2008 - Dy Name: JIt4J tJE S. ID: A - Econ 201 Multiple...

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------------ D y JIt4J tJE S. Name: ID: A Econ 201 Multiple Choice IdentifY the letter ofthe choice that best completes the statement or answers the question. 1. During a war, a governmeHt will often draft people, most of whom are presently employed, into the army. An economist, computing the real cost of the war, would be sure to include which of the following items? a. the value of the civilian goods no longer produced by the new soldiers b. the cost offeeding and nothing the new soldiers c. the dollar cost of the pa~Tall d. the higher prices of civihan goods due to wartime shortages e. the cost of transporting he soldiers to combat 2. The principle of comparative fidvantage explains how one nation can take advantar,e of another one through international trade. 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 are good at producing everything, while others have no comparative advantages. some nations end up with large trade surpluses. 3. The law of comparative advantages explains why advanced nations will not trade with less-developed countries. an advanced nation will not trade with other countries. less-developed countries only trade among themselves. nations trade with each other, regardless of their relative levels of economic development. nations erect trade barriers. 4. When economists are cr;tical of government regulations that prohibit free individuals from making certain kinds of contracts, for example.'to purchase a good or service, they will usually invoke the concept of marginal analysis. mutual gains from voluntary tr·~de. inflation-unemployment trade-o'7:[ the need for abstraction. externalities. 5. Standby passengers on airline: who pay iaw rates for seats benefit from the low price. How are the airlines affected? They lose, because the s .andby pass~ngers do not cover the full cost of the seats. They gain, because the additional rennue covers the "fixed costs" of the flight. They lose, because the gain of the pal :;engers must necessarily come at the expense of the airline. They benefit as long as the additional tevenue from the passengers exceeds the marginal cost. Uncertain, because economic theory says nothing about this sort of situation.
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------------ Name: ID: A 6. Which of the following is an example of an undesirable side effect of the operation of the market mechanism? a. negative externalities b. comparative advantages c. abstractions d. productivity growth 7. When interdiction efforts manage to stem the flow of illegal drugs into the United States, assuming no change in demand, the price of these substances rises. This price increase leads to more crime as addicts attempt to maintain their now more-expensive habits. Economists call this side-effect of the drug business the illusion of rationality.
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This note was uploaded on 03/17/2008 for the course ECON 201 taught by Professor Dr.jaques during the Spring '08 term at Cal Poly Pomona.

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2008 - Dy Name: JIt4J tJE S. ID: A - Econ 201 Multiple...

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