Mid%2DSemester_Exam_2006 - AUSTRALIAN NATIONAL UNIVERSITY...

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AUSTRALIAN NATIONAL UNIVERSITY Mid-Semester Examination March 2006 MICROECONOMICS 1 (ECON1101) Study Period: 15 minutes Writing Period: 90 minutes Permitted Materials: Non-programmable Calculators Answer all of the following questions in the script book. Each question is worth 10 marks. 1. You are just starting an Economics exam. Use the concepts of opportunity cost, marginal analysis and incentives to explain why you shouldn’t spend too long answering this question. Use the same concepts to explain why you should write more than five lines. 2. Consider a small economy with two people, Brooke and Ridge, who each produce silk and wine. If Brooke spends all day making silk, she can make 30 metres of silk, while if she spends all day making wine she can make 120 litres of wine. If Ridge spends all day making silk, he can make 60 metres, while if he spends all day making wine he can make 60 litres. Assume that both people have constant opportunity cost.
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