Econ 1 UCLA

Professor Lee Ohanian

Winter 2025

Practice Midterm

1. The overriding reason why households and societies face many decisions is that

(a) resources are scarce.

(b) goods and services are not scarce.
(c) incomes fluctuate with business cycles.
(d) people, by nature, tend to disagree.

2. The property of society getting the most it can from its scarce resources is called

(a) efficiency.
(b) equality.
(c) externality.
(d) productivity.

3. The two basic reasons why economists often appear to give conflicting advice to poli-
cymakers are differences in

(a) opinions and education.

(b) opinions and values.
(c) scientific judgments and education.
(d) scientific judgments and values.

4. Production possibilities frontiers are usually bowed outward. This is because

(a) the more resources a society uses to produce one good, the fewer resources it has
available to produce another good.
(b) the opportunity cost of producing a good decreases as more and more of that good
is produced.
(c) of the effects of technological change.

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 (d) resources are specialized; that is, some are better at producing particular goods
rather than other goods.

5. Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves
and baseball bats, but Tom is better at producing both goods. In this case, trade could

(a) benefit both Steve and Tom.

(b) benefit Steve, but not Tom.
(c) benefit Tom, but not Steve.
(d) benefit neither Steve nor Tom.

6. When describing the opportunity cost of two producers, economists use the term

(a) natural advantage.

(b) trading advantage.
(c) comparative advantage.
(d) absolute advantage.

7. Alexis is a lawyer. She bills her clients $100 an hour for her services. She can also mow
her lawn in 30 minutes. She can hire someone to mow her lawn who takes an hour. Of
the following prices, which is the highest Alexis would pay someone to mow her lawn?

(a) $99
(b) $49
(c) $29
(d) Alexis would always mow her own lawn because she can do it faster.

8. Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of
fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units
of fish per year. There are 10 workers in each country. Political pressure from the fish
lobby in Farmland and from the wheat lobby in Boatland has prevented trade between
the two countries on the grounds that cheap imports would kill the fish industry in
Farmland and the wheat industry in Boatland. As a result, Boatland produces and
consumes 25 units of wheat and 125 units of fish per year while Farmland produces
and consumes 125 units of wheat and 25 units of fish per year. If the political pressure
were overcome and trade were to occur, each country would completely specialize in the
product in which it has a comparative advantage. If trade were to occur, the combined
output of the two countries would increase by

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 (a) 25 units of wheat and 25 units of fish.
(b) 50 units of wheat and 50 units of fish.
(c) 75 units of wheat and 75 units of fish.
(d) 100 units of wheat and 100 units of fish.

9. Suppose John and Wayne are the only two demanders of cowboy movies. Each month,
John buys six cowboy movies when the price is $10 each, and he buys four cowboy
movies when the price is $15 each. Each month, Wayne buys four cowboy movies when
the price is $10 each, and he buys two cowboy movies when the price is $15 each.
Which of the following points is on the market demand curve?

(a) quantity demanded = 2; price = $15

(b) quantity demanded = 4; price = $25
(c) quantity demanded = 10; price = $10
(d) quantity demanded = 16; price = $25

10. In markets, prices move toward equilibrium because of

(a) the actions of buyers and sellers.

(b) government regulations placed on market participants.
(c) increased competition among sellers.
(d) buyers’ ability to affect market outcomes.

11. Which of the following events must cause equilibrium quantity to rise?

(a) demand increases and supply decreases

(b) demand and supply both decrease
(c) demand decreases and supply increases
(d) demand and supply both increase

12. Equilibrium quantity must increase when demand

(a) increases and supply does not change, when demand does not change and supply
increases, and when both demand and supply increase.
(b) increases and supply does not change, when demand does not change and supply
increases, and when both demand and supply decrease.

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 (c) decreases and supply does not change, when demand does not change and supply
decreases, and when both demand and supply increase.
(d) decreases and supply does not change, when demand does not change and supply
decreases, and when both demand and supply decrease.

13. The price elasticity of demand measures how much

(a) quantity demanded responds to a change in price.

(b) quantity demanded responds to a change in income.
(c) price responds to a change in demand.
(d) demand responds to a change in supply.

14. Demand is said to be inelastic if the

(a) quantity demanded changes proportionately more than price.

(b) price changes proportionately more than income.
(c) quantity demanded changes proportionately less than price.
(d) quantity demanded changes proportionately the same as price.

15. Which of the following statements about the consumers’ responses to rising gasoline
prices is correct?

(a) Because gasoline is a necessity, consumers do not decrease their quantity demanded
in either the short run or the long run.
(b) Consumers react to a 10% increase in price with about a 10% decrease in quantity
demanded in both the short run and long run.
(c) Consumers decrease their quantity demanded more in the short run than in the
long run.
(d) Consumers decrease their quantity demanded more in the long run than in the
short run.

16. A decrease in supply will cause the largest increase in price when

(a) both supply and demand are inelastic.

(b) both supply and demand are elastic.
(c) demand is elastic and supply is inelastic.
(d) demand is inelastic and supply is elastic.

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17. Which of the following is not an example of a public policy?

(a) rent-control laws

(b) minimum-wage laws
(c) taxes
(d) equilibrium laws

18. A binding price ceiling

(a) causes a surplus.

(b) causes a shortage.
(c) is set at a price above the equilibrium price.
(d) is set at a price below the equilibrium price.

19. If the government removes a tax on a good, then the quantity of the good sold will

(a) increase.
(b) decrease.
(c) not change.
(d) All of the above are possible.

20. Suppose the government has imposed a price floor on the market for soybeans. Which
of the following events could transform the price floor from one that is not binding into
one that is binding?

(a) Farmers use improved, draught-resistant seeds, which lowers the cost of growing
soybeans.
(b) The number of farmers selling soybeans decreases.
(c) Consumers’ income increases, and soybeans are a normal good.
(d) The number of consumers buying soybeans increases.