Study Guide
MIDTERM EXAM
Fall 2023
ECON 101
MIDTERM EXAM
• November 18 SATURDAY at 16.00
• Classrooms (in C Block) will be anounced on Blackboard course site
before the exam
• The duration of the exam is 75 minutes
• There are 12 MC questions (24 points) and 4 Essay questions (76
points)
• You can bring a calculator. You are allowed to use only your own
calculator.
• Only students with an official excuse or a formal health report may
attend the make-up exams for Econ 101 midterm.
What is included
• This study guide is only to help you get ready for the exam. You are
responsible for the following units:
• UNIT 1 The capitalist revolution
• UNIT 2 Technology, population, and growth
• UNIT 3 Scarcity, work, and choice
• UNIT 4 Social interactions
• Textbook Link
• [Link]
• Core Econ The economy 1.0
UNIT 1
• Key concepts such as economics, GDP, GDP per capita, Industrial
revolution, technology, changes in gdp per capita over time (hockey
stick), Growth rate of GDP and GDP per capita, environmental
consequences, capitalism as an economic system (main institutions of
capitalism), economic success, varieties of capitalism, inequality
• You should also check the main figures in the textbook
UNIT 2
• Key Concepts
• Equilibrium, Ceteris paribus, Relative prices, Incentives, Diminishing
average product of labor, Reservation option, Economic rent, Isocost
line, Malthus and his model, production function
• How to choose technology C and D are inferior. Why?
E is the most labor intensive technology. Why?
How to choose among A, B and E?
UNIT 2
• Key Concepts
• Equilibrium, Ceteris paribus, Relative prices, Incentives, Diminishing
average product of labor, Reservation option, Economic rent, Isocost
line, Malthus and his model, production function
• How to choose technology C and D are inferior. Why?
At C 3 workers and 7 tonnes of coal are used. It is still
possible to produce the same amount of textile by
using 1 worker and 6 tonnes of coal (technology A).
Therefore C is inferior to A (and D is inferior to B)
E is the most labor intensive technology. Why?
Worker/coal ratio is at the highest level at E
How to choose among A, B and E?
We need to know input prices
UNIT 2
• True or False?
• According to the above table technology A is the cheapest one
• The slope of the Isocost line that goes through A is greater than the
slope of Isocost line that goes through B
UNIT 2
• True or False?
• According to the above table technology A is the cheapest one
• FALSE total cost at B => (4*4) + (2*6) =28 is lower than A=>
(1*4)+(6*6)= 40 and E => (10*4) +(1*6) =46
• The slope of the Isocost line that goes through A is greater than the
slope of Isocost line that goes through B
• FALSE The slope is given by wage/coal price ratio and its is the same
at each point
Malthus’ model: The effect of an improvement in technology
Population Less land per farmer
rises
Farmers’ incomes rise Average output per
farmer falls
Improvement in Farmers’ incomes fall
technology
Equilibrium Equilibrium
Subsistence incomes Subsistence incomes prevail
prevail Population constant at higher
Population constant level
UNIT 3
• Key Concepts: Constrained choice problem, Scarcity, Opportunity cost
economic cost, Marginal product, Indifference curve, Marginal rate of
substitution (MRS), Marginal rate of transformation (MRT) , Feasible
set , technological progress, Income effect, Substitution effect
• Question:
• Suppose that Mehmet studies for 10 hours a day and achieves a final
mark of 88. Suppose that working one more hour increases his grade
to 89.
• What is the average product at 10 hours of study per day?
• What is the marginal product of an additional hour at 10 hours of study per
day?
UNIT 3
• Key Concepts: Constrained choice problem, Scarcity, Opportunity cost
economic cost, Marginal product, Indifference curve, Marginal rate of
substitution (MRS), Marginal rate of transformation (MRT) , Feasible
set , technological progress, Income effect, Substitution effect
• Question:
• Suppose that Mehmet studies for 10 hours a day and achieves a final
mark of 88. Suppose that working two more hour increases his grade
to .
• What is the average product at 10 hours of study per day?
• 88/10 = 8.8
• What is the marginal product of an additional hour at 10 hours of study per
day?
• (89-88)/(11-10) = 1
1) The graph depicts the feasibility set and a set of indifference curves for a student who
would like to decide upon the combination of free time and final grade that would
yield him the maximum utility
Which of the following is NOT TRUE according to the above figure
a. E is the best choice because MRS= MRT
b. MRS is the slope of the indifference curve and MRT is the slope of the feasible
frontier
c. At point D, MRS is greater than MRT
d. At point D, MRS is less than MRT
1) The graph depicts the feasibility set and a set of indifference curves for a student who
would like to decide upon the combination of free time and final grade that would
yield him the maximum utility
Correct answer is D
At point D the slope of the
indifference curve (MRS) is higher
than the slope of the feasible
frontier (MRT)
We are ready to give up more
grade for another hour of free
time in our mind (MRS) than what
we actually lose (MRT)
Which of the following is NOT TRUE according to the above figure
Let’s enjoy our extra free time
a. E is the best choice because MRS= MRT and move towards E
b. MRS is the slope of the indifference curve and MRT is the slope of the feasible
frontier
c. At point D, MRS is greater than MRT
d. At point D, MRS is less than MRT
UNIT 4
• Key Concepts
• Game, Social Interaction, Strategy, Best response, Dominant strategy,
dominant strategy equilibrium, Social dilemma, Altruism, Reciprocity,
Inequality aversion, Public good, Prisoners’ dilemma, Repeated Game,
Social preferences
Consider a simultaneous one-shot prisoners' dilemma game with completely self-interested players. There are two
prisoners, Bora and Demet, whose strategies are either to Accuse (implicate) the other in a crime that the prisoners may
have committed together, or Deny that the other prisoner was involved. The payoffs in the matrix below are the years of
jail sentence the prisoners will get. Less time in jail is a better outcome. Assume that the game is a simultaneous one-shot
game.
Indicate whether the following statements are true or false. You will not be given any credit unless you
present an explanation for the false statement
To accuse is the dominant strategy for Demet. True or False
Consider a simultaneous one-shot prisoners' dilemma game with completely self-interested players. There are two
prisoners, Bora and Demet, whose strategies are either to Accuse (implicate) the other in a crime that the prisoners may
have committed together, or Deny that the other prisoner was involved. The payoffs in the matrix below are the years of
jail sentence the prisoners will get. Less time in jail is a better outcome. Assume that the game is a simultaneous one-shot
game.
Indicate whether the following statements are true or false. You will not be given any credit unless you
present an explanation for the false statement
To accuse is the dominant strategy for Demet. True or False
TRUE Demet will accuse if Bora chooses to deny (O is less than 1 year jail) . Demet will again accuse
if Bora chooses to accuse (7 years of jail is less than 15 years of jail))
She will accuse independently of Bora’s decision