econ exam 2 ********

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For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges. Refer to Table 7-5. The market quantity of oranges demanded per day is exactly 7 if the price of an orange, P, satisfies

$0.25 < P < $0.60.

At a price of $40 per unit, sellers' total revenue equals

$1,200

Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals

$1050.

The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. The amount of revenue collected by the government from the tariff is

$12,000.

Refer to Figure 7-19. At the equilibrium price, producer surplus is

$150

Refer to Figure 7-2. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

$1800

Refer to Figure 9-4. Consumer surplus in Nicaragua without trade is

$2,250

Refer to Figure 7-7. What is the consumer surplus if the price is $100?

$2,500

Refer to Table 7-10. If the market price is $1,100, the combined total cost of all participating sellers is

$2,800

Refer to Figure 7-9. If the price of the good is $14, then producer surplus is

$20.50

Refer to Table 7-2. If the price is $22, then consumer surplus in the market is

$22, and Sasha, Eric, and Chen purchase the good.

Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. At equilibrium, producer surplus is

$24

The figure illustrates the market for calculators in a country. Refer to Figure 9-2. As a result of trade, total surplus increases by

$250

Refer to Figure 7-16. Producer surplus amounts to $300 if the price of the good is

$350

Refer to Figure 9-3. Without trade, the equilibrium price of computers is

$400 and the equilibrium quantity is 240 computers.

Refer to Figure 9-2. The increase in total surplus resulting from trade is

$5,120, since consumer surplus increases by $7,168 and producer surplus falls by $2,048.

Refer to Figure 7-24. At equilibrium, total surplus is

$54.

Refer to Figure 9-4. The change in total surplus in Nicaragua because of trade is

$625, and this is an increase in total surplus.

Refer to Figure 6-9. At which price would a price floor be binding

$7

Refer to Figure 6-9. A price floor set at

$7 will be binding and will result in a surplus of 8 units.

Refer to Table 7-7. If the market price is $1,000, the producer surplus in the market is

$700

Refer to Figure 9-10. Mexico's gains from trade are represented by the area that is bounded by the points

(Q0, P0), (Q2, P1), and (Q1, P1).

The graph below represents the various combinations of ham and cheese (in pounds) that the nation of Bonovia could produce in a given month. Refer to Figure 3-23. In the nation of Cropitia, the opportunity cost of a pound of ham is 0.3 pounds of cheese. Bonovia and Cropitia both can gain from trading with one another if one pound of ham trades for

0.40 pounds of cheese. Correct! All of the above are correct. 0.55 pounds of cheese. 0.75 pounds of cheese.

Refer to Figure 5-3. Using the midpoint method, between prices of $30 and $40, price elasticity of demand is about

0.54

A manufacturer produces 330 units when the market price is $8 per unit and produces 470 units when the market price is $13 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

1.36

If an 8 percent increase in price for a good results in a 15 percent decrease in quantity demanded, the price elasticity of demand is

1.88

Refer to Figure 4-13. If Producer A and Producer B are the only producers in the market, then the market quantity supplied when the price is $6 is

18 units

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

1980s

A 10 percent increase in gasoline prices reduces gasoline consumption by about

2.5 percent after one year and 6 percent after five years.

If the price elasticity of demand for a good is -1, then a 3 percent decrease in price results in a

3 percent increase in the quantity demanded.

Refer to Figure 3-4. If Alice produces only lemonade, she can produce

450 pitchers per day.

For each of the three potential buyers of apples, the table displays the willingness to pay for Allison, Sasha, and Ava, who are the only three buyers of apples. Assume that only three apples can be supplied per day. Refer to Table 7-4. If the market price of an apple is $0.70, then the market quantity of apples demanded per day is

6

Refer to Table 7-4. If the market price of an apple is $0.70, then the market quantity of apples demanded per day is

6

In the short run, which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

7 percent per year

Refer to Table 6-5. Suppose the government imposes a price ceiling of $3 on this market. What will be the size of the shortage in this market?

