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EC101_quiz1_exam_Print (3)

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arnavdurgam5
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© © All Rights Reserved
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Indian Institute of Technology Bombay


Department of Humanities and Social Sciences
EC 101: Economics
Academic Year: 2023-24 [Autumn Semester] Date: 6/9/2023
Max. Marks: 15 Quiz 1 Duration: 8.30-9.10 Hrs
Name:__________________________________________

Roll No. ________________________________________

CHOOSE THE BEST RESPONSE (MARK ONLY ONE RESPONSE)


1. Which of the following demonstrates the law of demand?
A. Relative to last month, Karan buys more chocolates at Rs.15 per chocolate since he got a raise at work
this month.
B. Karishma buys fewer brownies at Rs. 70 per brownie than at Rs. 80 per brownie, other things equal.
C. Dave buys more donuts at Rs. 25 per donut than at Rs. 50 per donut, other things equal.
D. Alice buys fewer Five-stars at Rs. 6 per Five-star since the price of Dairy Milk fell to Rs. 5 per Dairy
Milk.

2. The short-run tradeoff between inflation and unemployment implies that, in the short run,
A. a decrease in the growth rate of the quantity of money will be accompanied by an increase in the
unemployment rate.
B. an increase in the growth rate of the quantity of money will be accompanied by an increase in the
unemployment rate.
C. policymakers are able to reduce the inflation rate and, at the same time, reduce the unemployment rate.
D. policymakers can influence the inflation rate, but not the unemployment rate.

Table 1 (for Questions 3 and 4)


Labor Hours needed to make one
Bedsheet Dress
Helen 50 10
Carolyn 90 45
3. Refer to Table 1. For Helen, the opportunity cost of 1 bedsheet is
A. 0.2 dresses. C. 3.5 dresses.
B. 2 dresses. D. 5 dresses.
4. Refer to Table 1. Helen has a comparative advantage in
A. quilts and Carolyn has an absolute advantage in neither good.
B. dresses and Carolyn has an absolute advantage in bedsheets.
C. quilts and Carolyn has an absolute advantage in dresses.
D. dresses and Carolyn has an absolute advantage in neither good.
5. Benefits from trade would include
(i) the ability of people and nations to specialize.
(ii) lower prices
(iii) a greater variety of goods and services becoming available.

A. (i) and (ii) C. (i), (ii) and (iii)


B. (i) and (iii) D. (ii) and (iii)
6. Suppose the number of buyers in a market increases and a technological advancement occurs also.

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What would we expect to happen in the market?


A. The equilibrium price would increase, but the impact on the amount sold in the market would be
ambiguous.
B. The equilibrium price would decrease, but the impact on the amount sold in the market would be
ambiguous.
C. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
D. Both equilibrium price and equilibrium quantity would increase.

7. Suppose the price of good x falls. As a result, the quantity demanded for good x increases for a
particular consumer. For this consumer, the substitution effect induced the consumer to purchase more
x while the income effect induced the consumer to purchase less x. We can infer that
A. x is a normal good. C. x is a Giffen good.
B. x is an inferior good. D. x is a luxury good.

8. With respect to the variables price and quantity demanded,


A. price and quantity demanded are independent of each other.
B. price is the dependent variable and quantity demanded is the independent variable.
C. price is the independent variable and quantity demanded is the dependent variable.
D. price and quantity demanded are both dependent variables, since both depend on the actions of buyers
and sellers.

9. Any point on a country's production possibilities frontier represents a combination of two goods that
an economy
A. will never be able to produce.
B. can produce using some portion, but not all, of its resources and technology.
C. may be able to produce in the future with more resources and/or superior technology.
D. can produce using all available resources and technology.

10. Rajeev spends an hour studying instead of playing tennis. The opportunity cost to him of studying is
A. the improvement in his grades from studying for the hour.
B. the improvement in his grades from studying minus the enjoyment of playing tennis.
C. the enjoyment and exercise he would have received had he played tennis.
D. zero. Since Rajeev chose to study rather than to play tennis, the value of studying must have been
greater than the value of playing tennis.

11. The price of good A increases from Rs. 4.50 to Rs. 5.50. This causes the quantity demanded of good
B to decrease from 1100 to 900 units per month. Find the cross price elasticity of demand using the
mid-point method.
A. -1.0 C. +1.0
B. +2.0 D. -2.0

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Figure 1 (for Q.12-13): On the graph below, the shift of the


supply curve from S1 to S2 represents the imposition of a tax on a
good. On the axes, Q represents the quantity of the good and P
represents the price.

12. Consider Figure 1. Which of these statements about the effects


of the tax is correct?
A. The tax is paid by sellers; sellers bear one-half of the burden of
the tax; government collects Rs.24 from the tax.
B. The tax is paid by sellers; sellers bear one-third of the burden
of the tax; government collects Rs.24 from the tax.
C. The tax is paid by sellers; sellers bear two-thirds of the burden
of the tax; government collects Rs.30 from the tax.
D. The tax is paid by buyers; buyers bear two-thirds of the burden
of the tax; government collects Rs.16 from the tax.

13. Consider Figure 1. Suppose the demand curve is not the one drawn on the graph; instead, the demand
curve is a vertical line passing through the point (Q = 10, P = 5). Using the two supply curves that are
drawn, which of the following statements would describe the effects of the tax correctly?
A. The price paid by buyers would be Rs.9.
B. The price received by sellers (after paying the tax) would be Rs.6.50.
C. The government would collect Rs.27 from the tax.
D. Buyers of the good would bear 100 percent of the burden of the tax.

14. What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras
become more expensive, digital cameras become cheaper, the cost of the resources needed to
manufacture traditional film falls and more firms decide to manufacture traditional film?
A. Price will fall and the effect on quantity is ambiguous.
B. Price will rise and the effect on quantity is ambiguous.
C. Quantity will fall and the effect on price is ambiguous.
D. The effect on both price and quantity is ambiguous.

15. Suppose the government has imposed a price ceiling on televisions. Which of the following events
could transform the price ceiling from one that is not binding into one that is binding?
A. Firms take advantage of an advance in technology that reduces the amount of labor necessary to
produce televisions.
B. The number of firms selling televisions decreases.
C. Consumers' income decreases, and televisions are a normal good.
D. All of the above are correct.

End of Paper

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Rough Work

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EC 101: Economics
Quiz 1
Date: 6th Sept 2023 Time: 8.30 – 9.10 Hrs.
Name:___________________________________________
Roll No.:_________________________________________
Answers
Q. No Answer Q. No Answer

1. 9

2. 10

3. 11

4. 12

5. 13

6. 14

7. 15

8.

Total Marks:______________________

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