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Econ211Exam1Review - Review for Exam 1 1 On a traditional...

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Review for Exam 1 1. On a traditional PPF diagram, the two goods in question: a. Have a cross elasticity of zero b. Must be complements c. Exhibit constant opportunity costs d. Are inferior goods e. Are substitutes 2. “Yao Ming is a tall Chinese man.” This would be an example of a. A normative statement b. A positive statement c. The post hoc fallacy d. Sample selection bias e. The big tradeoff 3. As reported in a September 9, 2006, article in The Economist , according to a survey, only 41% of business travelers said they would turn on their cell phones (if allowed) in flight. “One reason is cost: at prices above $3 a minute, demand drops off considerably.” This statement a. Ignores income elasticity, and cell phones on airplanes are likely inferior b. Confuses demand with quantity demanded c. Implies that cell phone demand is highly inelastic d. Suggests that cell phone companies would still collect more revenue even if demand dropped e. Can’t be true because there are simply no good substitutes available for cell phones 4. The social (or economic) arrangement that gives popular author John Grisham ownership of and control over this novels is a. Property rights b. Dynamic comparative advantage c. Absolute advantage d. Productive efficiency e. The paradox of value 5. Comparative advantage is just a fancy term or economic jargon for a. The gains from trade b. Diminishing marginal utility c. Tradeoffs d. Lower opportunity costs e. Being better at everything than someone else is 6. The Production Possibilities Frontier has the shape it does because a. Demand curves are downward sloping b. Opportunity costs are constant as production of a particular good increases c. Resources are not equally productive in alternative uses d. Of diminishing marginal utility e. Of some unemployed resources, or at least ones that are being employed inefficiently
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7. “For someone going on a $500 cruise, adding $100 for a passport to the price could make them look at an alternative vacation.” That comment appeared in an April 14, 2006 Wall Street Journal story on the fact that beginning in 2007, Americans going to the Carribean, Canada, or Mexico will have to carry a valid US passport. If true, the statement implies that a. Demand curves for cruises are upward sloping b. The supply of cruises will be downward sloping in January 2007 c. A cruise in an inferior good d. The cross elasticity of demand between cruises and passports is negative e. The price elasticity of demand for vacation travel is pretty low 8. The “Law of Supply” occurs or happens or is valid or is confirmed because a. As the price of a good increases, the opportunity cost of not producing it increases b. When the price of a good rises, the supply curve will increase (that is, shift to the right) c. When the price of a good rises, the supply curve will increase (that is, shift to the left) d. Firms will produce more of a good the less it costs to make it e. The higher the price of a good, the less of it consumers will want to
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Econ211Exam1Review - Review for Exam 1 1 On a traditional...

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