EXAMI - PRINCIPLES OF MICROECONOMICS 0511-211 FALL QUARTER...

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PRINCIPLES OF MICROECONOMICS 0511-211 FALL QUARTER 2008-2009 Department of Economics, Rochester Institute of Technology Examination # 1 100 points WITH SOLUTIONS Instructor: Dr. Bríd Gleeson Hanna You have 1 hour and 50 minutes to complete the following 50 multiple-choice questions. PLEASE REMEMBER TO PUT YOUR NAME ON YOUR SCANTRON FORM. 1. A tradeoff exists between a clean environment and a higher level of income in that a. studies show that individuals with higher levels of income actually pollute less than low-income individuals. b. efforts to reduce pollution typically are not completely successful. c. laws that reduce pollution raise costs of production and reduce incomes. d. by employing individuals to clean up pollution, employment and income both rise. ANS: C 2. A furniture maker currently produces 100 tables per week and sells them for a profit. She is considering expanding her operation in order to make more tables. Should she expand? a. Yes, because making tables is profitable. b. No, because she may not be able to sell the additional tables. c. It depends on the marginal cost of producing more tables and the marginal revenue she will earn from selling more tables. d. It depends on the average cost of producing more tables and the average revenue she will earn from selling more tables. ANS: C 3. When you calculate your opportunity cost of going to college, what portion of your room-and-board expenses should be included? a. Your full room-and-board expenses should always be included. b. None of your room-and-board expenses should ever be included. c. You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college. d. You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college. ANS: D 4. Teresa eats three oranges during a particular day. The marginal benefit she enjoys from eating the third orange a. can be thought of as the total benefit Teresa enjoys by eating three oranges minus the total benefit she would have enjoyed by eating just the first two oranges. b. determines Teresa’s willingness to pay for the first, second, and third oranges. c. does not depend on how many oranges Teresa has already eaten. d. All of the above are correct. ANS: A
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5. Sarah buys and sells real estate. Two weeks ago, she paid $140,000 for a house on Oak Street, intending to spend $20,000 on repairs sell the house for $175,000. Last week, the city government announced a plan to build a “halfway house” for convicted criminals on Oak Street. As a result of the city’s announced plan, Sarah is weighing two alternatives: She can go ahead with the $20,000 in repairs and then sell the house for $135,000, or she can forgo the repairs and sell the house as it is for $120,000. Sarah should a. keep the house and live in it. b.
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EXAMI - PRINCIPLES OF MICROECONOMICS 0511-211 FALL QUARTER...

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