econ exam 1 - Economics 101/P Gray Fall 2009 Exam One 17...

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Page 1 Economics 101/P. Gray – Fall 2009 – Exam One – 17 Sept. Answer Key – Correct answers in red bold ; Explanatory comments in Blue . 1. The problem of scarcity is confronted by: A) industrialized societies. B) pre-industrialized societies. C) societies governed by communist philosophies. D) all societies. 2. Opportunity cost is: A) about half of the monetary cost of a product. B) the dollar payment for a product. C) the benefit derived from a product. D) the value of the best alternative forgone in making any choice. 3. A choice made ________ is a choice whether to do a little more or a little less of something. A) at the front end B) in the beginning C) at the margin D) ceteris paribus 4. Which of the following is the best example of making a choice at the margin? A) buying a new car B) quitting your job C) drinking another cup of coffee D) attending college 5. The basic concern of economics is: A) to keep business firms from losing money. B) to prove that capitalism is better than socialism. C) to study the choices people make. D) to use unlimited resources to produce goods and services to satisfy limited wants. 6. Although water is very abundant in most places, it is scarce because: A) it has no alternative uses. B) there is not enough of it to meet all needs. C) it is a free good. D) scarce goods in general are not all that costly. 7. Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is: A) $10,000. B) whatever she would have purchased with the $10,000 instead. C) whatever she would have earned had she not been in college. D) whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college.
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Page 2 8. Zoe's grandparents are excited about finally paying off their mortgage, because, as they say, ―Our cost of housing is now zero.‖ Zoe should explain to them the economic principle of: A) marginal analysis: if the additional cost of housing is zero, then their additional benefit is also zero. B) opportunity cost: by living in the house, they are giving up the opportunity to sell the house, buy a smaller one, and pocket the difference. C) efficiency: if their cost of housing is now zero, they should let Zoe move in without charging her any rent. Zoe is better off, and her grandparents aren't hurt. D) equity: it is unfair that some people are still paying off their mortgage. 9. Some baseball fans leave the game in the seventh or eighth inning in order to avoid the post-game traffic. The fans are: A) not considering they have already paid the cost of their tickets. B) making marginal decisions by comparing the cost of leaving early to the benefit of leaving early. C) thinking only about the benefits of avoiding traffic.
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This note was uploaded on 02/23/2010 for the course ECON 101 taught by Professor Ohler during the Spring '08 term at Washington State University .

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econ exam 1 - Economics 101/P Gray Fall 2009 Exam One 17...

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