance?
C) If the college increased tuition, will class size decline?
D) Should the college cut tuition to stimulate enrollment?

3) If an economy is fully utilizing its resources, it can produce more of one product only if it
A) doubles manufacturing of the product.
B) produces less of another product.
C) adds more people to the labor force.
D) reduces the price of the most expensive products.

4) During an economic upturn when consumer income rises, the demand for caviar increases and
the demand for hummus decreases. This implies that caviar
A) and hummus are complements.
B) is a normal good and hummus is an inferior good.
C) is an inferior good and hummus is a normal good.
D) is an economic bad and hummus is an economic good.

5) When there is an excess demand of a product in an unregulated market, the tendency is for
A) price to rise. B) price to decrease.
C) quantity supplied to decrease. D) quantity demanded to increase.

6) When the price of fresh fish increases 10%, quantity demanded is unchanged. The price
elasticity of demand for fresh fish is
A) perfectly inelastic. B) elastic.
C) inelastic. D) unitary elastic.

7) Total revenue increases if price ________ and demand is ________.

A) falls; inelastic B) falls; elastic
C) rises; elastic D) rises; unit elastic
8. Assume there are only two countries (England and Ireland) and two goods (fish and chips).
Below is the ppf for each country:

Fish
Fish England Ireland
60 80

Chips Chips
20 20

Which country has a comparative advantage in what good? Please explain why. (5 points)

9. Consider the following event: farmers use a new fertilizer that makes orange trees produce more oranges.
How will this development affect the equilibrium price and quantity of oranges? Illustrate with a supply
and demand diagram. (5 points)

10. When the price of a subway trip is $2, the quantity demanded is 180 units per month; when the price is $4,
the quantity demanded is 100 units per month. (5 points)
a. Using the midpoint formula, calculate the price elasticity of demand.
b. Given your answer in part a, what will be the effect of a price decrease on total revenue? Will total
revenue increase or decrease or remain the same?

11. Why might the production possibility frontier be bow shaped? (3 points)

12. Suppose that the equilibrium wage in the labor market is $6. (6 points)
a. Use a labor demand and supply diagram, illustrate the labor market equilibrium. Label
everything clearly.
b. Suppose that the government sets a minimum wage at $5. What will this do to the labor
market outcome?
c. Suppose that the government sets a minimum wage at $8. What will this do to the labor
market outcome?