Midterm Practice Exam (ungraded) · Weeks 1–7 (Objectives 1–4)

Course: Principles of Microeconomics (ECON 1) · Silver Oak University (fictional sample) · Prof. Kessler
What this is: a low-stakes rehearsal for the cumulative midterm. It mirrors the real exam's blueprint — same coverage, item-type mix, length, and scenario-based difficulty — but is built from fresh item-bank variants and shares none of the live midterm's questions.
Settings: ungraded (0 points) · unlimited attempts · feedback shown after submission · opens before the exam window so you can prepare.

This is the human-readable practice exam with its vetted answer key and feedback (released after submission). The import-ready Classic QTI 1.2 is in O-practice-exam-week-08-qti.xml (generated by a validated Python script — parses with 20 items).

Integrity note. Every item here is a fresh variant — a new scenario and wording — with a pre-vetted answer. None of these are the live midterm questions. The paired live exam is L-midterm-week-08.md.

Blueprint (mirrors the midterm)

Coverage proportional to teaching time: Obj 1 ≈ 3 · Obj 2 ≈ 3 · Obj 3 ≈ 6 · Obj 4 ≈ 8.

Objective totals: Obj 1 = 3 · Obj 2 = 3 · Obj 3 = 6 · Obj 4 = 8 → 20 items (ungraded; mirrors the 100-point midterm's emphasis).

Questions, Key, and Feedback (feedback releases after submission)

Objective 1 — Scarcity, Opportunity Cost & the PPF

Q1 (MC). A production point located INSIDE a country's PPF (below the frontier) indicates that —
- A. the combination is unattainable with current resources
- B. some resources are idle or used inefficiently — the economy is not at full capacity ✅
- C. the country is producing efficiently on the frontier
- D. technology has recently improved, shifting the frontier outward
Feedback: A point inside the PPF is attainable but inefficient — some resources are sitting idle. Outside the PPF = unattainable. On the PPF = efficient (all resources fully and productively employed). (A is the classic mix-up — inside and outside get reversed.)

Q2 (MC). A country's PPF bows outward (is concave to the origin) rather than being a straight line. This shape reflects —
- A. constant opportunity costs as resources are reallocated
- B. decreasing opportunity costs — each extra unit of a good costs less
- C. increasing opportunity costs because resources are not equally suited to all uses ✅
- D. a technological improvement that allows more of both goods
Feedback: A bowed-out PPF reflects increasing opportunity cost: as a country shifts more and more resources into one good, it must drag over resources that are progressively less suited to it, so each additional unit costs more of the other good. (A describes a straight-line PPF; B is the opposite of what happens; D shifts the whole frontier outward.)

Q3 (MC). Which of the following is a NORMATIVE economic statement?
- A. A binding minimum wage above the equilibrium wage creates a surplus of labor in the basic supply-and-demand model
- B. Raising the minimum wage to $20 per hour would reduce teenage employment
- C. The government should raise the minimum wage to ensure every worker earns a living wage ✅
- D. Studies find that employment effects of modest minimum-wage increases are often small
Feedback: A normative statement expresses a value judgment about what OUGHT to happen — "should" and "ought" are the giveaway words. Options A, B, and D are positive statements — they make testable predictions about what happens under a policy (even if contested empirically). (C is explicitly a "should" — no dataset settles it.)

Objective 2 — Comparative Advantage & Gains from Trade

Q4 (MC). Nation A: 1 worker-day → 16 corn OR 4 soybeans. Nation B: 1 worker-day → 9 corn OR 3 soybeans. Which nation has the comparative advantage in soybeans, and why?
- A. Nation A, because it produces more corn (absolute advantage transfers to soybeans)
- B. Nation A, because 4 soybeans > 3 soybeans
- C. Nation B, because its opportunity cost of 1 soybean (3 corn) is lower than A's (4 corn) ✅
- D. Nation A, because it is absolutely more productive at both goods
Feedback: Comparative advantage belongs to the producer with the lower opportunity cost. A's OC of 1 soybean = 16 ÷ 4 = 4 corn. B's OC = 9 ÷ 3 = 3 corn. B's soybeans are cheaper in terms of corn foregone → B has CA in soybeans. (Pre-verified. A and D invoke absolute advantage — that tells you who produces more, not who has CA.)

