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# exam1-blue - ECON 251 EXAM#1-Blue Thursday 1 Which of the...

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ECON 251 EXAM #1--Blue Thursday, September 28, 2006 1. Which of the following is NOT a factor of production? a. Labor b. Entrepreneurship c. Bonds d. Land 2. Jim agreed to take his girlfriend out to dinner Friday night, and he expects to spend \$50 on their meal. The restaurant is 10 miles away, so he expects to spend about \$1.50 on gas to drive to the restaurant. If Jim weren’t going out with his girlfriend, he’d be driving 10 miles in the other direction to go bowling with his friends, where he’d expect to spend \$50. Which of the following would be included in Jim’s opportunity cost of going out to dinner with his girlfriend? a. the \$1.50 in gas expense to drive to the restaurant b. the \$50 he would spend on the meal c. the value he places on spending time with his girlfriend d. None of the above is part of the opportunity cost of going out to dinner. Production possibilities Possibility Pizza (millions in a month) CDs (millions in a month) A 0 100 B 1 95 C 2 80 D 3 60 E 4 35 F 5 0 3. In the above table, the production of 4 pizzas and 40 CDs is a. unattainable unless more resources become available or technology improves. b. feasible but would not satisfy production efficiency. c. feasible and would satisfy production efficiency. d. feasible, but only if marginal costs are constant.

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4. Which of the following is NOT true concerning an economy’s production possibilities frontier (PPF)? a. It reveals the maximum amount of any two goods that can be produced from a given quantity of resources, and given the technology. b. Tradeoffs occur along a PPF. c. Production efficiency occurs when production is on the frontier itself. d. Marginal costs of producing the good on the x axis decrease as more of good x is produced. 5. The figure above shows the PPF between socks and sweaters. Based on the figure, which statement is correct? a. The opportunity cost of moving from point B to point A is zero. b. Production at point A satisfies production efficiency. c. Production at point A satisfies allocative efficiency. d. Production at point B satisfies production efficiency. 6. In one hour Jim can clean 3 rooms and Lori can cook 2 dishes. If Jim cooks then he can cook 5 dishes and if Lori cleans then she can clean 1 room. Which of the following is true? a. Jim has absolute advantage in cooking but not cleaning. b. Jim has comparative advantage in cooking. c. Lori has comparative advantage in cooking. d. Lori’s opportunity cost of cleaning one room is ½ a dish of cooking.
7. Tom and Max produce sweaters and jackets. The figure above shows Tom’s PPF and Max’s PPF. Tom and Max can achieve gains to trade if a. Tom and Max both specialize in jacket production. b. Tom and Max both specialize in sweater production. c.

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exam1-blue - ECON 251 EXAM#1-Blue Thursday 1 Which of the...

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