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

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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 3. Refer to Table 1 . The opportunity cost of 1 pound of potatoes for the farmer is 4. Refer to Table 1 . The farmer has an absolute advantage in
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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 7. The case of perfectly elastic demand is illustrated by a demand curve that is 8. If Iowa’s opportunity cost of corn is lower than Oklahoma’s opportunity cost of corn, then
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