Q5 (MC). For nation A (OC of soybeans = 4 corn) and nation B (OC of soybeans = 3 corn), the terms of trade that make BOTH nations better off must be —
- A. less than 3 corn per soybean — below both OCs
- B. exactly 4 corn per soybean — at A's OC
- C. between 3 and 4 corn per soybean — strictly between the two OCs ✅
- D. more than 4 corn per soybean — above both OCs
Feedback: Both nations gain only when the ToT lies strictly between their two opportunity costs: between 3 corn/soybean (B's OC — below this, B gains nothing) and 4 corn/soybean (A's OC — above this, A gains nothing). (B at exactly 4 leaves A indifferent; D above 4 makes A worse off.)

Objective 3 — Demand, Supply & Market Equilibrium

Q6 (MC). Consumer incomes rise and the good in question is an inferior good. What happens to the market demand curve?
- A. It shifts rightward — higher income always raises demand
- B. It shifts leftward — demand decreases because consumers switch to normal goods as income rises ✅
- C. It remains unchanged — income is not a demand determinant
- D. It shifts rightward — inferior goods become cheaper as income rises
Feedback: An inferior good is one for which demand falls when income rises (negative YED). Higher income pushes consumers toward normal goods and away from inferior ones → demand shifts left → P and Q both fall. (A applies to normal goods; C is wrong — income IS a demand determinant.)

Q7 (MC). In a market with Qd = 100 − 2P and Qs = −20 + 4P, what is the equilibrium price?
- A. $10
- B. $15
- C. $20 ✅
- D. $25
Feedback: Set Qd = Qs: 100 − 2P = −20 + 4P → 120 = 6P → P* = 20. Q = 100 − 40 = 60. Check: Qs = −20 + 80 = 60 ✓. (Pre-verified. This is the W4 verified market — a different equation from the midterm's Qd=80−2P market.)*

Q8 (MC). Consumer tastes shift strongly toward a good (e.g., a new study links it to health benefits). Holding supply constant, what happens in this market?
- A. Supply shifts rightward — more is offered at every price
- B. Demand shifts rightward — equilibrium price and quantity both rise ✅
- C. Demand shifts leftward — equilibrium price and quantity both fall
- D. There is a movement up along the existing demand curve
Feedback: Tastes are a demand determinant — improved tastes shift demand rightward, raising quantity demanded at every price. With supply fixed, both equilibrium P and Q rise. (A wrongly shifts supply. D is wrong: a taste change shifts the curve; a movement along only happens when the own price changes.)

Q17 (Multiple answer — select all that apply). Which of the following events will shift the supply curve for automobiles to the LEFT (decrease supply)? Select all that apply.
- A. A fall in the price of steel (a key input)
- B. A new government regulation that raises production compliance costs ✅
- C. A rise in the price of automobiles in the market
- D. An increase in the cost of labor for autoworkers ✅
- E. A technological improvement in the assembly-line process
Feedback: B (higher compliance costs raise production costs → supply shifts left). D (higher labor costs raise input costs → supply shifts left). A is wrong — cheaper steel lowers costs → supply shifts RIGHT. C is wrong — a rise in the automobile's own price is a movement along the supply curve, not a shift. E is wrong — technology improvement shifts supply RIGHT.*

Objective 4 — Elasticity, Surplus & Government Intervention

Q9 (MC). A price increase from $4 to $6 causes quantity demanded to fall from 80 to 60. Using the midpoint formula, which of the following correctly classifies demand?
- A. |PED| ≈ 1.75 — elastic
- B. |PED| ≈ 0.71 — inelastic ✅
- C. |PED| ≈ 1.00 — unit elastic
- D. |PED| ≈ 0.50 — inelastic
Feedback: %ΔQd = (60−80)/70 = −0.2857. %ΔP = (6−4)/5 = 0.40. PED = −0.2857/0.40 = −0.714. |PED| ≈ 0.71 → inelastic. (Pre-verified. TR check: 4×80=$320 → 6×60=$360; TR rose with P → confirms inelastic ✓. A (1.75) uses wrong arithmetic. C (1.00) would mean unit elastic — not the case here.)

Q10 (MC). Which of the following goods would you expect to have the MOST elastic demand?
- A. insulin for a diabetic who has no medically approved alternatives
- B. table salt, which takes up a tiny share of most households' budgets
- C. a specific brand of luxury sneakers with many close substitute brands ✅
- D. gasoline in the short run, when drivers cannot easily change their commuting habits
Feedback: Demand is more elastic when there are many close substitutes, the good is a luxury, the time horizon is longer, and the good takes up a large share of the budget. Luxury sneakers with many substitute brands check the first two boxes most strongly. (A has no substitutes — very inelastic. B is cheap (small budget share) — inelastic. D is short-run with few substitutes — inelastic.)

