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Test Mid Term Micro 23e3e4

The document outlines a mid-term test for a Microeconomics course, consisting of multiple-choice questions and short answer sections. Topics covered include the law of demand, determinants of demand, price elasticity, equilibrium price and quantity, and comparative advantage. It also includes calculations for demand and supply curves, surplus and shortage analysis, and opportunity costs for different producers.

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hoaiphi112
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10 views4 pages

Test Mid Term Micro 23e3e4

The document outlines a mid-term test for a Microeconomics course, consisting of multiple-choice questions and short answer sections. Topics covered include the law of demand, determinants of demand, price elasticity, equilibrium price and quantity, and comparative advantage. It also includes calculations for demand and supply curves, surplus and shortage analysis, and opportunity costs for different producers.

Uploaded by

hoaiphi112
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Microeconomics – ULIS

Mid-term test
Time: 60 minutes
I. Mutiple choice (2 points)
1. The negative relationship between price and quantity demanded
a. applies to most goods in the economy.
b. is represented by a downward-sloping demand curve.
c. is referred to as the law of demand.
d. All of the above are correct.
2. Which of the following would not be a determinant of the demand for a
particular good?
a. prices of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good
3. An increase in the price of apple will lead to

a. A decrease in the price of pear


b. A decrease in the quantity demanded for pear
c. A shift to the left of the demand curve for apple
d. An increase in the quantity demanded for pear.
4. Suppose you calculate the price elasticity of demand for a certain good and
you report that the elasticity is 0.8. The fact that the elasticity is a positive
number means that
a. when the price of the good increases, the quantity demanded increases in
response.
b. demand for the good is elastic.
c. you have dropped the minus sign and reported the absolute value of the
elasticity.
d. the good has close substitutes and/or the good is a luxury

II. Short answer


1. Which of the following statements are positive, and which are normative?
( 1point)
a. The minimum wage creates unemployment among young and unskilled
workers. P
b. The minimum wage ought to be abolished. N
c. If the price of a product in a market decreases, other things
equal, quantity demanded will increase. P
d. A little bit of inflation is worse for society than a little bit of unemployment. N

2. Given the table of price, supply and demand for the good X as follows
Price (USD) 110 120 130 140
QD (products/week) 64 60 56 52
QS (products/week) 40 48 56 64

Find the equation for the demand and supply curves. Determine the equilibrium price
and quantity of good X. Draw a graph to illustrate. ( 1point)
To find equilibrium, we need to find the price where quantity demanded (Qd)
equals quantity supplied (Qs). At $130, Qd = 56 and Qs = 56, so:
Equilibrium Price: $130
Equilibrium Quantity: 56 products/week
Compute the price elasticity of demand at the equilibrium price. ( 1point)
 QD=a−bP
b=P2−P1/QD2−QD1=140−110/52−64=30−12=−0.4 => a=108
demand equation is:
QD=108−0.4P
 QS=c+dP
d=P2−P1/QS2−QS1
=140−110/64−40
=3024=0.8 => c=−48
supply equation is:
QS=−48+0.8P
 QD=QS
108+48=0.8P+0.4P
156=1.2P
P=130
 QD=108−0.4×130=108−52=56
the equilibrium quantity is Q=56 products per week.
Calculate the surplus or shortage and compute the price elast
icity of demand at prices P = 120 USD/unit; P = 140USD/unit. ( 1point)
 At $120, Qd = 60 and Qs = 48, so there is excess demand (a shortage) of 12
units.
 At $140, Qd = 52 and Qs = 64, so there is excess supply (a surplus) of 12
units.
3. Using the midpoint method, compute the elasticity of demand between
points A and B. Is demand along this portion of the curve elastic or
inelastic? Interpret your answer with regard to price and quantity
demanded. Now compute the elasticity of demand between points B and
C. Is demand along this portion of the curve elastic or inelastic? ( 2
point)

 A vs B

B vs C
KL :

4.

Labor Hours Needed to


Make 1 Pound of: Pounds produced in 40 hours:
Meat Potatoes Meat Potatoes
Farmer 8 2 5 20
Rancher 4 5 10 8

a. Who has an absolute advantage in producing meat? Who has an absolute advantage in
producing potatos? (1point)
Absolute Advantage:
 Meat: Rancher (10 pounds vs. Farmer's 5 pounds in 40 hours).
 Potatoes: Farmer (20 pounds vs. Rancher's 8 pounds in 40 hours).

b. Who has an comparative advantage in producing meat? Who has an comparative


advantage in producing potatos? (1point)
Comparative Advantage:
 To find comparative advantage, calculate opportunity cost:
o Meat: Rancher's opportunity cost for meat is lower.
o Potatoes: Farmer’s opportunity cost for potatoes is lower.

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