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practiceexam1 - ECON 251 Practice Exam 1 Spring 2008...

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ECON 251 Practice Exam 1 Spring 2008 Fireland's PPF 0 10 20 30 40 50 0 2 4 6 8 10 12 Wheat Cotton Redland's PPF 0 5 10 15 20 25 30 35 0 1 2 3 4 5 6 Wheat 1. Fireland and Redland are two countries that produce wheat and cotton. Their production possibility frontiers are given by the above picture. What is Fireland’s opportunity cost of producing 1 bushel of wheat in terms of cotton? a. 10 bushels of cotton b. 4 bushels of cotton c. ¼ of a bushel of cotton d. 1/10 of a bushel of cotton 2. Based on the PPFs from the problem above, Fireland has comparative advantage in the production of _________. a. wheat b. cotton c. neither wheat nor cotton d. both wheat and cotton
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Consider the following table of production possibilities: Burger s Soda A 0 15 B 1 14 C 2 12 D 3 9 E 4 5 F 5 0 3. We call a production plan of 3 burgers and 12 sodas a. attainable. b. unattainable. c. efficient. d. Both a and c. 4. Based on the table of production possibilities for burgers and sodas, what is the marginal cost of the 3 rd burger? a. 3 sodas b. 6 sodas c. 9 sodas d. 1 soda 5. Based on the table of production possibilities for burgers and sodas, what is the slope of the PPF between points B and C? Assume burgers are measured on the x axis. a. -3 b. -12 c. -15 d. -2 6. When an economy is producing at a point on its production possibility frontier, we say that the economy a. achieves allocative efficiency. b. achieves production efficiency. c. is maximizing consumer surplus. d. is maximizing its opportunity cost. 7. Economic growth can be caused by which of the following? a. Technological advances b. An increase in labor productivity c. Capital accumulation d. All of the above are causes of economic growth.
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8. Mark can produce 3 salads or 5 desserts per hour, while Susi can produce 7 salads or 7 desserts per hour. Which of the following is true? a. Mark has the comparative advantage in producing salads and desserts. b. Susi has the comparative advantage in producing salads and desserts. c. Mark has the comparative advantage in producing desserts, while Susi has the comparative advantage in producing salads. d. Mark has the comparative advantage in producing salad, while Susi has the comparative advantage in producing desserts. 9. Which of the following is NOT an economic factor of production? a. natural resources b. workers c. machinery d. money 10. Maggi is thinking of opening up a coffee shop or a bookstore. Her current job as a server at Villa Pizza pays $45,000 a year. She expects to earn $80,000 a year from owning a coffee shop or $60,000 a year owning a bookstore. Based on this information, what is Maggi’s opportunity cost of running a coffee shop? a.
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This note was uploaded on 04/18/2008 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue.

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practiceexam1 - ECON 251 Practice Exam 1 Spring 2008...

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