review midterm - Disclaimer: Note that the following are...

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Disclaimer: Note that the following are simply extra practice questions, and are not a substitute for attending the lecture, reading the class notes, the book, doing the homework, and attending discussion. Scarcity: The situation in which unlimited wants exceed the limited resources available to fulfill those wants. 11. Forest is a mountain man living in complete isolation in Montana. He is completely self- sufficient through hunting, fishing, and farming. He has not been in the city to buy anything in five years. One can infer A) the scarcity principle does not apply to Forest. B) Forest is not required to make choices. C) the scarcity principle still applies because more hunting means less fishing and farming. D) Forest is very satisfied. E) Forest is not rational. Answer: C Learning Objective: Discuss the Scarcity Principle 14. Josh wants to go to the football game this weekend, but he has a paper due on Monday. It will take him the whole weekend to write the paper. Josh decided to stay home and work on the paper. According to the scarcity principle, the reason Josh didn't go to the game is that A) Josh prefers schoolwork to football games. B) writing the paper is easier than going to the game C) Josh doesn't have enough time for writing the paper and going to the game D) it's too expensive to go to the game E) his professor doesn't like excuses Answer: C Learning Objective: Discuss the Scarcity Principle Opportunity cost: The highest-valued alternative that must be given up to engage in an activity. 33. The opportunity cost of an activity is the value of A) an alternative forgone. B) the next-best alternative forgone. C) the least-best alternative forgone. D) the difference between the chosen activity and the next-best alternative forgone. E) the alternative one would have preferred to choose. Answer: B Learning Objective: Economic surplus, opportunity cost 31. Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. The opportunity cost of going to the beach is: A) zero, because the money she spent was for food, drinks and an umbrella rather than to enter the beach. B) the $12 she spent on the umbrella, food and drinks. C) only $2 because she would have spent the money on food and drinks whether or not she went to the beach. D) the movie she missed seeing. E) the movie she missed seeing plus the $12 she spent on the umbrella, food and drinks. Answer: D Learning Objective: Economic surplus, opportunity cost 34.Amy is thinking about going to the movies tonight. A ticket costs $7 and she will have to cancel her
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dog-sitting job that pays $30. The cost of seeing the movie is A) $7. B) $30. C) $37. D) $37 minus the benefit of seeing the movie. E) indeterminate. Answer: C
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This note was uploaded on 03/30/2008 for the course MACRO Itro taught by Professor Kim during the Spring '08 term at University of Iowa.

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review midterm - Disclaimer: Note that the following are...

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