ECO2003F+Test+1_w_solutions_2008

ECO2003F+Test+1_w_solutions_2008 - ECO2003F: INTERMEDIATE...

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Unformatted text preview: ECO2003F: INTERMEDIATE MICROECONOMICS TEST 1 MARCH 2008 This test comprises of 20 multiple choice questions and has 10 pages including the cover page. Each question has a randomly assigned penalty of either 0, -0.5 or -1; which is shown on the right hand side of each question in square brackets and in bold. There are 5 options to choose from (A to E). In each question there are 4 answers to choose from (A to D); whilst E must be filled in if you plan to abstain from answering the question. Questions that are abstained by pencilling in E will receive no marks and no penalty (receive zero). In all of the cases below, choose the MOST correct answer 1 1. A shopper realises she was overcharged twice when she receives her credit card statement. She needs her original receipt in order to claim her refund, but she realizes it is in the bin. In the first instance she is unwilling to sift through litter, as she has only lost R25, in the second instance she has been overcharged by R100, and immediately sifts through the rubbish to retrieve her receipt. [Penalty: 1] Which of the following statements are true? (i) The consumers reservation price for retrieving her receipt is R25. (ii) The consumers reservation price for retrieving her receipt lies between R25 and R100. (iii) The opportunity cost of retrieving her receipt is greater than R25. (iv) The opportunity cost of retrieving her receipt is greater than R100. Choose the most correct option: A) i & ii B) iii & iv C) i & iii D) ii & iii E) Abstain 2. Jason prepays for a non-refundable theatre ticket, but discovers that a friend from France is in town for that night, and would rather have dinner with her than attend the performance. In the end he chooses to attend the performance, which reasoning pitfall has he succumbed to? [Penalty: 0] A) Failure to ignore sunk costs B) Ignoring implicit costs C) Failure to account for opportunity costs D) Failure to understand the average/marginal distinction E) Abstain 2 3. Meredith is furnishing her new flat. She can save (i) R100 on a R400 blender if she takes half hour drive (ii) R100 on a R 4000 home theatre system if she takes half hour drive [Penalty: 0] Which statement below is consistent in terms of rational choice? A) Meredith takes a 30 minute drive in scenario 2, but not in scenario 1. B) Meredith takes a 30 minute drive in both scenarios because the opportunity cost of a half hour drive is less than R100 C) Meredith takes a 30 minute drive in both scenarios because the opportunity cost of a half hour drive is greater than R100 D) Scenario 1 represents a 25% saving, whereas Scenario 2 only represents a 2.5% saving, so she will take the drive in 1, but not in 2.2....
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ECO2003F+Test+1_w_solutions_2008 - ECO2003F: INTERMEDIATE...

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