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Econ1 S08 1st Midterm (Stein)

Econ1 S08 1st Midterm (Stein) - Econ 001 Midterm 1 Answer...

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Econ 001: Midterm 1 February 19, 2008 Answer Key Instructions: This is a 60-minute examination. Write all answers in the blue books provided. Show all work. Use diagrams where appropriate and label all diagrams carefully. Write your name and your Recitation Instructor's name in every blue book that you use. This exam is given under the rules of Penn's Honor system. All blue books, blank or filled, must be handed in at the end of this exam. No blue books may be taken from the room. The use of Programmable Calculators is in violation of Departmental rule. It is strictly forbidden! The Midterm has 2 parts. Part 1 consists of 8 multiple-choice questions. Please use the first page of a blue book to record your answers. Part 2 consists of 2 short answer questions. Please use a separate blue book for each. Part I: Multiple Choice Questions (4 points each/32 points total): 1. Suppose that you have won a free trip to Italy for spring break, and it includes all relevant expenses. You cannot resell the ticket. You have two other alternatives for spring break: i) you are willing to pay $700 to go to Florida, but it actually costs you $500, or ii) you can stay in Philadelphia for free and study, and reap a benefit of studying worth $100 to you. What is your Opportunity Cost of going to Italy? a. $700 b. $500 c. $300 d. $200 e. $100 f. $-100
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2. Suppose that Alice and Bob produce Yoyos and Zippers. Alice has the comparative advantage in Yoyo production; Bob has the comparative advantage in Zipper production. Each has a constant opportunity cost. If Alice and Bob each split their time between making Yoyo and Zipper, then: a. The joint economy PPF is bowed in. b. The joint economy is not producing efficiently. c. There are no prices at which Alice and Bob would have been willing to trade. d. There is no point of specialization on the joint PPF. 3. In the 1990s the United States had an absolute advantage over China in the production of both toys & software. It now still has an absolute advantage in software, but not in toys. If both countries can only produce toys and software, we should expect the data to show that: i. In the 1990s the United State exported toys. ii. The United States is now exporting software.
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