75 units

Refer to Figure 2-3. Inefficient production is represented by which point(s)?

A

Import quotas and tariffs produce some common results. Which of the following is not one of those common results?

A deadweight loss is experienced by the domestic country.

Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

A is an airline ticket from Chicago to New York demanded by a vacationer and B is an airline ticket from Chicago to New York demanded by a business traveler.

Consider the U.S. market for coffee, a market in which the government has imposed a nonbinding price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling?

A sharp drop in consumer income; coffee is a normal good.

Refer to Figure 5-10. Total revenue when the price is P2 is represented by the area(s)

A+B

Refer to Figure 6-2. The price ceiling is binding. causes a shortage. causes the quantity demanded to exceed the quantity supplied. All of the above are correct.

All of the above are correct

This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. Refer to Table 7-2. Which of the following is not true? At a price of $9.00, no buyer is willing to purchase Vanilla Coke. You Answered At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying one. At a price of $4.00, total consumer surplus in the market will be $9.00. Correct Answer All of the above are correct.

All of the above are correct.

For each of the three potential buyers of apples, the table displays the willingness to pay for Allison, Sasha, and Ava, who are the only three buyers of apples. Assume that only three apples can be supplied per day. Refer to Table 7-4. Who experiences the largest loss of consumer surplus when the price of an apple increases from $0.70 to $1.40?

Allison

Which of these activities will most likely result in an external benefit?

An elderly woman plants a flower garden on the vacant lot next to her house.

Refer to Table 7-3. If you have a ticket that you sell to the group in an auction, who will buy the ticket?

Biyu

If consumers often purchase pastries to eat while they drink their cappuccinos at local coffee shops, what would happen to the equilibrium price and quantity of cappuccinos if the price of pastries falls?

Both the equilibrium price and quantity would increase.

Refer to Figure 7-15. When the price is P1, producer surplus is

C

Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?

DGH

Derek buys strawberries, and he would be willing to pay more than he now pays. Suppose that Derek has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then

Derek's consumer surplus would increase.

Which of the following is not correct? Economists have two roles: scientist and policy adviser. As scientists, economists develop and test theories to explain the world around them. Correct! Economic policies rarely have effects that their architects did not intend or anticipate. As policy advisers, economists use their theories to help change the world for the better.

Economic policies rarely have effects that their architects did not intend or anticipate.

Which of the following is not correct? Economists have two roles: scientist and policy adviser. As scientists, economists develop and test theories to explain the world around them. Economic policies rarely have effects that their architects did not intend or anticipate. As policy advisers, economists use their theories to help change the world for the better.

Economic policies rarely have effects that their architects did not intend or anticipate.

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31st house, its total cost will increase to $7.76 million. Which of the following statements is correct?

For the first 30 houses, the average cost per house was $250,000. The marginal cost of the 31st house, if it is built, will be $260,000. If the company can experience a marginal benefit of $275,000 by building the 31st house, then the company should build it. ANSWER: All of the above are correct.

In the circular-flow diagram, which of the following items flows from firms to households through the markets for the factors of production?

Goods and services

Refer to Table 7-12. You wish to purchase 10 piano lessons, so you take bids from each of the sellers. The bids are required to be rounded to the nearest dollar. You will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. Your parents have given you $450 to spend on piano lessons. You believe that the sellers with higher opportunity costs offer higher quality lessons. You want the highest quality lessons that you can afford, but you can spend any remaining money on dinner with friends. From whom will you take lessons, and how much money will you spend?

Greg; $401

In general, elasticity is a measure of

In general, elasticity is a measure of

How did the farm population in the United States change between 1950 and today?

It dropped from 10 million to fewer than 3 million people.

For a small country called Boxland, the equation of the domestic demand curve for cardboard is QD = 380 − 2P, where QD represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. For Boxland, the equation of the domestic supply curve for cardboard is QS = -60 + 3P, where QS represents the domestic quantity of cardboard supplied, in tons, and P again represents the price of a ton of cardboard. Refer to Scenario 9-1. Suppose the world price of cardboard is $139. Then, relative to the no-trade situation, international trade in cardboard produces which of the following results for Boxland?

