ECON204 - Midterm1 - F08

ECON204 - Midterm1 - F08 - Hayes 204 - 1st Midterm Fall 08...

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Hayes 204 - 1st Midterm Fall 08 Student: _ 1. The cost-benefit principle indicates that an action should be taken A. if the total benefits exceed the total costs. B. based on flipping a coin or speaking with a psychic. C. if the average benefits exceed the average costs . . if the net benefit (benefit minus cost) is zero. E. if the extra benefit is greater than or equal to the extra costs. 2. The opportunity cost of an activity is the value of A. an alternative forgone. @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 . .J. The scarcity principle indicates that A. no matter how much one has, it is never enough. B. compared to 100 years ago, individuals have less time today. @ with limited resources, having more of "this" means having less of "that." D. because tradeoffs must be made, resources are therefore scarce. E. the wealthier a person is, the fewer the number of tradeoffs he or she must make. 4. The marginal cost of an activity is the 0change in the cost of the activity that results from an extra unit ofthe activity. B. same as the total cost of the activity. C. ratio of total cost to the level of the activity. D. change in the level of the activity divided by the change in the cost of the activity. E. reservation cost. 5. If a nation has the lowest opportunity cost of producing a good, that nation has a(n) comparative advantage. B. absolute advantage. r:. comparative and absolute advantage. ). absolute advantage and possibly a comparative advantage. E. relative advantage.
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Making Pizza/hour Delivering Pizza/hour Lorie 12 6 Mike 10 15 6. Lone's opportunity cost of producing an extra pizza is delivering pIzzas. A.2 B.3/2 C. 2/3 @Yz E.5/6 7. The comparative advantage for pizza production belongs to and the comparative advantag~ pizza delivery belongs to _ A. Lorie; Lone B. Mike; Mike C. Mike; Lone Lone; Mike E. both;Mike 8. For individuals, comparative advantage springs from A. a combination of inborn talent, practice, and economic factors. B. a combination of inborn talent, education exclusively. C. a combination of and training and experience D. non-economic factors exclusively. @ a combination of inborn talent, education, training, and experience. 9. Once a country has acquired a comparative advantage A. it cannot lose it, because comparative advantage comes from natural resources and climate. B. it will keep it as long as it continues to specialize. C. It will keep it only if it also has an absolute advantage. D. it might lose it if trade restrictions are established. @It might lose it if other countries become better at producing the same product.
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10. "Holding all other relevant factors constant, consumers will purchase more of a good as its price falls." This statement reflects the behavior underlying @the demand curve. 3. an increase in demand.
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ECON204 - Midterm1 - F08 - Hayes 204 - 1st Midterm Fall 08...

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