Principles of Microeconomics (Econ 002) Signature:
Drake University, Spring 2004
William M. Boal Printed name:
MIDTERM EXAMINATION #1 VERSION A
“Competitive Supply and Demand”
February 11, 2004
INSTRUCTIONS: This exam is closed-book, closed-notes. Simple calculators are permitted, but graphing calculators or
calculators with alphabetical keyboards are NOT permitted. Numerical answers, if rounded, must be correct to at least 3
significant digits. Point values for each question are noted in brackets. Maximum total points are 100.
I. Multiple choice: Circle the one best answer to each question. [2 pts each: 20 pts total]
(1) The fundamental assumption that distinguishes
economics from other social sciences is that
a. people care only about themselves.
b. only the fittest survive.
c. people do the best they can with what they have.
d. all important social interactions involve money.
(2) Rational behavior implies doing something up to the
point where the opportunity cost of the last unit done
a. is much less than its benefit.
b. is much more than its benefit.
c. begins to fall below its benefit.
d. begins to exceed its benefit.
(3) Factory A can produce 20 cars per day or 60 trucks
per day. Factory B can produce 50 cars per day or 100
trucks per day. Which factory has a comparative
advantage in producing trucks?
a. Factory A.
b. Factory B.
c. Both factories.
d. Neither factory.
(4) Barter is less common than monetary exchange
because it
a. is less advantageous for tax purposes.
b. violates the principle of comparative advantage.
c. violates the law of one price.
d. requires a double coincidence of wants.
(5) In an efficient well-functioning market,
a. every potential seller will sell something.
b. total gains from trade (or earnings) for buyers will
equal total gains from trade for sellers.
c. every trade will take place at a price halfway
between the buyer's value and the seller's cost.
d. all trades take place at roughly the same price.
(6) Consider the market for HDTV sets, a normal good.
If consumers’ income increases as the economy
improves,
a. the demand curve will shift left.
b. the demand curve will shift right.
c. the supply curve will shift left.
d. the supply curve will shift right.
(7) If at a given price, the quantity demanded is less
than the quantity supplied,
a. the price will fall.
b. the price will rise.
c. the price will remain constant.
d. cannot be determined from information given.
(8) In spring, the price of bathing suits rises and the
quantity purchased also rises. This could be caused by a
a. a rightward shift in the supply curve.
b. a leftward shift in the supply curve.
c. a rightward shift in the demand curve.
d. a leftward shift in the demand curve.
(9) Which good is likely to have the most elastic
demand (that is, the highest price elasticity in absolute
value)?
a. A particular brand of sweater.
b. All sweaters.
c. All clothing.
d. cannot be determined from information given.
(10) The demand curve in the graph below is
a. perfectly elastic
b. perfectly inelastic.
c. unitary-elastic.
d. cannot be determined from information given.
Demand
Q
P
