Econ 201 Final Exam Review

# Econ 201 Final Exam Review - Econ 201 Final Exam...

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Econ 201 Final Exam Review--Practice Quiz— Answer Key Sample Quiz #1 1. Scarcity means a. there is poverty; b. there is income inequality; c. people want more than is freely available;* d. opportunity costs exceed sunk costs; e. sunk costs should be ignored. 2. Suppose that a company has signed a lease for \$20,000 for office space. If it decides to move to another location, it can sublet the space for \$15,000. What is the opportunity cost of staying in the leased space? a. \$20,000; b. \$15,000;* c. \$5,000; d. 1.33; e. 0.67. For questions 3 and 4 use the following information. The Dean has \$600,000 to spend. Faculty can be hired for \$100,000 each. Assistant deans can be hired for \$150,000 each. Draw her budget constraint with faculty hired on the horizontal axis. 3. If the Dean’s budget increases to \$800,000, the budget constraint a. rotates clockwise around the horizontal intercept; b. rotates counter-clockwise around the horizontal intercept; c. rotates clockwise about the vertical intercept. d. shifts parallel to the right;* e. shifts parallel to the left. 4. If the cost of hiring faculty rises to \$200,000, the budget constraint a. rotates clockwise around the horizontal intercept; b. rotates counter-clockwise around the horizontal intercept; c. rotates clockwise about the vertical intercept.* d. shifts parallel to the right; e. shifts parallel to the left. 5. The principle of diminishing returns implies that a. every activity eventually fails; b. as the level of activity pursued increases the (marginal) opportunity cost rises;* c. as the level of activity pursued increases the (marginal) opportunity cost falls; d. as the level of activity pursued increases the (average) opportunity cost rises; e. as the level of activity pursued increases the (average) opportunity cost falls. 6. The lost surplus that results when an incorrect decision is made is referred to as the a. deadweight burden;* b. trade-off; c. opportunity cost; d. sunk cost; e. little triangle. 1. The dean has received a donation of \$90,000 for technology acquisition. He will spend the money on either desktop computers for the faculty at a price of \$3,000 each or technology training seminars for the faculty at a price of \$9,000 each. a. Draw his budget constraint. Be sure to label both axes and intercepts. b. What is the opportunity cost of a training seminar? 3 desktop c. What is the opportunity cost of a desktop computer? 1/3 seminar 2. Marginal benefits and costs. Researchers believe that we can reduce the incidence of emphysema by reducing particulate matter in the atmosphere. A program to reduce pollution by hiring more inspectors has been proposed and evaluated.

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The costs of benefits of the program are given below. Inspectors
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Econ 201 Final Exam Review - Econ 201 Final Exam...

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