Economics II: Microeconomics- Graded Exam 1

Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to Amy cost of going to the movies is: Select one: a. $5. b. $15. c. $20. d. $35.

d. $35.

Refer to the table below. The average benefit of 2 units of activity is: (*Picture of the chart*) Select one: a. $80 b. $60 c. $40 d. $20

a. $80

Suppose there are two parallel highways between two cities with approximately equal traffic. What would you expect to happen if the state began charging tolls to drive on one of those highways? Select one: a. More drivers would drive on the non-toll road, making the toll road less congested. b. More drivers would drive on the toll road making the non-toll road less congested. c. Traffic would remain evenly divided between the two roads as drivers continuously sought the less-congested route. d. Traffic would decrease on both roads.

a. More drivers would drive on the non-toll road, making the toll road less congested.

The marginal cost of an activity is the: Select one: a. change in the total cost of the activity that results from carrying out an additional unit of the activity. b. the total cost of the activity divided by the change in the level of the activity. c. the total cost of the activity divided by the level of the activity. d. change in the level of the activity divided by the change in the cost of the activity.

a. change in the total cost of the activity that results from carrying out an additional unit of the activity.

Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of: Select one: a. inconsistent reasoning; saving $20 is saving $20. b. the proper application of the Cost-Benefit Principle. c. rational choice because saving 40% is better than saving 4%. d. inconsistent reasoning because prices are sunk costs.

a. inconsistent reasoning; saving $20 is saving $20.

Suppose Colin brews beer and makes cheese. If Colin can increase his production of beer without decreasing his production of cheese, then he is producing at an: Select one: a. inefficient point. b. efficient point. c. unattainable point. d. ideal point.

a. inefficient point.

Refer to the table below. Based on their comparative advantage, Martha should specialize in _______ while Julia should specialize in _______. (*Picture of chart*) Select one: a. pies; cakes b. cakes; pies c. neither pies nor cakes; both pies and cakes d. both pies and cakes; neither pies nor cakes

a. pies; cakes

Ginger bought a phone that came with a $10 rebate. Ginger should fill out and mail in the rebate form if: Select one: a. the opportunity cost of the time and trouble of sending in the rebate form is less than $10. b. the opportunity cost of the time and trouble of sending in the rebate form is more than $10. c. she would have bought the phone without the rebate, and so sending in the rebate form involves no opportunity cost. d. Ginger's surplus from purchasing the phone was less than $10.

a. the opportunity cost of the time and trouble of sending in the rebate form is less than $10.

Refer to the table below. According to the Cost-Benefit Principle, how many units of this activity should be carried out? (*Picture of the chart*) Select one: a. 2 b. 3 c. 4 d. 5

b. 3

You have noticed that your next-door neighbor, Mary, always works in the garden, and her husband, Joe, always walks the dog. You conclude that if Joe and Mary are efficient, then it must be the case that: Select one: a. Mary has an absolute advantage in gardening. b. Joe has a comparative advantage in walking the dog. c. Mary's opportunity cost of walking the dog is lower than Joe's. d. Joe experiences increasing opportunity costs when he gardens, but not when he walks the dog. Feedback

b. Joe has a comparative advantage in walking the dog.

Every time you go to the grocery store, you try to wait in the shortest line. But the lines always seem to be roughly the same length. Why? Select one: a. Random chance equalizes the length of the lines. b. Other people are trying to choose the shortest line too. c. The cashiers work at the same speed. d. The cashiers do not have an incentive to work faster.

b. Other people are trying to choose the shortest line too.

Refer to the figure below. Relative to point B, at point C this restaurant is: (*Picture of chart*) Select one: a. making more pizzas and more salads. b. making more pizzas and fewer salads. c. making fewer pizzas and more salads. d. operating more efficiently.

b. making more pizzas and fewer salads.

On a graph of a production possibilities curve, if a point is attainable, then it: Select one: a. must be efficient. b. might or might not be efficient. c. is efficient only if it does not exhaust all currently available resources. d. must completely exhaust all currently available resources.

b. might or might not be efficient.

Refer to the figure below. If this economy were currently operating at point D, then in order to make more movies: (*Picture of chart*) Select one: a. the first productive resources to switch to making movies should be those with the lowest opportunity cost of making milk. b. the first productive resources to switch to making movies should be those with the highest opportunity cost of making milk. c. no productive resources would need to switch from making milk to movies because point D is already efficient. d. no productive resources would need to switch from making milk to movies because each resource should continue to be used according to its comparative advantage.

b. the first productive resources to switch to making movies should be those with the highest opportunity cost of making milk.

The table below shows how total donations, average donations, total labor costs and average labor costs vary depending on the number of employees State U hires for its fundraising activities. (*Picture of chart*) The marginal cost of the 4th employee is: Select one: a. $9,500. b. $10,750. c. $11,000. d. $13,000.

c. $11,000.