It increases consumer surplus, decreases producer surplus, and increases total surplus.

Suppose Japan exports cars to Italy and imports wine from Argentina. This situation suggests

Japan has a comparative advantage relative to Italy in producing cars, and Argentina has a comparative advantage relative to Japan in producing wine.

If Ken can produce more eclairs in one day than Tara can produce in one day, then

Ken has an absolute advantage in the production of eclairs.

Which of the following is true when the price of a good or service falls?

More buyers enter the market

Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. Which of the following is correct?

One-half of the burden of the tax will fall on buyers, and one-half of the burden of the tax will fall on sellers.

Refer to Figure 4-27. Which of the four panels represents the market for peanut butter after a major hurricane hits the peanut-growing south?

Panel (d)

Which of the following is likely to have the most price inelastic demand?

Prescription medicine

Which of the following expressions can be used to compute the price elasticity of demand?

Price elasticity of demand =Q2-Q1/Q1+Q2 * P1+P2/(P2-P1)/2.

Refer to Figure 9-15. With the tariff, the quantity of saddles imported is

Q3 - Q2.

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?

Quantity will fall, and the effect on price is ambiguous.

Refer to Figure 6-12. Suppose a tax of $140 per unit is imposed on this market. Which of the following is correct?

Sellers will bear more of the burden of the tax than buyers will.

Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman objects that this policy would benefit the rich at the expense of the poor.

Senator Jackson's argument is primarily about efficiency, while Senator Feldman's argument is primarily about equality.

You go to the movieplex where movies ordinarily cost $8.00. You are intending to see a movie for which you have a $1.00-off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost

The amount you value the first movie + $1.00

For a particular good, a 20 percent increase in price causes a 5 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The good is a necessity.

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?

The marginal cost of going to Ft. Lauderdale decreases.

Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 1,000, P = $40) and (Q = 1,500, P = $30). Then which of the following scenarios is possible?

The vertical intercept of the demand curve is the point (Q = 0, P = $60).

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

There are many substitutes for this good.

Refer to Figure 9-1. From the figure it is apparent that

Uganda will export coffee if trade is allowed.

Refer to Figure 9-1. Relative to the no-trade situation, trade with the rest of the world results in

Ugandan consumers paying a higher price for coffee.

Refer to Figure 9-1. When trade is allowed,

Ugandan producers of coffee become better off and Ugandan consumers of coffee become worse off.

Assume, for Vietnam, that the domestic price of apples without international trade is higher than the world price of apples. This suggests that, in the production of apples,

Vietnam has a comparative advantage over other countries and Vietnam will export apples.

Who gets scarce resources in a market economy?

Whoever is willing and able to pay the price

Assume Zima buys paper in a competitive market. It follows that

Zima cannot influence the price of paper even if she buys a large quantity of them.

Refer to Figure 2-8. The movement from point A to point B is

a movement along the demand curve.

Refer to Figure 6-13. If the government imposes a price floor of $7 on this market, then there will be

a surplus of 20 units

If a binding price floor is imposed on the fish market, then

a surplus of fish will develop.

In the 1990s, inflation in the United States was

about 3 percent per year.

If an increase in income decreases the demand for a good, then the good is

an inferior good.

Suppose good X has a negative income elasticity of demand. This implies that good X is

an inferior good.

In the market for oil in the short run, demand

and supply are both inelastic.

Both Ryzard and Kalene produce hair bands and brooches. However, Kalene is better at producing both goods. In this case, trade could

benefit both Kalene and Ryzard.

A surplus results when a

binding price floor is imposed on a market

Refer to Figure 6-4. A government-imposed price of $6 in this market is an example of a

binding price floor that creates a surplus.

A decrease in supply will cause the smallest increase in price when

both supply and demand are inelastic.

