Mid_Term___Solution_Set.F06 - Section I Multiple Choice...

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Principles of Economics…… Mid Term Exam……Spring 2006……Solution Set & Distribution Section I: Multiple Choice : Indicate the best answer to each of the following questions by writing the appropriate letter on your solution sheet. Elaine and Gab are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1500 to Elaine and $ 1000 to Gab. Irrespective of who pays for the paving both people will benefit from it. Suppose Elaine earns $50,000 per year and Gab earns $40,000 per year. 1. Suppose the cost of paving the driveway is $2000, it is _____ for them to share its cost, because then they will have a total economic _______. A) inefficient; shortage of $500. B) efficient; surplus of $500. C) efficient; shortage of $500. D) efficient; surplus of $1000. E) inefficient; shortage of $1000. Use the following to answer question 2: Employee Electric Guitars/hour Acoustic Guitars/hour Mark 10 1 Glenn 8 8 Dennis 2 20 2. The absolute advantage for electric guitars belongs to __________ ; for acoustic guitars it belongs to __________. A) Mark; Dennis B) Mark; Glenn C) Glenn; Dennis D) Dennis; Mark E) Dennis; Glenn Use the following to answer question 3: Sheila and Jim live in an island where they are the only two workers. Sheila can either catch 10 fish or gather 40 pounds of berries each day, and Jim can either catch 8 fish or gather 24 pounds of berries each day. Both of them work 200 days per year. At current world prices 1 fish trades for 3.5 pounds of berries. 3. In a closed economy, who has the comparative advantage in catching fish? A) Sheila and Jim B) Only Jim C) Sheila and Jim D) Only Sheila E) Neither of them 4. Which of the following is NOT a factor limiting a private property rights solution to over hunting of whales? A) The behavior of whales is difficult to monitor. B) The natural "owners", those who would receive the property rights, would be difficult to establish. C) International enforcement of the property rights would be necessary. D) Whales have little marginal benefit. E) Incentives to cheat on the agreement would be large. 5. Which one of the following goods or services would you expect to have the lowest price elasticity of demand? A) Owning a home. B) Renting an apartment. C) A new car. D) Hamburger meat. E) Toothpicks. 6. The income elasticity of demand for chicken noodle soup is found to be -0.7. This means chicken noodle soup A) is a normal good.
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This note was uploaded on 04/14/2008 for the course MECE 1001 taught by Professor ? during the Spring '08 term at Columbia.

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Mid_Term___Solution_Set.F06 - Section I Multiple Choice...

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