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1. Which of the following answers most accurately reflect the role played by households in the circular flow model?
A) Households buy the factors of production and sell goods and services. B) Households own the factors of production and buy goods and services. C) Households buy the factors of production and buy goods and services. D) Households own the factors of production and sell goods and services. E) Households own both the factors of production and goods and services.
2. The farmer’s market offers 1 kg of apple for 3 TL or two kg for 5 TL. What’s the marginal cost of the second kg?
A) 2 TL B) 3 TL C) 5 TL D) 6 TL E) 8 TL
3. Suppose the relationship between your study time and your grade on the Introduction to Economics 1 midterm is given by the following table:
The hours you study Your Grade 4 72 5 80 6 90 7 96
What is the marginal grade improvement of the 7th hour of studying?
A) 6 B)18 C) 24 D) 90 E) 96
Answer questions 4 and 5 using the following graph
4. Above is a production possibility frontier for California. The following production point(s) is (are) associated with an inefficient use of resources:
A) a, b, c, d B) a C) e, c D) a, b ,d E) e
5. The opportunity cost of going from 90 to 120 hundreds of gallons of milk is _____.
A) 10 hundreds of lbs of almonds B) 20 hundreds of lbs of almonds C) 40 hundreds of lbs of almonds D) 90 hundreds of lbs of almonds E) 160 hundreds of lbs of almonds
9. Suppose coke and ice tea are substitutes in consumption. If the price of ice tea decreases, what happens to the demand for coke?
A) The demand for coke will increase and the demand curve for coke will shift leftward. B) The demand for coke will not change so there will be no shift. Thus, we move up along the demand curve. C) The demand for coke will decrease and the demand curve for coke will shift rightward. D) The demand for coke will increase and the demand curve for coke will shift rightward. E) The demand for coke will decrease and the demand curve for coke will shift leftward.
10. Substitutes in production are goods for which producing more of one requires pro- ducing less of the other. Consider good A and good B.The good B is A’s substitute in production. If the price of good B rises,
A) the supply for good A decreases. B) the demand for good A increases. C) the supply for good A increases. D) the demand for good A decreases. E) the quantity supplied for good A decreases.
11. When the price is above the equilibrium price,
A) there is shortage in the market. B) there is surplus in the market. C) quantity demanded is greater than quantity supplied. D) price tends to increase in the market. E) surplus is maximized.
Answer questions 12-13 using the following information Information: Suppose demand curve for tea is Q = 10 − 2 P , for P ≤ 5. Suppose that the supply curve for tea is for 3 P − 5 , for P ≥ 1_._ 67
12. What is the equilibrium quantity ( Q ∗) and price ( P ∗). A)( Q ∗ , P ∗)=(3, 4) B)( Q ∗ , P ∗)=(0, 5) C)( Q ∗ , P ∗)=(4, 3) D)( Q ∗ , P ∗)=(5, 1.67) E)( Q ∗ , P ∗)=(1.67, 0) 13. If the price of tea is 4 TL instead of the equilibrium price you found in Question 12, the
A) quantity demanded of tea is higher than the quantity supplied and a surplus exists. B) quantity supplied of tea is lower than the quantity demanded and a surplus exists C) quantity demanded of tea is higher the quantity supplied and a shortage exists D) quantity supplied of tea is higher the quantity demanded and a shortage exists E) quantity demanded of tea is lower than the quantity supplied and surplus exists
14. A negative supply shock is a shock that decreases supply. Which of the following would NOT considered as a negative supply shock?
A) The impact of Ukraine’s invasion on crude oil market B) The impact of COVID19 pandemic on automotive industry C) The impact of the Green Revolution in India (adopting new technologies in agriculture) on agriculture industry D) The impact of the Hurricane Katrina that struck southeastern United States in 2005 E) The impact of embargo against Cuba that prevents trade
18. If the markets are efficient,
A) Consumer surplus is maximized B) Consumer surplus is greater than producer surplus C) Deadweight loss is greater than zero D) Consume surplus is eqaul to producer surplus E) Total surplus is maximized
Answer questions 19-20 using the following graph
19. What is the total surplus in cell phone market at the equilibrium?
A) 625 B) 750 C) 1375 D) 1500 E) 2250
20. What is the deadweight loss when the price is 45 dollars per cell phone?
A) 625 B) 750 C) 1375 D) 1500 E) 2250 BONUS question (10 points) : Queues in barber shops are longer in poor areas than in rich areas. Why? (explain using one or two sentences).
