PS1 - Economics 1 Name: _ Problem Set 1 th (Due in class on...

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Economics 1 Analysis, Problems, and Polices Name: ___ Problem Set 1 (Due in class on Oct 8 th , 2007) I. Multiple Choice Questions (For each of the following questions, choose the best answer and explain clearly why you chose that answer over the other choices) 1. The marginal benefit of a good or service usually C a) stays constant as we consume more of it. b) increases as we consume more of it. c) decreases as we consume more of it.- the principle of marginal benefit explains that the more we have of any good or service, then the less we are willing to pay for an additional unit of it and the less its marginal benefit. The more that we have of a good, the less is its value to us and we may start to prefer something else; we like variety. d) decreases as we consume less of it 2. If additional units of a good could be produced at a constant opportunity cost, the production possibilities frontier would be B a) bowed outward b) a straight line- the PPF is bowed outward only if there is an increasing opportunity cost, representing the loss of more of a good each time an additional unit of another is produced. If it is a constant opportunity cost, the marginal cost is the same each time a good is produced, and relatively there are not additional units forgone. c)
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PS1 - Economics 1 Name: _ Problem Set 1 th (Due in class on...

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