Under rent control, bribery is a mechanism to

bring the total price of an apartment (including the bribe) closer to the equilibrium price.

When a tax is placed on the buyers of beer, the

burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

If a tax is levied on the sellers of flour, then

buyers and sellers will share the burden of the tax.

When a tax is levied on buyers of tea,

buyers of tea and sellers of tea both are made worse off.

Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the

buyers will bear a greater burden of the tax than the sellers.

Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana

can be thought of as the total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana.

Price controls

can generate inequities of their own.

hat is the fundamental basis for trade among nations?

comparative advantage

If the cross-price elasticity of two goods is negative, then the two goods are

complements

Which tools allow economists to determine if the a government policy benefits or hurts buyers and sellers?

consumer and producer surplus

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 Group of answer choices

cost of teaching increased.

Refer to Figure 7-1. When the price rises from P1 to P2, consumer surplus

decreases by an amount equal to B+C.

Refer to Figure 9-3. The imposition of a tariff on computers

decreases the number of computers imported by 160.

When a tax is placed on the sellers of cell phones, the size of the cell phone market

decreases, but the effective price received by sellers increases.

Refer to Figure 7-4. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

dgh

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is

elastic, since the price elasticity of supply is equal to 1.1.

Which of the following is not an example of a public policy?

equilibrium laws

When a payroll tax is enacted, the wage received by workers

falls, and the wage paid by firms rises.

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to Scenario 5-3. The change in equilibrium quantity will be

greater in the bread market than in the aged cheddar cheese market.greater in the bread market than in the aged cheddar cheese market.

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

income elasticity of demand is negative.

If the government levies a $1100 tax per automobile on sellers of automobiles, then the price paid by buyers of automobiles would

increase by less than $1100.

The supply of pickles is inelastic, and the supply of flour is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent.

increase, and total consumer spending on flour will increase.

Refer to Figure 9-1. When trade in coffee is allowed, consumer surplus in Uganda

increases by the area B + D.

Refer to Figure 9-1. When trade in coffee is allowed, producer surplus in Uganda

increases by the area B + D.

A good weather in California results in good crop of oranges causing the prices of both oranges and orange juice to fall. As a result, the consumer surplus in the market for oranges

increases, and the consumer surplus in the market for orange juice increases.

When the price of candy bars is $1.70, the quantity demanded is 500 per day. When the price falls to $1.50, the quantity demanded increases to 540. Given this information and using the midpoint method, we know that the demand for candy bars is

inelastic

A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton

is equal to 1.

To say that a price ceiling is nonbinding is to say that the price ceiling

is set above the equilibrium price.

A key determinant of the price elasticity of supply is the

length of the time period.

Refer to Figure 6-12. When the price ceiling applies in this market, and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is

less than Q3.

An example of a price floor is

minimum wage

Refer to Figure 6-9. In this market, a minimum wage of $7 is

nonbinding and creates neither a labor shortage nor unemployment.

The "invisible hand" directs economic activity through

prices

Jack builds furniture for a living. Jack's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his

producer deficit

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the

quantity supplied of toothpaste stays the same.

In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive cars. The goal of the tax was to

raise revenue from the wealthy.

The demand schedule below pertains to sandwiches demanded per week. Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following:• x = 2.• The current price of a sandwich is $3.00.• The market quantity supplied of sandwiches is 4.• The slope of the supply curve is 2.Then there is currently a

shortage of 6 sandwiches, and the equilibrium price of a sandwich is $5.00.

Suppose there is currently a tax of $80 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $80 per ticket to $64 per ticket, then the

supply curve will shift downward by $16, and the effective price received by sellers will increase by $16.

If the number of sellers in a market increases, then the

supply in that market will increase.

For a good that is a necessity, demand

tends to be inelastic

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

the availability of close substitutes in determining the price elasticity of demand.

