201-2010_sample__final

201-2010_sample__final - Sample Final Exam Ec 201 Michigan...

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Sample Final Exam Ec 201 Fall, 2010 Michigan State University L. Martin 1. The term opportunity cost refers to the a. market price of a good; b. market price net of any subsidies; c. best foregone alternative;* d. average cost including the normal return to invested capital; e. marginal private plus marginal external costs. 2. Fred has a budget of $400 for entertainment expenses each month. He likes to eat dinner in restaurants for about $40 each and to buy books for about $20 each. The opportunity cost of dinner in a restaurant is a. 2 books;* b. .5 books; c. 20 books; d. 10 books; e. $40. 3. Use the data from question #2. Draw Fred’s budget constraint with books measured on the horizontal axis. Suppose that the price of books rises to $25. Fred’s budget constraint a. shifts out parallel; b. shifts in parallel; c. rotates, becoming steeper;* d. rotates, becoming flatter; e. does not change unless Fred chooses a different bundle. 4. Continue with the data from questions #2 and #3. The substitution effect of this price change leads Fred to a. buy more books; b. buy fewer books;* c. buy more books if books are a normal good and fewer if books are inferior; d. buy fewer books if books are a normal good and more if books are inferior; e. the answer depends on the price elasticity of demand. 5. Continue with the data from questions #2 and #3. The income effect of this price change leads Fred to a. buy more books; b. buy fewer books; c. buy more books if books are a normal good and fewer if books are inferior; d. buy fewer books if books are a normal good and more if books are inferior;* e. The answer depends on the price elasticity of demand.
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6. If Fred’s demand for books is elastic, then the amount that he spends on books will a. increase; b. decrease;* c. increase if books are a normal good and decrease if books are inferior; d. increase if books are an inferior good and decrease if books are normal; e. There will be no change in his expenditure on books. 7. A worker in Austria can produce either 4 kegs of beer or 6 cases of sausage in the same time that a Polish worker can produce 2 kegs of beer or 4 cases of sausage. These facts imply a. Poland has comparative advantage in beer; b. Austria has comparative advantage in sausage; c. Poland has comparative advantage in sausage;* d. Poland has absolute advantage in sausage; e. None of the above. 8. Workers specialize in jobs where they have a. compensating differentials; b. efficiency wages; c. comparative advantage;* d. absolute advantage; e. diminishing returns. 9. If Tanzania has comparative advantage in Coffee, a. it will import coffee; b. it will export coffee;* c. it will run a trade deficit; d. it will import capital from abroad; e. it will impose tariffs on coffee. 10.
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This note was uploaded on 11/17/2011 for the course EC 201 taught by Professor Haider during the Fall '10 term at Michigan State University.

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201-2010_sample__final - Sample Final Exam Ec 201 Michigan...

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