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Econ1 S09 Final (Stein) - Econ 001 Final Exam(Dr Stein May...

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Econ 001: Final Exam (Dr. Stein) May 7th, 2009 Instructions: This is a 120-minute examination. Write all answers in the blue books provided. Show all work. Use diagrams where appropriate and label all diagrams carefully. Write your name and your Recitation Instructor's name in every blue book that you use. This exam is given under the rules of Penn's Honor system. All blue books, blank or filled, must be handed in at the end of this exam. No blue books may be taken from the room. The use of Programmable Calculators is in violation of Departmental rule. It is strictly forbidden! Check: The Exam has 2 parts. Part 1 consists of 12 multiple-choice questions. Please write you answers in blue book 1. Part 2 consists of 2 short answer questions. Please use one book for Q1 & Q2. Part 3 consists of 2 short answer questions. Please use one book for Q3 & Q4. Part I: Multiple Choice Questions (3 points each/36 points total): 1. Steve has planned to attend a conference next week in Mexico City. He has already purchased a nonrefundable plane ticket for $300. His all inclusive hotel room would cost him a total of $500 and has not yet been paid. Unfortunately Steve is having second thoughts about going to Mexico because he is afraid of contracting the Swine Flu. Were he to go to Mexico, Steve would quantify his fear as the equivalent of $100. Steve has no alternative use of his time. What is Steve’s opportunity cost of going to Mexico? a. $0 b. $100 c. $500 d. $600 e. $900
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2. The Economic Stimulus package that was passed in February included large investment projects in infrastructure (e.g., roads, railways, bridges). The goals of this package are: a. To shift the economy from inside the PPF to onto the current PPF curve. b. To shift out the economy’s PPF curve for future years. c. Both a & b are correct. d. Neither is correct. 3. At the Greek Lady there are 3 workers, Tom, Dick and Harry, who can make salads and gyros. Tom, Dick and Harry can respectively make a maximum of 200, 300 and 400 salads in a day. Further, their opportunity cost of making a gyro (expressed in terms of salads) is respectively 2, 3 and 4. The following table sums up this information Tom Dick Harry Maximum amount of salads possible to produce in a day 200 300 400 Opportunity cost of producing a gyro (in terms of salads) 2 3 4 Comparing Tom & Harry to each other we know that: a. Tom has an absolute advantage in making gyros. b. Tom has a comparative advantage in making gyros. c. Neither a nor b is true d. Both a & b are true.
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