HW1_08 - ECO 108: Introduction to Economics Problem Set 1...

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ECO 108: Introduction to Economics Problem Set 1 (Chapter 1) Professor: Shanjun Li 1.Economics is best defined as the study of A) prices and quantities. B) inflation and interest rates. C) how people make choices under the conditions of scarcity and the results of the choices. D) graph drawing. E) wages and incomes. 2. Economic questions always deal with A) financial matters. D)insufficient resources. B) political matters. E)choice in the face of limited resources. C) graphical matters. 3. The range of topics or issues that fit within the definition of economics is A) limited to market activities, e.g., buying soap. B) limited to individuals and firms. C) extremely wide, requiring only the ideas of choice and scarcity. D) limited to governments and nations. E) very limited. 4.The logical implication of the scarcity principle is that A) one will never be satisfied with what one has. B) as wealth increases, making tradeoffs becomes less necessary. C) as wealth decreases, making tradeoffs becomes less necessary. D) choices must be made. E) resources need to be made unlimited. 5. Forest is a mountain man living in complete isolation in Montana. He is completely self- sufficient through hunting, fishing, and farming. He has not been in the city to buy anything in five years. One can infer A) the scarcity principle does not apply to Forest. B) Forest is not required to make choices. C) the scarcity principle still applies because more hunting means less fishing and farming. D) Forest is very satisfied. E) Forest is not rational. 6. The 7 th glass of soda that Tim consumes will produce an extra benefit of 10 cents and 1
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has an extra cost of zero (Tim is eating at the cafeteria). The cost-benefit principle predicts that Tim will A) realize he has had too much soda to drink and go home. B) drink the 7 th glass and continue until the marginal benefit of drinking another glass of soda is zero. C) volunteer to empty out the fountain. D) not drink the 7 th glass. E) flip a coin to decide. Use the following to answer questions 7-10: Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. 7. The opportunity cost of attending Elite U is A) $50,000 B) $10,000 C) $20,000 D) $15,000 E) impossible to determine 8. The opportunity cost of attending State College is A) $30,000 B) $20,000 C) $15,000 D) $10,000 E) impossible to determine. 9. Larry maximizes his surplus by attending A) Elite U, because $60,000 is greater than the benefit at the other schools. B) State College, because the difference between the benefit and cost is greatest there.
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HW1_08 - ECO 108: Introduction to Economics Problem Set 1...

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