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1

1. The term which means whatever must be given up to obtain an item is

c. Opportunity Cost

2

2. Scarcity, every economic decision involves

a. Trade off

3

3. In order to fix 1 car tire, jerry fixed 3 bicycle tires. In order to fix 1 car tire, berry fixes 5 bike tires, who has the comparative advantage

a. Berry has the comparative advantage over Jerry

4

4. GRAPH
a. Biff is 9, 6. Howie is 12 9 The answer is absolute advantage in both activities.

a

5

5. GRAPH
a. The prices were a) 10 b)8 c)6  I put 6 - WRONG

a

6

6. Milk can be used to make yogurt and cheese, other things equal, if consumption starts demanding more yogurt
a. Supply of milk will decease.
b. Demand of milk will increase.
c. Supply of milk will increase
d. Demand of milk will decrease
e. None of the above

E
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Complements so since increase in demand of yogurt, increase in demand of milk.
B.

7

7. if resources are owned by individuals instead of government

c. resources used will be guided by changing related to prices as owners attempt to maximize self interest

???
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Self interest.

8

8. Demand for cocaine is unit Elastic, price of cocaine were to rise 10%,

b. quantity demand will fall 10%

9

9. Price for a 27 TV = $450. consumers buy 1000 of them, prices rises to $550 by 600 of them. What is the price elasticity of demand in this range.

Answer is 2.5

10

10. In economics “short run” is defined

a. A period of time during which at least one production input is fixed.

11

11. The total cost to build 8 tract houses is $1,000,000. total cost to build 9 tract houses $1,050,000. What is the Margin cost of the 9th tract house.

a. NOT 116,667

MC = Change in TC / Change in Quantity

Use this formula
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change in TC = 50000
Change in Quantity = 1

MC = 50k

12

12. once it becomes obvious that a common resource is being overused

The answer is B. as a period of time when at least one of the four factors of production is fixed.

13

13. If the equilibrium of a dollar in terms of pesos is 20. what is the equilibrium price in terms of dollars

.05

14

Related to gasoline, which graph demonstrates the effect of an increase in the price of Cars

-NOT Demand shift right

???
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increase in the price of cars means decrease in quantity demanded for cars.

since gasoline is a complement, it also means a decrease in quantity demanded for gasoline.

15

15. Accounting profit is equal to?
A. Total revenue minus the explicit cost of producing goods and services.
B. Total revenue minus the opportunity cost of producing goods and service.
C. Average revenue minus the average cost of products the last unit of a good or service.
D. Marginal revenue minus marginal cost.
E. Total revenue minus depreciation.

C
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Revenue - explicit.
A.

16

16. Comparative advantage is based on?
A. Capital cost.
B. Labor cost.
C. Opportunity costs.
D. Dollar Price.
E. Both labor and capital costs.

C
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opportunity costs.

17

17. Alternative outputs from one day of Labor?
Wheat (is bushels) Textile (in yards)
United States 12 3
Great Britain 3 12
According to the table above, the United States

A. Has an absolute advantage over Great Britain in the production of textiles.
B. Has an absolute advantage over Great Britain in the production of wheat.
C. Has a comparative advantage in the production of textiles.
D. Should export textiles to Great Britain.
E. None of the above.

B
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correct.

18

18. Which of the following would not tend to lower the price of VCR?
a. Decreasing price of DVD players.
b. Increasing price of video cassettes.
c. Improvements in VCR production technology.
d. Reduced price of raw material used in making VCR’S
e. Increasing price of pay per view movies on cable TV.

C

19


19. Fresh tuna can be canned or used to make sushi. Other things equals, if consumers starts demanding more sushi?
a. The price of tuna will fall.
b. Less tuna will be canned and more will be used in tuna sushi.
c. The supply of fresh tuna will decrease.
d. The price of tuna sushi will fall.
e. None of the above.

B

20

20. At a price of $9.50/pound, people buy 45 pounds of lamb. At a price of $10.50/pound, people buy 35 pounds of lamb. What is the arc elasticity of demand for lamb in this price range?
a. 1.0
b. 2.5
c. 0.4
d. 3.0
e. none of the above

D
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(35 - 45)/ [(45 + 35) / 2]
-10/ (80/ 2)
= -.25

(10.50 - 9.50) / [(10.5 + 9.5) / 2]
1/ (20/2)
= .1

-.25/.1
= -2.5

E. None of the above. Arc elasticities of demand are always negative.

21

21. In economics, short run is defined as?
a. A period of time less than a year.
b. A period of time during which at least one production input is fixed.
c. A period of time less than one month.
d. A period of time during which all production inputs are fixed.
e. A period of time during which all production inputs are variable.

