ECON exam 1

26) Refer to Figure 2-10. Which of the following events would explain the shift of the production possibilities frontier from A to B?

b. The economy experienced a technological advance in the production of books.

32) Refer to Table 2-6. What is James's opportunity cost of making a tricycle?

B) 1/2 of a wagon

7) In a market economy, who decides what goods and services will be produced?

C) consumers and producers

6) Refer to Table 1-1. What is Eva's marginal cost if she decides to stay open for two hours instead of one hour?

A) $12

5) Refer to Table 1-1. What is Eva's marginal benefit if she decides to stay open for two hours instead of one hour?

A) $25

31) Refer to Table 2-6. What is James's opportunity cost of making a wagon?

A) 2 tricycles

30) Refer to Table 2-6. What is Lucy's opportunity cost of making a tricycle?

A) 3/4 of a wagon

27) For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?

B) Switzerland has the comparative advantage in watches.

3) In the first six months of 2003, branches of Commerce Bank in New York City were robbed 14 times. The New York City Police recommended steps the bank could take to deter robberies, including the installation of plastic barriers called "bandit barriers." The police were surprised the bank did not take their advice. According to a deputy commissioner of police, "Commerce does very little of what we recommend. They've told our detectives they have no interest in ever putting in the barriers." It would seem that Commerce bank would have a strong incentive to install "bandit barriers" to deter robberies. Why wouldn't they do it?

B) The banks must have weighed the cost of installing bandit barriers against the benefits and decided that they have "no interest in ever putting in the barriers."

1) Economics is the study of the ________ people make to attain their goals, given their ________ resources.

B) choices; scarce

29) Refer to Table 2-6. What is Lucy's opportunity cost of making a wagon?

C) 1 1/3 tricycles

Eva runs a small bakery in the village of Roggerli. She is debating whether she should extend her hours of operation. Eva figures that her sales revenue will depend on the number of hours the bakery is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $12 per hour. 4) Refer to Table 1-1. Using marginal analysis, determine how many hours should Eva extend her bakery's hours of operations?

C) 4 hours

33) Refer to Table 2-6. Which of the following statements is true?

C) Lucy has a comparative advantage in making wagons and James in making tricycles.

Table 2-6 shows the output per week of two people, James and Lucy. They can either devote their time to making bracelets or making necklaces. 28) Refer to Table 2-6. Which of the following statements is true?

C) Lucy has an absolute advantage in making wagons and James in making tricycles. D) James has an absolute advantage in making tricycles and Lucy in making wagons.

2) Consider the following statements: a. Consumers rent more DVDs from a video store that rents DVDs at a lower price than other rival video stores in the area. b. Department stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment. c. Farmers produce more cotton when its selling price falls.

D) a and b.

22) Refer to Figure 2-4. It is possible for this economy to produce

a. 40 notepads and 20 lamps.

11) After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision 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 Spain increases.

13) Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

a. cost of teaching increased.

16) Suppose that the Federal Reserve Bank announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

a. the Federal Reserve Bank is worried about inflation.

18) Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

a. the nation is producing beyond its capacity, so inflation will occur.

25) Refer to Figure 2-4. The opportunity cost of this economy moving from point Z to point Y is

b. 10 lamps.

20) Refer to Table 2-3. What is the opportunity cost to Libraryland of increasing the production of books from 200 to 300?

b. 150 magazines

19) When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good

b. decreases as more of the good is produced.

12) Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

b. more than $40, as the marginal benefit will exceed the marginal cost.

17) In the simple circular-flow diagram, households

b. own the factors of production.

15) Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

b. the standard of living will likely be higher in India than in Bangladesh.

24) Refer to Figure 2-4. Suppose this economy is producing at point W. Which of the following statements would best explain this situation?

c. There is widespread unemployment in the economy.

10) For which of the following individuals would the opportunity cost of going to college be highest?

c. a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree

23) Refer to Figure 2-4. This economy cannot currently produce 30 notepads and 45 lamps because

c. given its current technology, it does not have the resources to produce that level of output.

14) An example of an externality is the impact of

c. pollution from a factory on the health of people in the vicinity of the factory.

9) A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

d. All of the above are correct.

8) Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?

d. Kendra must decide between going to Colorado or Cancun for spring break.

21) Refer to Table 2-3. Which of the following statements is correct?

d. The opportunity cost of an additional 100 books increases as more books are produced.