The Principles of Economics

The Principles of Economics

The Principles of Economics

Mid-Term Examination, 10:00 - 10:50 A.M., April 19, 2004 (Monday).

Student Number Name (in Korean)

3 points each (1~10).

1. Both households and societies face many decisions because resources are ______.

2. What you give up to obtain an item is called your ______.

3. The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary’s statement is a ______economic statement, and the labor head’s statement is a ______economic statement.

4. According to the graph, Cliff has a______advantage in wheat and Paul has a ______advantage in corn.

5. Trade is based on ______advantage.

6. You lose your job and as a result you buy fewer mystery books. This shows that you consider mystery books to be a/an ______good.

7. If a decrease in income increases the demand for a good, then the good is a/an ______good.

  1. A perfectly ______demand curve is horizontal.
  2. Economists make ______to make the world easier to understand
  3. ______means that society is getting the most it can from its scarce resources

3 points each with the penalty of 1 point for a wrong answer (11~15).

  1. Which of the following concepts is NOT illustrated by the production possibilities frontier?

a.efficiency b. opportunity cost c. equity d. tradeoffs

12. On the production possibilities frontier shown, which point represents the maximum possible production of tubas?

a.A b. B c. D d. E

13. This diagram shows the market for in-line roller skates. Which of the following would cause a move from point A to point B? increase in the price of bicycles

b.a decrease in the price of bicycles

c.a decrease in consumer incomes

d.a popular new movie that convinces teens that skateboards are really cool

14. Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 chair for

a.Mike is 1/5 table and 1/3 table for Sandy. b. Mike is 5 tables and 3 tables for Sandy.

c.Mike is 1/3 table and 1/5 table for Sandy. d. Mike is 3 tables and 5 tables for Sandy.

15. Which of the following would result in an increase in equilibrium price and an ambiguous change in equilibrium quantity? increase in supply and demand b. an increase in supply and a decrease in demand

c.a decrease in supply and an increase in demand d. a decrease in supply and demand

True /False Questions: 3 points each with the penalty of 3 points for a wrong answer (16~20).

16. Suppose that the demand for apples increased more than the supply of apples increased. The net effect of these two changes would be an increase in the equilibrium price and a decrease in the equilibrium quantity.

17. Suppose that the elasticity of supply of lawn mowers is 1.5. If the price of lawn mowers rises 5 percent, the quantity supplied of lawn mowers would rise 7.5 percent.

18. Cross-price elasticity is used to determine whether goods are inferior or normal goods.

19. If a price ceiling of $2 per gallon is imposed on gasoline, but the market equilibrium price is $1.50, the price ceiling is a binding constraint on the market.

20. A binding minimum wage in a competitive labor market creates unemployment.

Suppose that university agronomists discover a new rice hybrid that is more productive than exsiting varieties. Try to give your answer to the following questions: (40 points)

21. Explain briefly the meaning of 'market' in economics. (5)
22. Try to explain the characteristics of demand curve of agricultural product such as rice using graph and considering the price elasticity of demand. (5)
23. What will happen to the rice 'market'? Explain this using an appropriate graph. (10)
24. Can good news for farming be bad news for famers? Why? (20)