Suppose that Jayden is filling out a survey that he received in the mail. The survey asks him what he would do if the price of his favorite toothpaste increased. Jayden reports that he would switch to a different brand. The survey asks what he would do if the price of all toothpastes increased. Jayden reports that he must use toothpaste, so he would have to adjust his spending elsewhere. These examples illustrate the importance of

the definition of a market in determining the price elasticity of demand.

Which of the following is an example of a highly organized market?

the market for soybeans

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.

When a nation first begins to trade with other countries and the nation becomes an importer of corn,

the nation's consumers of corn become better off and the nation's producers of corn become worse off.

If a price ceiling is binding, then

there will be a shortage in the market.

Daniel says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Daniel's demand for apps is

unit elastic

The minimum wage does not apply to

unpaid internships.

When two variables move in the same direction, the curve relating them is

upward sloping, and we say the variables are positively related.

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

wheat farmers would experience an increase in their total revenue.

An example of normative analysis is studying

whether equilibrium outcomes are socially desirable

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

with shortages and waiting lists, they have no incentive to maintain and improve their property.

For which of the following goods is the income elasticity of demand likely highest?

yachts

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

zero.

The figure illustrates the market for calculators in a country.

has a comparative advantage in calculators. You Answered should export calculators. is a price taker in the world economy. Correct Answer: All of the above are correct.

Workers displaced by trade eventually find jobs in

the industries in which the country has a comparative advantage.

Consider Paul's decision to go to college. If he goes to college, he will spend $90,000 on tuition, $15,000 on room and board, and $7,000 on books. If he does not go to college, he will earn $22,000 working at a construction job and he will spend $11,000 on room and board. Paul's cost of going to college is

$123,000.

If Faith attends college, it will take her four years, during which time she will earn no income. She will pay $50,000 for tuition, $12,000 for room and board, and $5,000 for books. If she spends the four years working rather than attending college, she will pay $18,000 for room and board, pay no intuition, and buy no books. Based on this information, Faith's economic cost of attending college would be $67,000 if, over the four years, she could earn

$18,000 instead of attending college.

Jeff decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Jeff pay for his computer?

$2,300

The figure illustrates the market for roses in a country. The amount of revenue collected by the government from the tariff is

$200

If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good, then for that consumer, consumer surplus amounts to

$4

Which of the following statements about trade is false?

With trade, one country wins and one country loses.

Trade makes costs

lower and raises the variety of goods and services available.

Laissez-faire is a French expression which literally means

allow them to do.

Consumer surplus is the

amount a consumer is willing to pay minus the amount the consumer actually pays.

Inflation is defined as

an increase in the overall level of prices in the economy.

A common argument in favor of restricting trade

concerns the strategy of bargaining. is that efforts should be made to get new industries started. emphasizes the belief that all countries should play by the same rules. ANSWER! All of the above are correct.

If the government levies a $0.25 tax per MP3 music file downloaded on buyers of MP3 music files, then the price received by sellers of MP3 music files would

decrease by less than $0.25.

Denise values a stainless steel dishwasher for her new house at $500. The actual price of the dishwasher is $650. Denise

does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $0.

Critics of free trade sometimes argue that allowing imports from foreign countries causes a reduction in the number of domestic jobs. An economist would argue that

foreign competition may cause unemployment in import-competing industries, but the effect is temporary because other industries, especially exporting industries, will be expanding.

When the government prevents prices from adjusting naturally to supply and demand,

it adversely affects the allocation of resources.

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

its average cost is less than its marginal cost.

The income of a typical worker in a country is most closely linked to which of the following?

productivity

For markets to work well, there must be

property rights

Which of the following words and phrases best captures the notion of equality?

sameness

A tariff is a

tax on an imported good

Within a country, the domestic price of a product will equal the world price if

the country allows free trade.

When a country allows trade and becomes an exporter of a good,

the gains of the domestic producers of the good exceed the losses of the domestic consumers of the good

For most students, the largest single cost of a college education is

the wages given up to attend school.

Market economies are distinguished from other types of economies largely on the basis of

the ways in which scarce resources are allocated.

The maximum price that a buyer will pay for a good is called

willingness to pay


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