ECONOMICS 201(06) FALL 2017 ASSIGNMENT 1

DUE DATE AND TIME: 18:30 OCTOBER 17 IN LECTURE

LATE ASSIGNMENTS WILL NOT BE ACCEPTED UNDER ANY CIRCUMSTANCES

ASSIGNMENTS SENT ELECTRONICALLY WILL NOT BE ACCEPTED UNDER ANY

CIRCUMSTANCES

ONLY ASSIGNMENTS HANDED IN AT THE BEGINNING OF YOUR LECTURE ON OCTOBER 17

WILL BE ACCEPTED

Students can collect an IBM bubble sheet in the lecture starting October 3 from the instructor or in a
tutorial.

Please ensure that you fill in the bubbles for your UCID# and your name. If an assignment does not have
both a UCID# and name filled in the bubble sheets, the score on that assignment will be zero.

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

Figure 2-6

1. Refer to Figure 2-6. What is the opportunity cost to society of the movement from point A to point C?
a. 50 baseballs
b. 100 baseballs
c. 100 bananas
d. 300 bananas
 Table 3-3
Labor Hours Needed to Make
One Unit of: Amount Produced in 24 Hours:
Baskets Birdhouses Baskets Birdhouses
Montana 6 2 4 12
Missouri 3 4 8 6

2. Refer to Table 3-3. The opportunity cost of 1 basket for Montana is

a. 1/3 birdhouse.
b. 1 birdhouse.
c. 3 birdhouses.
d. 4 birdhouses.

3. Refer to Table 3-3. Montana has an absolute advantage in

a. birdhouses and Missouri has an absolute advantage in baskets.
b. baskets and Missouri has an absolute advantage in birdhouses.
c. neither good and Missouri has an absolute advantage in both goods.
d. both goods and Missouri has an absolute advantage in neither good.

4. Refer to Table 3-3. Montana has a comparative advantage in

a. baskets and Missouri has a comparative advantage in birdhouses.
b. birdhouses and Missouri has a comparative advantage in baskets.
c. neither good and Missouri has a comparative advantage in both goods.
d. both goods and Missouri has a comparative advantage in neither good.

5. If the price of a substitute to good X increases, then the

a. demand for good X will decrease.
b. market price of good X will decrease.
c. demand for good X will increase.
d. quantity demanded for good X will increase.

6. Wheat is the main input in the production of flour. If the price of wheat increases, all else equal, we would
expect the
a. supply of flour to be unaffected.
b. supply of flour to decrease.
c. supply of flour to increase.
d. demand for flour to decrease.
 7. An increase in the price of oranges would lead to
a. an increased supply of oranges.
b. a reduction in the prices of inputs used in orange production.
c. an increased demand for oranges.
d. a movement up the supply curve for oranges.

8. What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell
and the price of tea fell?
a. Price will fall and the effect on quantity is ambiguous.
b. Price will rise and the effect on quantity is ambiguous.
c. Quantity will fall and the effect on price is ambiguous.
d. Quantity will rise and the effect on price is ambiguous.

9. In the case of perfectly inelastic demand,

a. quantity demanded stays the same regardless of price changes.
b. huge changes in quantity demanded result from very small changes in the price.
c. the change in quantity demanded exactly equals the change in price.
d. the change in quantity demanded will be twice the change in price.

10. If the demand for donuts is elastic, a decrease in the price of donuts will
a. increase total revenue of donut sellers.
b. decrease total revenue of donut sellers.
c. not change total revenue of donut sellers.
d. There is not enough information to answer this question.

11. If a 6 percent increase in income results in a 10 percent increase in the quantity demanded of pizza, then the
income elasticity of demand for pizza is
a. negative and therefore pizza is an normal good.
b. negative and therefore pizza is a inferior good.
c. positive and therefore pizza is an inferior good.
d. positive and therefore pizza is a normal good.

12. If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of
supply is
a. 1/2 and supply is elastic.
b. 1/2 and supply is inelastic.
c. 2 and supply is inelastic.
d. 2 and supply is elastic.
13. A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the
bakery would be willing to supply 1100. Using the midpoint method, the elasticity of supply for bagels
would be
a. 0.61.
b. 0.77.
c. 1.24.
d. 1.63.

14. A price ceiling will only be binding if it is set

a. equal to equilibrium price.
b. above equilibrium price.
c. below equilibrium price.
d. A price ceiling is never binding in a free market system.

15. A binding price ceiling is imposed on the market for peaches. At the ceiling price, the quantity demanded of
peaches will be
a. greater than the quantity supplied.
b. equal to the quantity supplied.
c. smaller than the quantity supplied.
d. artificially restricted by the price ceiling.

16. Which of the following is NOT a result of government imposed rent controls?
a. fewer new apartments offered for rent
b. less maintenance provided by landlords
c. bribery
d. higher quality housing

17. A tax on the sellers of jewelry will cause the price the buyers pay
a. and the effective price the sellers receive to rise.
b. and the effective price the sellers receive to fall.
c. to rise, and the effective price the sellers receive to fall.
d. to fall, and the price the sellers receive to rise.
 Figure 8-5

18. Refer to Figure 8-5. If a tax is imposed in this market, the price sellers would receive for their product would
be
a. $2.
b. $6.
c. $10.
d. $16.

19. Refer to Figure 8-5. If a tax is imposed in this market, producer surplus would be
a. $600.
b. $900.
c. $1500.
d. $3000.

20. Refer to Figure 8-5. The deadweight loss in this market as a result of a tax would be
a. $600.
b. $900.
c. $1500.
d. $1800.