ECON 2110 Practice Exam 1

You want to purchase two pizzas. The price is $8 per pizza, 2 for $15, and 3 for $20. What will be the marginal cost to you of buying a third pizza?

$5

If Jason sells a rifle for $125 and his producer surplus is $75, his cost must have been

$50

Caitlin would be willing to pay $50 to see Les Miserables, but buys a ticket for only $30. Caitlin values the performance at _____ and her consumer surplus is ______.

$50,$20

Austria and Albania each produce tea chests and violins. In a day, an Austrian worker can produce 400 tea chests violins. In a day, an Albanian worker can produce 100 tea chests or 1 violin. A trade that would make both countries better off is:

1 violin for 150 tea chests

Austria and Albania each produce tea chests and violins. In a day, an Austrian worker can produce 400 tea chests violins. In a day, an Albanian worker can produce 100 tea chests or 1 violin. What is the cost of producing a tea chest in Albania?

1/100 of a violin

You cut down 4 trees or dig 12 holes in an hour. You can cut down 3 trees or dig 6 holes in an hour. The cost of one of of my trees is:

3 holes

If demand is Qd = 90-P and supply is Qs=P-30, total surplus is

900

The Law of Demand

says that people buy less of a good when price rises (all else held constant)

If you buy a motorcycle for $1,000 and then discover that you hate riding it and will never ride it again, the best thing to do is:

sell the motorcycle for the best offer you can get

The real power of trade lies in people's ability to:

specialize and increase production

You cut down 4 trees or dig 12 holes in an hour. You can cut down 3 trees or dig 6 holes in an hour. We could both be made better off if i:

specialize in digging holes

At the intersection of the supply curve and the demand curve:

the quantity supplied equals the quantity demanded, no buyer who is willing to pay the market price goes without, no seller who is willing to sell at the market price is unable to do so.

When there is excess supply,

there is downward pressure on price

If we as a country decided to dedicate more resources to making meat safe,

there will be less left over to do other desirable things

The idea that human behavior is "self-interested" assumes that people want

to advance projects in which they are interested

Use the economic model: As you spend more time studying, we would expect the cost of that studying

to rise at the margin, if there are other things you like to do

The cost of a college education includes:

tuition paid, textbooks purchased, a foregone salary at alternative employment

Bill Gates dropped out of college and founded Microsoft. His opportunity cost of continuing to attend college was

tuition, the cost of books, and the income from his Microsoft pursuits

In economics, the cost of something is

what you must give up to get it

The idea that "people respond to incentive" would lead us to conclude that the murder rate:

would fall if tougher penalties are enacted

If you say that expanding the food stamp program is the right thing to do, and I reply that expanding the program will lead to less resources spent in other areas, we are unlikely to have a meeting of minds because:

you are making a normative argument and I am making a positive statement.

U.S. can make 10 roses or 40 daffodils and Mexico can make 5 roses or 10 daffodils. Therefore,

The U.S. has the absolute advantage in both products and the comparative advantage in daffodils

How do buyers and sellers coordinate their desires?

Through their independent effect on prices

If you decide to go to a movie this evening rather than study econ, you thereby demonstrate that

at the margin, you value two hours of movie watching more than two hours of studying econ

If you pay $400 for a seasonal pool pass at a private club, the marginal cost to you of swimming on any given weekday will be

$0

What is the change in total producer surplus if the price rises from $2 to $2 per unit?

$15

Which would leave Bob better off (measure as "benefits less costs"), paying $25 for an "all the plates of clams you can eat" buffet, or paying $4 for each plate of clams?

$4 per plate

U.S. can make 10 roses or 40 daffodils and Mexico can make 5 roses or 10 daffodils. Both countries could be made better off by participating in trade at a price of

1 rose for 3 daffodils

Austria and Albania each produce tea chests and violins. In a day, an Austrian worker can produce 400 tea chests violins. In a day, an Albanian worker can produce 100 tea chests or 1 violin. Which of the following is true?

Austria has the comparative advantage in tea chests and Albania has the comparative advantage in violins.

It takes Jessica 4 hours to catch a fish on a deserted island and 2 hours to gather a coconut. Her partner, Darius can catch a fish in 4 hours and it takes him 4 hours to gather a coconut. Which of the following statements is FALSE?

Jessica has an absolute and comparative advantage in gathering coconuts.

In the range for which of the demand curve for a good is above the supply curve,

people value the good more than it costs to make it.

Two persons each produce two identical goods. Which of the following is true about their absolute and comparative advantages in the production of these two goods?

One person can have an absolute advantage in both goods but not a comparative advantage in both goods

Which of the following is NOT true of trade

Trade makes rich people richer and poor people poorer

U.S. can make 10 roses or 40 daffodils and Mexico can make 5 roses or 10 daffodils. Which of the following is true?

Trade would make both countries better off if Mexico specializes in roses and the U.S. in daffodils

What factor is responsible for ending malaria in the United States?

Wealth

Which of the following is not a positive statement?

You should learn to take better care of your cookies.

Should you paint your own house or hire a painter to do it for you? Your comparative advantage as a painter increases you

all of the above

If a buyer values a product at $28 and a seller's opportunity cost of providing the product is $12, the gains from trade:

are $16

A seller will be willing to sell a product only if

the price received is at least as great as the cost of production

If each of us had to grow our own food:

civilization would collapse and billions of people would starve

The economic way of thinking would lead us to conclude that obesity rates would rise if

food becomes easier to prepare, food prices in the grocery store drop, exercise becomes more difficult to engage in.

The concept of opportunity cost suggests that the cost to airlines of allowing employees to fly for free is:

greater at Christmas than in mid-february

The decision whether to purchase the "all you can eat" buffet versus ordering from the menu at fixed prices

is a marginal decision

The economics model:

is about how people make choices

The professional basketball players' union negotiates a contract that dramatically increases all players' salaries. How would this influence the cost to a player of quitting basketball to pursue a career in broadcasting?

it would increase the cost

A friend of yours invests his lifesavings in a yacht even though he has never sailed, can't swim, and hates being out on the water. You try to talk him out of it, but he won't listen. His purchase of the yacht:

makes him better off

The costs that influence decisions to supply are always

marginal costs

This means that dedicating more resources to making meat safer,

may be a good or bad idea, depending on the marginal benefits and costs.

If people are "rational" in the economic sense, they

none of the above

When I visit family in Connecticut, I usually drive rather than fly. Therefore, using the economics way of thinking, you can deduce that

none of the above

You cut down 4 trees or dig 12 holes in an hour. You can cut down 3 trees or dig 6 holes in an hour. A trade that would help us both is:

one of your trees for 2.5 of my holes

Division of knowledge refers to:

people learning different tasks in which they specialize

If sellers want to sell more products than buyers are willing to purchase, we know that

the current price is greater than the equilibrium price

After graduating from high school, steve had three choices, listen in order of preference: (1) matriculate at Clemson, (2) work in a printed circuit board factory, or (3) attend a rival college. His opportunity cost of going to Clemson includes:

the income he could have earned at the printed circuit board factory and the direct cost of attending clemson

When Adam Smith coined the term "invisible hand," he was referring to

the market