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ECON 251 Final Exam Pink Spring 2012 1. Robert just graduated from Purdue. He has three options: He can work at an investment bank for $60,000 a

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Econ 251 Spring 2012 Final Exam PINK Page 1 of 13 ECON 251 Final Exam Pink Spring 2012 1. Robert just graduated from Purdue. He has three options: He can work at an investment bank for $60,000 a year, he can play professional basketball in Europe for $100,000 a year, or he could work as a researcher at the Department of Education for $35,000 a year. What is the opportunity cost for Robert of playing professional basketball? a. $35,000 b. $40,000 c. $60,000 d. $95,000 Katie and John produce tennis racquets and brownies. In one hour, Katie can produce 3 tennis racquets or 10 brownies. In one hour, John can produce 4 tennis racquets or 12 brownies. Use this information to answer the following X questions. 2. What is the opportunity cost for Katie of producing 1 brownie? a. 3 tennis racquets b. 1 tennis racquet c. 3/10= 0.3 of a tennis racquet d. 1/10= 0.1 of a tennis racquet 3. _________ has an absolute advantage in producing brownies, and _________ has a comparative advantage in producing brownies. a. Katie; Katie b. Katie; John c. John; Katie d. Katie; Katie 4. If John and Katie work together to produce brownies and tennis racquets which of the following points would be on their economy wide PPF? a. 22 brownies and 7 tennis racquets b. 12 brownies and 3 tennis racquets c. 10 brownies and 4 tennis racquets d. Both b and c
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Econ 251 Spring 2012 Final Exam PINK Page 2 of 13 5. What is the slope of John’s individual PPF if the quantity of tennis racquets produced is measured on the x axis? a. -3/10 b. -3 c. -1/3 d. -10/3 6. Which of the following would you expect to decrease the demand for tennis racquets? a. A decrease in the price of tennis balls which are complements in consumption of tennis racquets b. An increase in the supply of tennis racquets c. An increase in the price of tennis racquets d. None of the above would decrease the demand for tennis racquets 7. How will the equilibrium price and quantity of tennis racquets be affected by a decrease in the demand for tennis racquets? a. Equilibrium price will fall, and equilibrium quantity will rise. b. Equilibrium price will rise, and equilibrium quantity will rise. c. Equilibrium price will fall, and equilibrium quantity will fall. d. Equilibrium price will rise, and equilibrium quantity will fall. 8. Tennis racquets and tennis balls are complements in consumption, while tennis racquets and racquetball racquets are substitutes in production. If the price of tennis balls increases at the same time that the price of racquetball racquets increases, how will equilibrium in the market for tennis racquets be affected? a. Equilibrium price will fall, and equilibrium quantity will fall. b. Equilibrium price will be indeterminate, and equilibrium quantity will fall. c. Equilibrium price will rise, and equilibrium quantity will be indeterminate. d. Equilibrium price will be indeterminate, and equilibrium quantity will rise.
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