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ECON 201 Midterm Exam

Midterm Exam for Macroeconomics (75 Points)

1.    Define the term resources, and list the four categories of resources. What characteristic of resources results in

the need to make choices? Provide an example of a resource from each of the four categories of resources.

2.    Refer to the graph below. Assume that the county is producing at point C.

a.    Does this country’s production possibilities curve exhibit increasing opportunity costs? Explain.

b.    If this country were to go to war, the most likely move would be from point C to which point? Explain.

c.    If the economy entered into a recession, the country would move from point C to which point? Explain.

5.    Tesla Motors makes sports cars powered by lithium batteries.

a.    Draw a correctly labeled graph showing a hypothetical supply curve for Tesla sports cars.

b.    On the same graph, show the effect of a major new discovery of lithium that lowers the price o lithium.

c.    Suppose Tesla Motors expects to be able to sell its cars for a higher price next month. Explain the effect that will have on the supply of Tesla cars this month.