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# Practice_Exam_1__student_ - Practice Exam 1 1.The...

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Practice Exam 1 1.The adage, "There is no such thing as a free lunch," is used to illustrate the principle that a.goods are scarce. b.people face tradeoffs. c.income must be earned. d.households face many decisions. 2. Mallory decides to spend three hours working overtime rather than watching a video with her friends. She earns \$8 an hour. Her opportunity cost of working is a.the \$24 she earns working. b.the \$24 minus the enjoyment she would have received from watching the video. c.the enjoyment she would have received had she watched the video. d.nothing, since she would have received less than \$24 of enjoyment from the video. 3. A rational decisionmaker takes an action if and only if a.the marginal benefit of the action exceeds the marginal cost of the action. b.the marginal cost of the action exceeds the marginal benefit of the action. c.the marginal cost of the action is zero. d.the opportunity cost of the action is zero. 4. The average cost per seat on the 50-passenger Floating-On-Air Bus company's trip from Kansas City to St. Louis, on which no refreshments are served, is \$45. In advance of a particular trip, three seats remain unsold. The bus company could increase its profit only if it a.charged any ticket price above \$0 for the three remaining seats. b.charged at least \$15 for each of the three remaining seats. c.charged at least \$45 for each of the three remaining seats. d.paid three people to occupy the three remaining seats. 5. The amount by which firms’ sales revenue exceeds their payments to factors of production is called a.rent. b.capital. c.profit. d.interest.

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Figure1 6.Refer to Figure 1. A movement from point C to point D could be caused by a.unemployment. b.a decrease in society's preference for bananas. c.fewer resources available for production of bananas. d.All of the above are correct. 7. Refer to Figure 1. If the economy moves from point C to point B, then which of the following statements is correct? a.The economy benefited from a technological advance in the production of baseballs. b.The opportunity cost of each additional baseball is 2 bananas. c.The opportunity cost of each additional banana is 2 baseballs. d.The move involves no opportunity cost; it simply reflects the desires of the economy’s citizens. 8. The Federal Reserve a.designs tax policy. b.enforces the nation's antitrust laws.
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## This note was uploaded on 05/04/2009 for the course ECON 202 taught by Professor Amsler during the Spring '08 term at Michigan State University.

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Practice_Exam_1__student_ - Practice Exam 1 1.The...

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