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Practice Midterm

Practice Midterm - Economics 2 UCLA Prof Ohanian Practice...

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Economics 2 UCLA Prof. Ohanian Practice Midterm Questions These questions are designed to test you on some of the material covered in chapters 1-7. What is the difference between comparative advantage and absolute advantage? True, false, or uncertain, and explain your answer. A person who has an absolute advantage in every possible task should never trade. Davis can produce a maximum of 100 pounds of apples, or a maximum of 100 pounds of oranges. Sarah can produce a maximum of 200 pounds of apples, or 400 pounds of oranges. Show Davis’ ppf and Sarah’s ppf. Describe the patterns of absolute advantage and comparative advantage. Show societies ppf. What is a competitive market? What is the law of demand? True, False, or uncertain, and explain your answer: “Joe has so much money, he doesn’t face a scarcity problem, because he has everything he wants.” Suppose that the government places a very high tax on sales of pepsi. Show in a supply-demand graph what would happen to the equilibrium price and quantity of coke, and explain why.
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