Q11 (Matching). Match each surplus concept to its correct description.
| Surplus concept | Correct description |
|---|---|
| Consumer surplus | The area below the demand curve and above the market price — net benefit to buyers |
| Producer surplus | The area above the supply curve and below the market price — net benefit to sellers |
| Deadweight loss | The value of mutually beneficial trades lost because of a distortion (tax, price control) |
| Total surplus at competitive equilibrium | Maximized — allocative efficiency is achieved |
Feedback: CS is under demand, above price. PS is above supply, below price. DWL is the triangle of surplus that disappears with a tax or price control. At the competitive equilibrium, the sum CS + PS is maximized — no policy can raise total surplus by forcing the price away from equilibrium. (The distractor "dollar revenue collected by the government" describes tax revenue, not DWL.)

Q12 (MC). In a market with demand P = 24 − Q and supply P = 4 + Q, equilibrium is Q = 10, P = 14. Producer surplus equals —
- A. $30
- B. $40
- C. $50 ✅
- D. $100
Feedback: PS = ½ × Q × (P − supply intercept) = ½ × 10 × (14 − 4) = ½ × 10 × 10 = $50. (Pre-verified. D ($100) is total surplus. The midterm's Q12 asks for CS on this same market ($50) — this question asks for PS on the same market ($50 as well — symmetric because the slopes are equal).)

Q13 (MC). The equilibrium wage in the market for entry-level workers is $12/hour. The government sets a minimum wage of $16/hour. In the simple supply-and-demand model, the direct result is —
- A. a shortage of workers — more jobs available than workers seeking them
- B. a surplus of workers — more workers want to supply labor than employers demand at $16 ✅
- C. no effect — the minimum wage is non-binding at $16
- D. the demand curve shifts rightward as firms see labor as more productive
Feedback: The minimum wage ($16) is above the equilibrium wage ($12) → binding price floor. At $16, the quantity of labor supplied exceeds the quantity demanded → surplus of workers (unemployment in this model). (A reverses the surplus/shortage logic for a floor. C has the binding logic backwards — a floor is binding when ABOVE equilibrium. D incorrectly shifts demand.)

Q14 (MC). If demand for a good is highly elastic and supply is highly inelastic, and the government imposes a per-unit tax on sellers, the tax burden will fall mainly on —
- A. buyers, because sellers can easily pass the tax along
- B. sellers, because the more inelastic side bears more of the burden ✅
- C. the government, because it collects the tax revenue
- D. buyers and sellers equally, regardless of elasticity
Feedback: Economic incidence falls on the more inelastic side — sellers here have very inelastic supply (few options to adjust output or exit), so they absorb most of the tax as a reduction in their net price. (A has it backwards: with elastic demand, buyers can easily substitute away, so sellers cannot pass the tax to them. D ignores elasticity entirely.)

Q15 (True / False). A steeper demand curve always indicates more elastic demand.
- True
- False ✅
Feedback: False. Elasticity is a unit-free percentage ratio (midpoint formula: %ΔQ / %ΔP), while slope measures raw-unit changes. The same demand curve can be elastic over some price ranges and inelastic over others, regardless of steepness. A steep curve in one set of units can become flat with rescaled axes — but elasticity does not change. "Steeper = more inelastic" is a persistent myth.*

Q16 (True / False). A binding price ceiling set below the equilibrium price creates deadweight loss because some mutually beneficial trades no longer take place.
- True ✅
- False
Feedback: True. A binding ceiling sets price below equilibrium. Quantity supplied falls short of quantity demanded — the transactions that would have taken place between the reduced Qs and the original Q are prevented. Those lost trades represent surplus that goes to neither buyers nor sellers → deadweight loss. (In addition to the shortage, there is a redistribution of surplus and an efficiency loss.)

Q18 (MC). Country X has comparative advantage in fish (its OC of fish is lower). Country Y has comparative advantage in coconuts. The only terms of trade that make BOTH countries better off are those that lie —
- A. below both countries' opportunity costs of fish
- B. between the two countries' opportunity costs of coconuts ✅
- C. above both countries' opportunity costs of coconuts
- D. equal to one country's exact opportunity cost of fish
Feedback: For both countries to gain, the price at which they exchange must be strictly between both opportunity costs — expressed in terms of the good being traded. If trading coconuts for fish, the ToT (fish per coconut) must be between Y's OC of coconuts and X's OC of coconuts. (A and C put the ToT outside the range where both gain. D at exactly one country's OC leaves that country indifferent — no gain.)

