ECON 1010 Mid Term 1 Exam A Spring 2026

1. Suppose wood becomes more expensive. How would this affect the housing market?

B. Wood prices increase → Supply of homes fall → Housing shortages develop → Home prices rise → Quantity of homes demanded falls

2. Suppose fountain drinks are inferior goods. Which of the following correctly represents what happens in the market for fountain drinks following a decrease in average income?

A. Income falls → Demand rises → Shortage → Price rises → Quantity supplied rises

3. Which of the following is/are true in a market setting? i. A shortage puts upward pressure on price. ii. A shortage occurs when the quantity demanded is greater than the quantity supplied. iii. A surplus puts downward pressure on prices.

C. i, ii and iii

4. Ceteris paribus, which of the following would cause the equilibrium price of pumpkins to increase? i. A drought reduces pumpkin yields. ii. Scientists, in partnership with farmers, create a new pumpkin variety that grows faster than previous varieties. iii. A viral TikTok video of a special type of pumpkin pie has everyone trying to make it.

E. i and iii only

5. Which of the following is/are true at a price of $2? i. The quantity demanded is 240 ii. The quantity supplied is 360 iii. The quantity demanded is 360 iv. The quantity supplied is 220

D. iii and iv only

6. Which of the following is/are true at a price of $3? i. The quantity demanded is 240 ii. The quantity supplied is 360 iii. The quantity demanded is 360 iv. The quantity supplied is 240

A. i and iv only

7. If the current price of t-shirts is $9, all else equal, the price is likely to _____ in the near future.

A. Rise by $1

8. At which price(s) would a surplus occur?

A. $11 and $12

9. If the t-shirt market is in equilibrium, the price per t-shirt is ____ and ____ t-shirts are produced and sold.

C. $10, 200

10. If the t-shirt market is initially in equilibrium, which of the following would cause the price of t-shirts to rise?

B. An increase in the number of people who want to buy t-shirts

11. Which good has elastic demand at a price of $10.50?

A. Goods X and Y only

12. Which good has inelastic demand at a price of $10.50?

C. Good Z only

13. If the cross elasticity of demand between good A and good B is 2.02, then good A and good B are…

C. substitutes.

14. Which of the following is/are true? i. If a good has elastic demand, the seller experiences a fall in revenue when the price rises. ii. If a good has inelastic demand, the seller experiences a rise in revenue when the price rises. iii. If a good has unit elastic demand, the seller experiences no change in revenue when the price rises.

C. i, ii and iii

15. If the income elasticity of demand for a good is -2, then when income rises 10 percent, the quantity demanded…

D. decreases 20 percent.

16. Which of the following is/are true of the income elasticity of demand? i. It is always negative. ii. It is only negative for normal goods. iii. It is only negative for inferior goods. iv. It is only positive for substitute goods.

D. iii only

17. Which of the following is not true of the price elasticity of demand?

B. It has the same value at every point on a linear demand function.

18. Which of the following is/are true of the absolute value of the price elasticity of demand? i. It is equal at points A, B, C, D and E ii. It is larger at point D than at point E iii. It reflects inelastic demand at point A

B. ii only

19. How would the price elasticity of demand at point C be calculated?

E. {[(100-220)/((100+220)/2)] × 100} ÷ {[(10-5)/((10+5)/2)] × 100}

20. Which of the following explains why supply is more elastic as more time passes?

D. It is difficult or impossible to increase the quantity produced in a short period of time.

21. In which scenario can a consumer only increase his utility by consuming more of good A and less of good B? i. He uses a quarter of his budget to consume some quantity of good B but none of good

C. ii only

22. A consumer has a budget of M which she uses to purchase king cakes and/or beignets. Suppose the price per king cake is $25 and the price per beignet is $5. Which is the consumer’s budget constraint if Qₖ꜀ and Qᵦ represent the quantities of king cakes and beignets respectively?

A. 25Qₖ꜀ + 5Qᵦ = M

23. Katie has $15. She likes M&M candies and Hershey's white chocolate bars. M&M candies are $1.50 a pack and (the large) Hershey bars are $3.00 each. Katie can choose to buy…

D. Both answer A and answer B are correct.

24. As Buffy uses more stakes, the marginal utility of a stake ________ and as she uses more cloves of garlic, the marginal utility of a clove of garlic ________.

D. decreases, decreases

25. The marginal utility of which clove of garlic is the largest?

A. The first clove

26. If Buffy increases her consumption of wooden stakes from 3 to 4 stakes, her marginal utility from the 4th stake is…

A. 8

27. If Buffy had an unlimited budget and the unit price of a wooden stake was $10, how many stakes would she buy?

C. 3

28. Suppose Buffy had a budget of $7 to spend on wooden stakes and cloves of garlic. Which combination maximizes her utility if the prices of wooden stakes and cloves of garlic were $1 per stake and $1 per clove?

A. 4 wooden stakes and 3 cloves of garlic

29. Suppose Buffy had a budget of $5 to spend on wooden stakes and cloves of garlic. Which combination maximizes her utility if the prices of wooden stakes and cloves of garlic were $1 per stake and $1 per clove?

B. 3 wooden stakes and 2 cloves of garlic

30. What optimization problem does the typical consumer solve?

B. Maximize utility subject to the budget constraint

31. The utility-maximizing rule says that consumers must…

C. allocate the entire available budget and make the marginal utility per dollar the same for all goods.

32. When labor usage is at 12 units, output is 36. From this we can infer that…

C. the average product of labor is 3.

33. Which of the following is correct about marginal and average products?

D & C (this question was an error. Option C should read “When the marginal product is increasing, the average product must be constant” and therefore the correct answer would be D)

34. At the Punjab Bakery, two workers can decorate 8 cakes in an hour and three workers can decorate 15 cakes in an hour. The marginal product of the third worker is…

A. 7 cakes and the average product for three workers is 5 cakes.

35. In production theory the short run is…

D. a time period in which at least one input is fixed.

36. Ceteris paribus when graphing a relationship refers to..

A. holding constant all but two variables.

37. Whenever one variable increases, another variable decreases. The two variables are…

A. negatively related.

38. If there is no scarcity,

E. an action would have zero opportunity cost.

39. Amy can study for an hour or spend that hour sleeping or going out for dinner. If she decides to study for the hour, the opportunity cost of the hour spent studying is…

B. sleeping or going out for dinner, whichever she would have preferred the most.

40. In the circular flow model, rent, wages, interest, and profit paid flow from ________ through ________ to ________.

B. firms; factor markets; households