practicefinalexam - ECON 251 Final Exam Fall 2006 1. The...

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3 4 5 6 7 25 5 10 15 20 Cars repaired/hour Bob’s PPF 30 35 Cakes/hour Angela’s PPF ECON 251 Final Exam Fall 2006 1. The production possibilities of Angela and Bob are shown on the diagram below. Which of the following statements is correct? a. Bob has a comparative advantage in repairing cars. b. Angela has an absolute advantage in both fixing cars and baking cakes. c. Bob has a comparative advantage in baking cakes. d. Bob has an absolute advantage in both baking cakes and repairing cars. 2. Based on the graph above, what is Angela’s opportunity cost of repairing a car? a. 6 repaired cars b. 15 cakes c. 3 cakes d. 2.5 cakes 3. What is the marginal cost of producing the 4 th unit of SUV based on the PPF below? a. 1 compact car b. 2 compact cars c. 3 compact cars d. 4 compact cars
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4. The law of demand says that when the price of a product rises, a. the quantity demanded of the product falls. b. the quantity demanded of the product rises. c. the quantity supplied of the product falls. d. the demand curve for the product shifts to the left. 5. Suppose that beer and wine are substitutes in consumption. If the price of beer increases, how will the market for wine be affected? a. The demand for wine will decrease. b. The demand for wine will increase. c. The supply of wine will increase. d. The supply of wine will decrease. 6. Suppose that beer and wine are substitutes in consumption and there is an effective price ceiling in the market for wine. If the supply of beer falls, what can we expect to see? a. The shortage of wine will fall. b. The shortage of wine will increase. c. The surplus of wine will fall. d. The surplus of wine will increase. 7. Jeremy wants a Nintendo Wii for Christmas. He’s willing to pay $300 for one, but no more than that. The retail price of a Wii is $249, but all the stores are sold out. They’re currently selling on eBay for $500. Based on that information, a. Jeremy’s marginal benefit of a Wii is $300. b. If Jeremy buys a Wii on eBay, he will earn $251 in consumer surplus. c. It would be rational for Jeremy to buy a Wii on eBay. d. The retail price of a Wii is above the market equilibrium price. 8. If the equilibrium price of wheat is $2/bushel and the government imposes a price floor of $1.80/bushel, the price of wheat will a. decrease to $1.80/bushel.
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b. remain at $2/bushel. c. fall somewhere between $1.80 and $2/bushel. d. increase above $2/bushel. 9. Advances in labor productivity increase the supply of output because higher productivity a. increases the price expected in the future. b. decreases the number of goods available. c. increases the price of resources used to produce the goods. d. decreases the cost of production. 10. If demand and supply schedules shift simultaneously, we can predict what will
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This note was uploaded on 04/07/2008 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

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practicefinalexam - ECON 251 Final Exam Fall 2006 1. The...

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