ECON 102 Midterm Exam Part 1 Answers (Penn State University)

ECON 102 Midterm Exam Part 1 Answers (Penn State University) Question 1 When an economist talks about scarcity, he or she is referring to Question 2 Which of the following is a positive statement? Question 3 A statement of economic theory that abstracts from the nuances of reality is Question 4 You can either go to a movie, go to a concert, or go out to eat tonight. You decide that your first choice is going to a concert, second choice is going out to eat, and third choice is going to a movie. So, you go to a concert. The opportunity cost of this decision is Question 5 Your opportunity cost of cutting hair at your barbershop is $20 per hour. Electricity costs $6 per hour, and your weekly rent is $250. You normally stay open nine hours per day. What is the marginal cost of staying open for one more hour? Question 6 Consider the following table which shows the yield per acre of cotton and wheat in two countries, USA and Mexico: In Mexico, the opportunity cost of producing 24 units of wheat is Question 7 Mark can produce 50 baseballs in a month and Katie can produce 60 baseballs in a month. Also, Mark can produce 40 bats in a month and Katie can produce 30 bats in a month. ______________has the absolute advantage in the production of bats, and _____________ has the comparative advantage in the production of bats. Question 8 The law of increasing opportunity costs arises because Question 9 Assume Oklahoma and South Dakota each have 100 acres of farmland. The following table gives hypothetical figures for yield per acre in the two states: Suppose the two states decide that they want to produce 600 total units of wheat. What is the maximum amount of corn that they could produce? Question 10 Assume Oklahoma and South Dakota each have 100 acres of farmland. The following table gives hypothetical figures for yield per acre in the two states: What is the marginal rate of transformation between wheat and corn in South Dakota? Question 11 The price of a cookie at bakeries increases from $1.30 to $1.50. The law of supply predicts that Question 12 In the above figure, a technological development would be represented by Question 13 In the above figure, a shortage will occur in the market at a price of Question 14 Which of the following will tend to increase the equilibrium price of a good and increase the equilibrium quantity of a good? Question 15 What happens to the equilibrium price and quantity of deli ham when the price of deli turkey decreases? (Assume that deli ham and deli turkey are consumed in place of each other). Question 16 If a demand curve is vertical, the slope is ______ and the price elasticity is______. Question 17 When the price of a slice of pizza rises by 22%, the quantity demanded for pizza slices declines by 32%. The demand for pizza can be described as Question 18 The cross price elasticity of demand measures Question 19 You own a business that creates handmade rocking chairs and you believe that the demand for your rocking chairs is inelastic. If you would like to raise your business’s total revenue, you should Question 20 Suppose Demand is given by Q = 64 -8P. What is the price elasticity of demand when P = 1?