Q19 (MC). When incomes in a region rise by 20% and demand for a particular good rises by 30%, the income elasticity of demand (YED) is approximately +1.5. This classifies the good as —
- A. an inferior good, because YED is positive
- B. a necessity, because YED is between 0 and 1
- C. a luxury good, because YED > 1 ✅
- D. a substitute, because YED is positive
Feedback: YED > 0 = normal good. YED > 1 = the good is a luxury — demand is more than proportionally responsive to income changes (spending on it rises faster than income). (A is wrong — positive YED means normal, not inferior. B incorrectly classifies this YED as a necessity; necessities have 0 < YED < 1. D confuses YED with XED — "substitute" is a cross-price concept.)

Q20 (Matching). Match each economic concept to its correct one-line definition.
| Concept | Correct one-line definition |
|---|---|
| Opportunity cost | The value of the next-best alternative forgone when a choice is made |
| Comparative advantage | The ability to produce a good at a lower opportunity cost than another producer |
| Price elasticity of demand | The percentage change in quantity demanded divided by the percentage change in price |
| Deadweight loss | The reduction in total surplus caused by a market distortion such as a tax or price control |
Feedback: These are the four most tested concepts across all four objectives — they form the conceptual spine of the first half of the course. OC drives trade-offs and the PPF; CA drives gains from trade; PED measures responsiveness; DWL measures the efficiency cost of government intervention. The distractor ("tax revenue") describes the government's receipts, not lost surplus.*

Answer Key (quick reference)

Quality Gate (self-checked before shipping)

• Mirror check: 20 items, coverage Obj 1 = 3 · Obj 2 = 3 · Obj 3 = 6 · Obj 4 = 8 — matches the midterm blueprint's emphasis and item-type mix.
• Single-answer integrity: every MC and T/F has exactly one correct option; the two matching items (Q11, Q20) pair one-to-one; the one multiple-answer item (Q17) keys B, D.
• Quantitative gate: PASS. Verified in Python:
• Q4: A's OC of soybean = 16/4 = 4 corn; B's OC = 9/3 = 3 corn; B has CA ✓
• Q5: Valid ToT: between 3 and 4 corn/soybean ✓
• Q7: 100−2P = −20+4P → 120=6P → P=20, Q=60 ✓
• Q9: PED (P $4→$6, Q 80→60) = −0.714, |PED|=0.71 inelastic ✓
• Q12: PS = ½×10×(14−4) = $50 ✓
• Graph-logic check: PASS.
• Inferior good + income rise → demand shifts left ✓ (Q6)
• Taste improvement → demand shifts right ✓ (Q8)
• Higher input/compliance costs → supply shifts left ✓ (Q17)
• Binding price floor (min wage $16 > eq $12) → surplus of workers ✓ (Q13)
• More inelastic side bears more tax burden ✓ (Q14)
• Binding ceiling → DWL (lost trades) ✓ (Q16)
• Integrity vs. live exam (L-midterm-week-08.md): 0 items are shared — verified by full stem comparison:
• Midterm Q2 asks OC from a PPF (30 wheat / 10 cloth → 3 wheat per cloth); practice Q1–Q2 use a different concept slot (interior point, bowed PPF shape).
• Midterm Q4 uses fish/coconuts (X=20/8, Y=12/6); practice Q4 uses corn/soybeans (A=16/4, B=9/3).
• Midterm Q7 uses Qd=80−2P, Qs=−10+3P → P=18; practice Q7 uses Qd=100−2P, Qs=−20+4P → P=20 (the verified W4 market).
• Midterm Q9 uses P $2→$4, Q 100→80 → |PED|=0.33; practice Q9 uses P $4→$6, Q 80→60 → |PED|=0.71.
• Midterm Q12 asks for CS on D: P=24−Q, S: P=4+Q; practice Q12 asks for PS on the same market.

Canvas placement block

canvas_object              = Quizzes::Quiz
title                      = "Midterm Practice Exam (ungraded)"
assignment_group           = "Practice exercises"
points_possible            = 0
grading_type               = not_graded
allowed_attempts           = unlimited
show_feedback              = true       # released after submission
available_from_offset_days = -3        # opens 3 days before the exam window
due_offset_days            = 6         # on or before the exam due date
published                  = true
shuffle_answers            = true
provenance                 = "~ Prof. Kessler's edition · Fall 2026 · built with thecoursemaker.com"