B

22

24. The table below shows a firms cost for range of quantity. Find the value of X?

Q TC ATC MC
100 500 5
X
120 720 6

a. 11
b. 20
c. 1
d. 220
e. None of the above.

A
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MC = change in TC / change in Q
220/ 20 = 11
A.

23

25. Compared to perfect competition, monopoly in the long run?
a. Restricts outputs
b. Changes a higher price.
c. Produces at greater than the minimum average total cost.
d. Is able to make greater profits.
e. All of the above.

E

24

26. A foot-Loofah is worth $15 to Edna. But she buys one on sale at Bath and Body works for just $8 what is the consumer surplus that results from edna’s purchase?
a. $8
b. $15
c. $7
d. $23
e. Cannot be determined from the information given.

C
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She was WILLING to pay 15, but received it for only 8 dollars; she saved 7 dollars as the "consumer surplus"

C.

25

27. If purchases power parity exists and the exchange rate is 1.50 u.s. dollars per British pound, then a latte that has a price of $4.00 in Northridge, California, has a price of _ in London, England?
a. 8.00 pounds
b. 4.00 pounds
c. 6.00 pounds
d. 2.67 pounds
e. .38 pounds

D
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4 dollars/ x = 1.5 dollars/pound
x = 4 dollars / 1.5 dollars/pound
x = 2.67 pounds.

26

Cost of $500,000 a year to rent and buy stock. 50,000 a year at working for accounting and wants to quit what is the opportunity cost?
A.500,000 B. 550,000 C.450,000 D.50,000 E. 450,000(wrong) 60,000

B

27

Because of scarcity, every economic decision involves
A. Trade-off B. trade-in C. money payment D. increasing cost E. tax or tariff

A

28

30. Bliff and Harvey in 1hr. what is the absolute advantage?

1 hr. Bliff Harvey
Martins 9 12
Gin 6 9

Harvey does has both absolute advantage

29

. Opportunity cost of producing 1 pound of meat
½ of a potato

A

30

. What will cause outward shift of the Demand curve for electricity?
a. decrease in price of electricity
b .increase in price of A/C
c. Increase in price of heating oil
d. decrease in price of natural gas
e. increase in price of electricity

C

31

A raise in the demand for a resource to produce some product (x) will
a. Raise the cost of using the resource for an alt. product
b. Reduce the use of that resource in alt lower valued production
c. Increase the value of the resource
d. All

D

32

Economists can be college professor as business analysis. If an increase in businesses’ need for econ analysis
a. wages of economists will tend to decrease
b. colleges will have to pay less money to hire econ as professors
c. more economists will decide to become professors
d. less economists will decide to become professors
e. None

E

33

Price elasticity of demand

Percentage change of Qd divide change in P

34

37. Elasticity of demand
Quantity Price
A 4 15
B 12 6

1.17
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% change in Quantity/ % change in Price

positive change in quantity, negative change in price.

8/ [(4+12)/2] / -9/ [(15 + 6)/2]
8/8 / -9/ 10.5
1 / -.8571
= 1.17

35

MC is

MC = Change of TC/ Change of Q

36

AVC is

ATC = TC/Q

37

TR= 770
FC=200
TC=860
What would you recommend to the store after looking at the data above?

Close now or stay open in short run and plan to close in the long run

38

. graph to locate the CS

BAC

39

42. foreign exchange market
They will lower price (W/A)


43. common pool resource
Public park (W/A)
Water (W/A)

A

40

44.
In 40 hours Cheese Bread
England 40 20
Scotland 20 5

England will import Cheese and Scotland will import Bread

41

Helena does her bathroom Saturday night and she wants to see a movie and surf the web. If she doesn’t clean her bathroom and surf the web what is the value (note she can not see the movie and surf the web).
a) Value to Helena of watching a movie
b) Value to Helena of surfing the web
c) Value to surf the web Plus watching the movie
d) Value to surf the web Minus watching the movie
e) Clean her bathroom minus the value of surfing the web (WRONG)

????
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Opportunity cost problem.

