Review Final BA 315 Winmter 08

Review Final BA 315 Winmter 08 - Final Exam Review, Winter...

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Final Exam Review, Winter 2008 Student Name:__________ BA 315: Economy, Industry, and Competitive Analysis Department of Finance Lundquist College of Business University of Oregon Ali Emami The final exam is a two hour comprehensive test covering chapters 1-7 and 10, 12, 13, and 14 of Sch and TS chapters 3-5. Followings are sample questions and some suggested answers for your review. Format for your final exam will be similar to other test you had in this class (about 10 questions). Office hours are on Wednesday 1:00 to 4:00. Exam will be on Thursday March 20 th at 1:00 p.m. in the same class room. Part A: Microeconomics Chapter 1: PROBLEMS 1. According to Figure 1.1, what is the opportunity cost of increasing consumer output from OF to OD? In figure 1.1, the move from OF to OD along the consumer goods axis moves the economy from point X to point C on the production possibilities curve. As a result, the economy must give up G minus E military goods. 2. Draw a production possibilities curve based on Table 1.1, labeling combinations A-F. What is the opportunity cost of producing 100 missiles? The opportunity cost of producing 100 missiles is a reduction in the production of houses from 100 to 75, or a loss of 25 houses. 3. Assume that it takes 4 hours of labor time to paint a room and 3 hours to sand a floor. If all 24 hours were spent painting, how many rooms could be painted by one worker? If a decision were made to sand two floors, how many painted rooms would have to be given up? Illustrate with a production-possibilities curve. Page 1 Production Possibilities Curve F E D C B A 0 20 40 60 80 100 120 0 50 100 150 200 250 300 Quantity of Missiles Quantity of Houses
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1. Production Possibilities Curve 0 2 4 6 8 10 0 1 2 3 4 5 6 7 Rooms Painted Floors Sanded If all 24 hours were spent painting, it would be possible to paint a total of six rooms (24/4 = 6). If you wanted to sand two floors, it would take a total of six hours (3 hours per floor x two floors). In these six hours, you could have painted 1½ rooms, thus the opportunity cost of sanding two floors is not paining 1½ rooms. 4. Suppose in problem 3 that a second worker became available. Illustrate the resulting change in production possibilities. Now what would be the opportunity cost of sanding two floors? Production Possibilities Curve 0 2 4 6 8 10 12 14 16 18 0 2 4 6 8 10 12 14 Assuming the second worker is as productive as the first, a doubling of the labor input allows you, in 24 hours, to paint and sand twice as many rooms and floors. The opportunity cost of sanding two floors, however, has remained unchanged. Page 2
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Opportunity cost is the value of what you must give up in order to do the next best thing. Even though you now have two workers, the opportunity cost of sanding two floors for either worker is still 1½ floors.
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This test prep was uploaded on 04/22/2008 for the course ECON 315 taught by Professor Aliemami during the Spring '08 term at University of Oregon.

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Review Final BA 315 Winmter 08 - Final Exam Review, Winter...

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