Question

1000 Econ 2200 Midterm Exam - Page 2 of 12 Multiple Choice Questions 1. Scarcity is a situation in which: (a) most people can get only bare necessities. (b) some people can get all they want and some cannot (c) people can satisfy all their wants. (d) people cannot satisfy all their wants. Refer to the information provided below to answer questions 2 and 3. In an hour, Sue can produce 80 caps or 4 jackets and Tessa can produce 40 caps or 4 jackets inckets). 2. Sue's opportunity cost of producing a car is (a) 10 (b) 20 (e) 0.1 (d) 0.05 jacket(s). 3. Tessa's opportunity cost of producing a cap is (a) 10 (b) 20 (c) 0.1 (d) 0.05 4. A surplus will occur if and (a) od > Q": market price the equilibrium price (b) Q' <Q' market price the equilibrium price (c) Q4 > Q': market price< the equilibrium price (d) Q' <Q : market price< the equilibrium price 5. In the Circular-Flow Diagram, firms are on the side of input (factors of produc- tion) markets and on the side of output (goods & services) markets. (a) supply: demand (b) demand; supply (c) demand: demand

Answer 1

1. Scarcity is a situation in which

d. People cannot satisfy all their wants.

2. Sue can produce, 80 caps or, 4 Jackets

1 cap = 0.05 jackets

3 Tessa opportunity cost

40 caps = 4 jackets

1 cap = 0.1 jacket

4. Surplus is that scenario when the Quantity supplied is greater than the quantity demanded. The equilibrium price is less than the market price.

Option B.

5. Firms are on the demand side of the input and supply side of the output.

8. Slope of the two points are

$\large m = \frac{3 - 2}{-2 - 3} = \frac{1}{-5}$

The equation of the line is

$\large y = mx &plus; b$

$\large y = \frac{-1}{5}x &plus; b$

One of the points is (3,2)

$\large 2 = \frac{-1}{5}\times 3 &plus; b$

$\large b =2&plus; \frac{3}{5} = \frac{13}{5}$

Thus the equation is

$\large y = -\frac{1}{5}x &plus; \frac{13}{5}$

Option C is correct.

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