Exam_I_Practice_-_II

Exam_I_Practice_-_II - Exam I Practice II (The KEY appears...

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Exam I Practice – II (The KEY appears at the end of the exam.) Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. The adage, "There is no such thing as a free lunch," is used to illustrate the principle that a. goods are scarce. b. people face tradeoffs. c. income must be earned. d. households face many decisions. ____ 2. Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is a. the improvement in his grades from studying for the hour. b. the improvement in his grades from studying minus the enjoyment of playing tennis. c. the enjoyment and exercise he would have received had he played tennis. d. zero. Since Russell chose to study rather than to play tennis, the value of studying must have been greater than the value of playing tennis. ____ 3. After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision? a. The marginal benefit of going to Cancun increases. b. The marginal cost of going to Cancun decreases. c. The marginal benefit of going to Ft. Lauderdale decreases. d. The marginal cost of going to Ft. Lauderdale decreases. ____ 4. Bill’s Bakery bakes fresh bread every morning. Any bread not sold by the end of the day is thrown away. A loaf of bread costs Bill $1.50 to produce, and he prices loaves of bread at $4 per loaf. Suppose near the end of one day Bill still has 12 loaves of bread on hand. Which of the following is correct? a. Bill should only sell the remaining bread for $4 per loaf since that is the regular price. b. Bill should only sell the remaining bread for $1.50 per loaf or more since that is what the bread costs to make. c. Bill should be willing to sell the remaining bread for any price above $0 per loaf since he will have to throw it away if he does not sell it for something. d. Bill should just throw the bread away and change the price of his bread starting tomorrow to make sure he sells all of his bread each day. ____ 5. You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should a. compare the total cost of your education to the total benefits of your education. b. compare the total cost of your education to the benefits of staying one more semester. c. compare the cost of staying one more semester to the benefits of staying one more semester. d. compare the total benefits of your education to the cost of staying one more semester. ____ 6. Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations? a.
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Exam_I_Practice_-_II - Exam I Practice II (The KEY appears...

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