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Key for Midterm 1 Spring 2007

Key for Midterm 1 Spring 2007 - Economics 100 Key for...

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Economics 100 – Key for Midterm 1 Spring 2007 Page 1 of 4 Question Answer Notes (3 points each for a total of 75 points) 1 C Scarcity is a situation of unlimited wants and limited resources. 2 D People must make choices when confronted with scarcity. 3 A Opportunity cost is your best alternative foregone. 4 E The vertical intercept is the value of P when Q = 0, which is 5. The slope is defined as the change in P / change in Q, which is 0.3. 5 B The income effects tells us that an increase in a relative price that makes the household worse with will lower his or demand for all economic goods and services. Therefore, students at CSU-LB would take less classes and buy less clothes. 6 D The capital market is where excess savings of households is transferred to firms for capital accumulation. The relative price in the capital market is the interest rate . See handout #1c. 7 E The U.S. opportunity cost of one more action film is 10 / 50 = 1 / 5 art films. 8 D The French opportunity cost of one more art film is 8 / 10 = 4 / 5 action films. 9 C The idea of comparative advantage says that each country should specialize in the production of the good that it produces at a lower opportunity cost.
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