2000 - ECON201 Midterm Exam Fall 2002 Dr. Jaques Multiple...

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ECON201 Midterm Exam Fall 2002 Dr. Jaques Multiple Choice Identify the letter ofthe choice that best completes the statement or answers the question. 1. Rational choice requires that opportunity cost be a. ignored in making a decision. b. considered for individual choices, but not for societal choices. c. computed, but not actually used in making a decision. d. considered as part ofmaking a decision. used as the sole decision criterion. 2. The opportunity cost to you of an action is how much you must pay for the opportunity to take the action. the value to you of thc next best action you could have taken. the cost to society ofgiving you the opportunity to take the action. the dollar cost to you ofthe action. 3. During a war, a government will often draft people, most of whom are presently empl,)yed, into the a:m). \n economist, computing the real cost ofthe war, would be sure to include which ofthe following items? the value of the civilian goods no longer produced by the new soldiers the cost of feeding and clothing the new soldiers the dollar cost ofthe payroll the higher prices ofcivilian goods due to wartime shortages e. the cost of transporting the soldiers to combat 4. The principle ofcomparative advantage explains how one nation can take advanta.ge ofanother one through international trade. b. two nations may engage in mutually beneficial trade, even though one of them is more productive than the other. one individual can take advantage of another through international trade. some people arc good at producing everything, while others have no comparativf~ advantages. some nations end up with large trade surpluses. 5. The United States produces hoth automobiles and computers more efficiently than M~xico. Nevertheles~, t is possible that both nations would benefit from trade in these items. The reas<?n for this is the law of comparative advantage. b. the inflation-unemployment trade-off. externalities. the cost disease of personal services. attempts to repeal the law of supply and demand.
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6. The law of comparative advantages explains why a. advanced nations will not trade with less-developed countries. b. an advanced nation will not trade with other countries. c. less-developed countries only trade among themselves. d. nations tradc with each other, regardless of their relative levels of economic development. e. nation~; erect trade barriers. 7. When economists are critical of government regulations that prohibit free individuals from making certai : kinds of contracts, for example, to purchase a good or service, they will usually invoke the concept of' marginal analysis. b. mutual gains from voluntary trade. c. inflation-unemployment trade-off. the need for abstraction. e. externalities. 8. Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the aHin :• affected? They Jose, because the standby passengers do not cover the fuJI cost ofthe seats.
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2000 - ECON201 Midterm Exam Fall 2002 Dr. Jaques Multiple...

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