makeupexam1 - ECON 251 Makeup Exam #1 Wednesday, September...

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ECON 251 Makeup Exam #1 Wednesday, September 27, 2006 1. Which of the following is NOT true? a. The four resources of economics are labor, natural resources, money, and entrepreneurship. b. Microeconomics studies the choices people make when faced with scarcity. c. Sunk costs should not be included as part of an opportunity cost. d. The law of demand states that the quantity consumed rises when prices fall. 2. The Latin term ceteris paribus means a. Therefore. b. Other things being equal. c. What is correct for the part is not correct for the whole. d. When one variable increases, the other variable decreases. 3. Jim bought two tickets to a football game for $20 a piece. If he goes to the football game, he’ll miss 2 hours of work and 2 hours of study time. Work pays him $6 per hour, and he expects the 2 hours of study time to raise his next test grade by 5 percentage points. Jim could also resell his football tickets for $20 each if he wanted. Which of the following should NOT be included in Jim’s opportunity cost of going to the game? a. the value of the 5 percentage point increase in his next test grade b. the $12 in wages he’ll lose if he goes to the game c. the $20 per ticket price that he could get for reselling his tickets d. All of the above should be included in Jim’s opportunity cost of going to the game. 4. Super Organic Vegi produces only organic tomatoes and potatoes. The table shows the marginal benefit and marginal cost schedules for tomatoes and potatoes. All the following statements are true EXCEPT Tomatoes Marginal benefit Marginal cost 4 35 1 5 10 4 6 9 9 7 6 20 8 2 64 a. The marginal cost of the fifth tomato is less than its marginal benefit, so more resources should be put into producing more than 5 tomatoes. b. Producing 6 tomatoes is the quantity that satisfies allocative efficiency since the marginal benefit is equal to the marginal cost. c. Only 4 tomatoes should be produced to satisfy allocative efficiency since that’s where the marginal benefit is greatest relative to marginal cost.
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d. The marginal benefit of the seventh tomato is less than the marginal cost of the seventh tomato. 5. On the production possibility frontier for goods X and Y, if the production of good X increases, the opportunity cost of producing another unit of good Y a. increases. b. decreases. c. may increase or decrease depending on the current level of production. d. does not change since economy-wide production possibility frontiers are linear. Don’s production possibilities Bob’s production possibilities Pens 10 5 Markers 20 15 6. Based on the table above, which of the following is true? a. Bob has an absolute advantage in producing markers. b.
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This note was uploaded on 04/27/2011 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

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makeupexam1 - ECON 251 Makeup Exam #1 Wednesday, September...

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