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Hi there!Attached is the completed midterm with all answers, complete solutions, calculations, and justifications provided :)Please take a look over it and let me know if you have any questions.Thanks again,Selenica
ECON 201 – Spring 2017
Midterm Exam – chapters 1, 2, 3, 4, 5, 7, 13
The exam is primarily short answer questions - please briefly explain your answers where relevant. You
may use your textbook and refer to the Powerpoints and videos on the course Moodle page. Return
completed exam no later than 11 pm Saturday April 29th via email
Scenario 1
You have the afternoon free. You have a choice between going to the movies with a friend or studying
economics for three hours. If you go to the movies, you will spend $8.00 on a ticket and $4.50 on popcorn.
If you choose to study economics for three hours, you will raise your exam grade by 10 points.
1. Refer to Scenario 1. What is your opportunity cost of going to the movies?
If you go to the movies, the opportunity cost is the $12.5 you spend ($8 + $4.5) and 10 points on
your exam.
2. Refer to Scenario 1. What is your opportunity cost of studying economics?
The utility derived from going to the movies with your friend.
3. Consider a small family wheat farm. List some examples of explicit costs of farming and implicit costs of
farming.
Explicit costs: All costs that have a direct financial cost, or things you have to pay for: Inventory, taxes,
land, supplies.
Implicit costs: All of the costs that do not incur a direct financial payment. This includes the opportunity
cost of doing something else with the land (building an apartment building, growing another type of
crop), and the time spent working on the farm that could be spent doing something else.
4. Fill in the blank: In the short run, as compared to the long run, both the price elasticity of demand and the
price elasticity of supply tend to be more inelastic .
Figure 1
5. Refer to Figure 1. In this market for iPhones, the technology improves while all other factors remain
constant. Which curve(s) shift(s) and in which direction?
The supply curve shifts to the right.
6. Refer to Figure 1. In this market for tablet computers, more suppliers enter the market and the price of
laptops, a substitute good, increases, while all other factors remain constant. Explain the change(s) in the
equilibrium price and quantity.
Both demand and supply curves shift to the right. As laptops increase in price, consumers substitute
tablets for laptops; demand increases, supply increases to match demand, and the market equilibrium
shifts right.
7. Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result...