MIDTERM EXAM 1: MARCH, 2008
ECON 0110:
MACROECONOMICS
DR. KENKEL
THIS IS TEST 1A WITH ANSWERS
20 questions worth 12.5 points each.
Total Points = 250
1.
You just won a lottery prize.
The prize states that you will receive $150,000 two years from today
and an additional $250,000 three years from today.
Assume you could invest money at 5% annual
interest elsewhere in the economy.
What is the present value of the prize?
a.
Less than $300,000
b.
$300,000 to less than $319,999
c.
$320,000 to less than $339,999
*d.
$340,000 to less than $360,000
e.
none of the above
ANSWER:
150,000/(1.05)^2 + 250,000 /(1.05)^3 = 136,054.42 + 215,959.40 = 352,013.82
2.
If Mary's taxable income is $20,000, then her taxes will be $4,000.
If her taxable income is $40,000,
then her income taxes will be $8,000.
This is an example of
3.
The following points lie on the linear PPF for the China:
Suits
Cell phones
A
0
5,000
B
8000
2500
C
16000
0
In China, the opportunity cost of a cell phone is
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4.
The following points lie on the linear PPF for Korea:
Cars
Refrigerators
A
0
40,000
B
4000
30,000
C
16000
0
In Korea, the opportunity cost of a car is
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 Spring '08
 Kenkel
 Macroeconomics, Comparative Advantage, Progressive Tax, OC

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