Refer to the table below. The average benefit of 4 units of activity is: (*Picture of the chart*) Select one: a. $4 b. $5 c. $9 d. $10

c. $9

Refer to the table below. Corey's opportunity cost of delivering of a pizza is making: Picture Select one: a. 6 pizzas. b. 12 pizzas. c. 2 pizzas. d. 1/2 of a pizza.

c. 2 pizzas.

Frank owns an apple farm and plans to spend 4 hours today picking apples. The number of apples he can pick per hour depends on the total number of hours he spends working in either the east orchard or the west orchard in the manner shown in the table below. (*Picture of the chart*) If Frank spends 2 hours picking apples in the east orchard and 2 hours picking apples in the west orchard, how many apples in total will Frank be able to pick today? Select one: a. 21 b. 42 c. 84 d. 92

c. 84

Lou and Alex live together and share household chores. They like to cook some meals ahead of time and eat leftovers. The table below shows the number of rooms they can each clean and the number of meals they can each cook in an hour. Picture Which of the following is true? Select one: a. Lou has both an absolute advantage and a comparative advantage over Alex in both tasks. b. Alex has a comparative advantage over Lou in cleaning. c. Lou has a comparative advantage over Alex in cleaning. d. Alex has both an absolute advantage and a comparative advantage over Lou in both tasks.

c. Lou has a comparative advantage over Alex in cleaning.

Suppose that Nepal invests less in new factories and equipment than does the United States. This will likely cause: Select one: a. Nepal's production possibilities curve to shift outward faster than the U.S.'s. b. The U.S.'s production possibilities curve to shift inward faster than Nepal's. c. The U.S.'s production possibilities curve to shift outward faster than Nepal's. d. Nepal's production possibilities curve to shift inward faster than the U.S.'s.

c. The U.S.'s production possibilities curve to shift outward faster than Nepal's.

Which branch of economics is most likely to study differences in countries' growth rates? Select one: a. microeconomics b. normative economics c. macroeconomics d. experimental economics

c. macroeconomics

The number of U.S. households with access to the Internet is growing rapidly. Compared to 50 years ago, one would predict that when considering a major purchase, people today will gather: Select one: a. less information because the Internet has lowered the cost of gathering information. b. less information because the Internet has increased the benefit of gathering information. c. more information because the Internet has lowered the cost of gathering information. d. more information because the Internet has increased the cost of gathering information.

c. more information because the Internet has lowered the cost of gathering information.

Suppose a retail store was offering 10% off list prices on all goods. The benefit of the 10% savings is: Select one: a. unrelated to the list price of the good. b. negatively related to the list price of the good. c. positively related to the list price of the good. d. zero since costs and benefits shouldn't be measured proportionally.

c. positively related to the list price of the good.

The textbook notes that the last time a major league batter hit .400 was in 1941. This is because: Select one: a. the average quality of batters has fallen. b. the league imposes harsh penalties for steroid use. c. specialization by pitchers, infielders, and outfielders has made it harder for batters to hit. d. baseball diamonds have become larger.

c. specialization by pitchers, infielders, and outfielders has made it harder for batters to hit.

The idea that tradeoffs have to be made when resources are scarce is reflected in the fact that: Select one: a. points below the production possibilities curve are efficient. b. points below the production possibilities curve are inefficient. c. the production possibilities curve has a negative slope. d. the slope of a linear production possibilities is constant.

c. the production possibilities curve has a negative slope.

The table below shows how total donations, average donations, total labor costs and average labor costs vary depending on the number of employees State U hires for its fundraising activities. (*Picture of chart*) The total value of donations raised by three employees is: Select one: a. $43,899. b. $45,000. c. $48,911. d. $51,963.

d. $51,963.

Refer to the figure below. Which of the following is true? (*Picture of chart*) Select one: a. Point A is efficient because it is farthest from the origin. b. Point D is efficient because it requires using the fewest resources. c. Point F is the most efficient because medical care is the highest there. d. Points B, C, E and F are efficient.

d. Points B, C, E and F are efficient.

You are the Minister of Trade for a small island country with the following annual PPC: Picture You are negotiating a trade agreement with a neighboring island with the following annual PPC: Picture As soon as you see the other island's PPC, you realize there are: Select one: a. no gains from trade because your both have the same comparative advantage. b. no gains from trade because there is no difference in your ability to harvest coconuts. c. no gains from trade because the other island has an absolute advantage. d. gains from trade because your island has a comparative advantage in coconuts.

d. gains from trade because your island has a comparative advantage in coconuts.

Positive economic principles are those that: Select one: a. are always correct. b. are influenced by political ideology. c. indicate how people should behave. d. predict how people will behave.

d. predict how people will behave.

Refer to the figure below. This economy would be operating at point B if: (*Picture of chart*) Select one: a. it was operating efficiently. b. the opportunity cost of making milk were higher than the opportunity cost of making movies. c. the opportunity cost of making movies were higher than the opportunity cost of making milk. d. resources that are better-suited to making movies were being used to make milk, while resources that are better-suited to making milk were being used to make movies.

d. resources that are better-suited to making movies were being used to make milk, while resources that are better-suited to making milk were being used to make movies.