Exam 1 - Spring 2008

Exam 1 - Spring 2008 - ECON 101-008 Exam#1 Spring 2008...

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ECON 101 - 008 Exam #1, Spring 2008 Bubble your answers on your scantron sheet using your #2 pencil. Each question is worth 3 points. Hence, your maximum score can be 102 points (based on 100 points). MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1. If the marginal cost of producing a television is constant at $200, then a firm should produce this item A) until the marginal benefit it receives reaches zero. B) as long as its marginal cost does not rise. C) only if the marginal benefit it receives is greater than $200 plus an acceptable profit margin. D) as long as the marginal benefit it receives is just equal to or greater than $200. 2. Cassie ʹ s Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt ʺ as is ʺ now for $900. What should she do? A) She should not do anymore work on the quilt because she has already spent too much time on it and has not been paid for that time. B) It does not matter what she does; she is going to take a loss on her project. C) She should purchase the period fabric, complete the task and then sell the quilt. D) She should cut her losses and sell the quilt now. 3. The decision about what goods and services will be produced made in a market economy is made by A) producers deciding what society wants most. B) workers deciding to produce only what the boss says must be produced. C) consumers dictating to firms what they need most. D) consumers and firms choosing which goods and services to buy or produce. 4. Increasing opportunity cost along a bowed out production possibilities frontier occurs because A) of the scarcity of factors of production. B) some factors of production are not equally suited to producing both goods or services. C) of inefficient production. D) of ineffective management by entrepreneurs. 1
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Figure 2 - 6 German auto producer, BMW currently produces two types of automobiles sports utility vehicles (SUVs) and coupes in its US plant. Since it opened in 1994, the company had made and continues to make several strategic production decisions. Figure 2 - 6 shows changes to its production possibilities frontier in response to some of these production strategies. 5. Refer to Figure 2 - 6. Between 1995 and 2003, worker productivity increased so that the total number of vehicles produced increased as the company added more machinery, workers and changed the layout of the factory. This is best represented by the
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Exam 1 - Spring 2008 - ECON 101-008 Exam#1 Spring 2008...

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