ECON 101 Midterm Exam Week 4 Midterm Part 1 of 1 – 100.0 Points Question 1 of 19 5.0 Points Economics is the study of: Answer Key: C Question 2 of 19 5.0 Points Which of the following is not a central focus of the “economic perspective”? Answer Key: B Question 3 of 19 5.0 Points The satisfaction or pleasure one gets from consuming a good or service is: Answer Key: B Question 4 of 19 5.0 Points The private ownership of property resources and use of prices to direct and coordinate economic activity is characteristic of: Answer Key: B Question 5 of 19 5.0 Points Which statement best describes a capitalist economy? Answer Key: C Question 6 of 19 5.0 Points Capitalism is an economic system that: Answer Key: D Question 7 of 19 5.0 Points In a market system, well-defined property rights are important because they: Answer Key: D Question 8 of 19 5.0 Points If two goods are complements: Answer Key: C Question 9 of 19 5.0 Points When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. In this range of prices, demand for this product is: Answer Key: A Question 10 of 19 5.0 Points Demand can be said to be inelastic when: Answer Key: C Question 11 of 19 5.0 Points Economic growth is shown by a shift of the production possibilities curve outward and to the right. Answer Key: True Question 12 of 19 5.0 Points The four factors of production are land, labor, capital, and government services. Answer Key: False Question 13 of 19 5.0 Points If demand increases and supply simultaneously decreases, equilibrium price will rise. Answer Key: True Question 14 of 19 5.0 Points Property rights have a positive effect in a market economy because they encourage owners to maintain their property. Answer Key: True Question 15 of 19 5.0 Points In the price range where demand is inelastic, a decrease in price will result in a decrease in total revenue. Answer Key: True Question 16 of 19 5.0 Points Price elasticity of supply decreases the longer the time period. Answer Key: False Question 17 of 19 5.0 Points Toothpaste and toothbrushes are substitute goods. Answer Key: False Question 18 of 19 5.0 Points A government-set price ceiling will lower equilibrium price and quantity in a market. Question 19 of 19 10.0 Points Under what elasticity conditions would the following be true: “Increasing the minimum wage will result in a decrease in employment for workers who now earn less than the new minimum wage”? ANSWER: This statement is an example of “Elasticity of Labor Demand”. Companies gain profit by paying more workers less than minimum wage. If the minimum wage increases, it now becomes too expensive to keep additional hands on the payroll, therefore resulting in a loss of employment. On the other hand, if there is only a slight increase in the rise of minimum wage (3% – 5%), the loss of employment rate should be much less (1% – 2%) making the labor demand inelastic. I think it all depends on the total amount of revenue the company is taking in.
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