FinalF2006.Stein-1 - Econ 001: Final Exam (Dr. Stein)...

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Econ 001: Final Exam (Dr. Stein) Answer Key Dec 19, 2006 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 16 multiple-choice questions. Please write you answers in blue book 1. Part 2 consists of 4 short answer questions. Please use a separate blue book for Q1, Q2 & Q3&4 (combined). Part I: Multiple Choice Questions (2.5 points each/40 points total): 1. The UA has signed an agreement with Ruckus Network to provide a set of restricted music download services for free. One alternative that was not chosen was Ruphsody. That service would cost each student $30 a year but is on average $40 better than the free service. What was the true cost, per student, of choosing Ruckus? a. $0 b. $10 c. $40 d. -$10 2. In Tuscany, the opportunity cost incurred when 10 bottles of wines are produced is 4 pairs of shoes. For China, the opportunity cost incurred when 2 bottles of wines are produced is 10 pairs of shoes. Which of the following statements is correct? a. Tuscany has the comparative advantage in producing shoes b. Tuscany has the absolute advantage in producing shoes c. China has a higher opportunity cost in producing wines d. China has a lower opportunity cost in producing wines
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3. A car producer recently raised the price for cars, which resulted in an increase in the total revenue. This suggests that: a. A car is a normal good b. A car is an inferior good c. Demand for cars is elastic d. Demand for cars is inelastic e. As long as demand is downward sloping an increase in price will always lead to a decrease in revenue, so the seller must be mistaken. 4. If prices and income in a two-good society double, what will happen to the two goods consumed by each individual? a. No change in consumption. b. Increase in both goods if they are normal. c. No clear answer as we do not know the substitution effect. d. Decrease in both goods if they are inferior. 5. A consumer spends a given amount of income on soy burgers and steaks. Steak is a normal good and soy burger an inferior good. If the price of steak decreases, then the consumer buys ______ steak and ______ soy burgers. a. more, more b. more, less c. less, more d. less, less e. none of the above 6. Consider the following statements when answering this question: I. A firm's average variable cost curve does not depend on the level of fixed costs. II. For every quantity for which average variable cost is increasing, a firm's
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FinalF2006.Stein-1 - Econ 001: Final Exam (Dr. Stein)...

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