Econ 100 Section 02 Quiz 01

Econ 100 Principles of Economics

Quiz 01 Section 02
Roll Number:
Total Time: 50 mins

Total Marks: 50

1. Which of the following statements is normative and which is positive?

a. The minimum wage creates unemployment among young and unskilled
workers. (1)

b. The minimum wage ought to be abolished. (1)

c. A little bit of inflation is worse for society than a little bit of unemployment. (1)

2. Draw a ranchers production possibilities frontier showing increasing opportunity cost of

cattle production in terms of prairie dog production. Prairie dogs are on the horizontal
axis and cattle production is on the vertical axis. (3)

Econ 100 Section 02 Quiz 01

Using a separate graph for each situation, show what would happen to the initial
production possibilities frontier in each of the following situations:
a. The outcome is efficient, with ranchers choosing to produce equal numbers of
cattle and prairie dogs. (2)

b. The price of prairie dogs increases to $200 each, so ranchers decide to allot
additional land for prairie dogs. (2)

c. A drought destroys most of the available grass for grazing of cattle, but not for
prairie dogs since they also eat plant roots. (2)

Econ 100 Section 02 Quiz 01

3. Suppose we are analyzing the market for hot chocolate. Graphically illustrate the impact
each of the following would have on demand or supply. Also show how equilibrium
price and equilibrium quantity would change.

Econ 100 Section 02 Quiz 01

a. Winter starts, and the weather turns sharply colder. (2)

b. The price of tea, a substitute for hot chocolate, falls. (2)

c. The price of cocoa beans decreases (cocoa beans are used to make chocolate).
(2)

Econ 100 Section 02 Quiz 01

4. Fill in the table below, showing whether equilibrium price and equilibrium quantity go
up, go down, stay the same, or change ambiguously. Also show it graphically below the
table. (2 + 2 + 2)

An Increase in Supply
No Change in Demand
An Increase in Demand
A Decrease in Demand

Econ 100 Section 02 Quiz 01

5. For each of the following changes, determine whether there will be a change in quantity
demanded or a change in demand. (2 + 2 + 2)

a) a change in the price of a related good

b) a change in price

c) a change in income

6. Explain the difference between absolute advantage and comparative advantage. Which is
more important in determining trade patterns, absolute advantage or comparative
advantage? Why? (4)

7. a) Given the table below, graph the demand and supply curves for flashlights. Make
certain to label the equilibrium price and equilibrium quantity. (2)
Price
5

Quantity demanded
6000

Quantity Supplied
10000
6

Econ 100 Section 02 Quiz 01

4
3
2
1

8000
10000
12000
14000

8000
6000
4000
2000

b. What is the equilibrium price and the equilibrium quantity? (1)

c. Suppose the price is currently $5. What problem would exist in the market? What
would you expect to happen to price? Show this on your graph. Which government
policy will lead to this problem? (3)

d. Suppose the price is currently $2. What problem would exist in the market? What
would you expect to happen to price? Show this on your graph. Which government
policy will lead to this problem? (3)

Econ 100 Section 02 Quiz 01

8. Identify each of the following topics as being part of microeconomics or

macroeconomics:
a. the effect of a change in the price of Coke on the purchase of Pepsi (1)

b. the impact of tax policy on national saving (1)

c. the effect of a balanced-budget amendment on economic stability (1)

9. When the price of apples increases from 10 to 20, the demand for oranges increases from
50 to 75. What is the relation between apples and oranges (i.e.substitutes/complements).
Why? (2)

Econ 100 Section 02 Quiz 01

10. When the income of Saadia goes up from $100 to $150, her demand for pulses goes
down from 10 units to 6 units. What type of good is pulse for Saadia? Why. (2)