midterm 1 - Fall 2007 ECON 2304-07427 GROUP A Midterm 1 1....

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Unformatted text preview: Fall 2007 ECON 2304-07427 GROUP A Midterm 1 1. Which of these statements is a positive statement (as opposed to a normative statement)? a. Income tax rates should not have been cut as they were a few years ago. b. The quantity of money has grown too slowly in recent years. c. When the quantity of money grows rapidly, inflation is a predictable consequence. d. All of the above are positive statements. Table 1 Labor Hours Needed to Make 1 Pound of: Pounds produced in 40 hours: Meat Potatoes Meat Potatoes Farmer 8 2 5 20 Rancher 4 5 10 8 2. Refer to Table 1 . The opportunity cost of 1 pound of meat for the farmer is a. 1/4 hour of labor. b. 4 hours of labor. c. 4 pounds of potatoes. d. 1/4 pound of potatoes. 3. Refer to Table 1 . The opportunity cost of 1 pound of potatoes for the farmer is a. 8 hours of labor. b. 2 hours of labor. c. 4 pounds of meat. d. 1/4 pound of meat. 4. Refer to Table 1 . The farmer has an absolute advantage in a. meat, and the rancher has an absolute advantage in potatoes. b. potatoes, and the rancher has an absolute advantage in meat. c. meat, and the rancher has an absolute advantage in meat. d. neither good, and the rancher has an absolute advantage in both goods. 2 5. Refer to Table 1 . The farmer has an absolute advantage in a. potatoes, and the rancher has a comparative advantage in meat. b. meat, and the rancher has a comparative advantage in potatoes. c. neither good, and the rancher has a comparative advantage in potatoes. d. neither good, and the rancher has a comparative advantage in meat. 6. Refer to Table 1 . The farmer and the rancher both could benefit if the farmer were to specialize in a. meat and the rancher were to specialize in potatoes. b. potatoes and the rancher were to specialize in meat. c. neither good and the rancher were to specialize in both goods. d. none of the above; they cannot both benefit by specialization and trade. 7. The case of perfectly elastic demand is illustrated by a demand curve that is a. vertical. b. horizontal. c. downward-sloping but relatively steep. d. downward-sloping but relatively flat. 8. If Iowas opportunity cost of corn is lower than Oklahomas opportunity cost of corn, then a. Iowa has a comparative advantage in the production of corn. b. Iowa has an absolute advantage in the production of corn. c. Iowa should import corn from Oklahoma. d. Oklahoma should produce just enough corn to satisfy its own residents demands. 9. Total output in an economy increases when each person specializes because a. there is less competition for the same resources. b. each person spends more time producing that product in which he or she has a comparative advantage. c. a wider variety of products will be produced within each country due to specialization....
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This note was uploaded on 04/19/2008 for the course ECON 2304 taught by Professor Majumder during the Fall '07 term at University of Houston.

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midterm 1 - Fall 2007 ECON 2304-07427 GROUP A Midterm 1 1....

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