42

In 40 hours Cheese Bread
England 40 20
Scotland 20 5
Don’t remember the question could have been how many units of bread does it to make cheese
½ (wrong)
¼
2
4

????
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England: 40 cheese per 20 bread
2 cheese per bread.

Scotland: 20 cheese per 5 bread
4 cheese per bread.

Scotland should produce bread while England produces cheese.

43

47. No doubt ticket is $45 and you want to illegally sell it (scalp) for $75 what is the opportunity cost?
$30 (WRONG)
$ 45 (I think this is correct)
$ 75
$ 115

????
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it's the $45 of watching the concert.

44

. Law of demand states

Price and quantity demand of a good are inverse related

45

More buyers enter a market Demand increases….
Quantity supply lends to increase
The product are able to use resourcing with higher opportunity cost
Price of good will raise (or increase)
………………..
All

All

46

elastic demand at any time
A. Cigarettes
B. Jewelry
C. Water
D. Gas
E. Electricity

A or B
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Things that have plenty of substitutes are elastic. Luxury goods are elastic.

Inelastic things are necessities.

B.

47

Good A has many substitutes and Good B has none what is true
A. Demand for Good B is likely to be elastic and Good A is inelastic
B. Demand for Good B is likely to be inelastic and Good A is elastic
C. Good A and B are elastic
D. Good A and B are inelastic

B

48

TC is $60,000
VC is $55,500
What is FC? ___
Q TC MC
10 10,000
X
20 25,000

What is X?

FC= 4,500


X=1500
------------------------------------------------------------------------
TC = FC + VC
60k = FC + 55.5k
FC = 4.5k


MC = change in TC / change in Q
= 15000/ 10
= 1500

49

What is true about new entry?

ALL

50

Graph and it is asking about a point on the graph (location is right outside of the Equilibrium

The Deadweight loss of over supply

51

drachmic is 50 what is the currency of US dollars
A. .50 (W/A)
B. 50.00
C. .02
D. .20
E. None of the above

D

52

56. In economics the cost of something is?

A. The out-of-pocket expense of obtaining it.
B. What you must give up to get it.
C. Always measured in units of time.
D. Always higher than people think
E. None

B

53

57. Cheese Bread
England 40 20
Spain 20 5
What is the opportunity cost of producing 1 unit of bread (Ex. England produces 40 units of cheese in 40 hours)?

A. 4 cheese
B. 2 cheese
C. 1/2 cheese
D. 7 cheese
E. ¼ cheese

A
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England: 1 bread = 2 cheese

Spain: 1 bread = 4 cheese

54

58. In LA sushi and sashimi are very similar food. What effect will an increase in price of sushi have on the demand curve for sashimi in LA?

A. There will be movement down the sashimi demand curve.
B. The sashimi demand curve will not be affected.
C. There will be movement up to the sashimi demand curve.
D. The sashimi demand curve will shift to the right.
E. The sashimi demand curve will sift to the left.

D
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substitutes.

55

59. In a market economy?

A. Resources are distributed equal across the all possible users.
B. resources move to higher valued uses in respond to change in price.
C. Resources usage is independent of the price.(WA)
D. Most resources are distributed by the government (WA)
E. All of the above.

???
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Market economy the resources adjust to the price.
B.

56

60. A factory produces 1,000 MP3 players per week. AVC=$10, FC=5,000, TC=?

A. 15
B. 5,005
C. 6,000
D. 15,000
E. 50,000

D

57

61. Which is true?

A. MC= TC/ Q
B. MC= TFC/ Q
C. MC= ATC/ Q
D. MC= Q/ L
E. None

A
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TC / Q = ATC
TFC / Q = AFC
ATC / Q = something else.
Q/ L = labor demand?

E. None since it's the change in TC / change in Q.

58

62.Airline know from exp. Vacation travel have elastic demand for travel whereas business travels have an inelastic demand for travel in order maximize the airline should?

A. Offer everyone a discount to increase sales.
B. Increase price to everyone.
C. Try to increase price for vacation travelers and decrease price for business travelers.
D. Try to decrease price for vacation travelers and increase price for business travelers.
E. Ignore this information

D

59

63. Monopolist sets price a $12 and sells 250 units. The marginal revenue cost corresponding to this level of output are $6 and $8 respectively. What recommendation would you give this monopolist.

A. Lower price.
B. Raise the price
C. Raise the output level
D. Keep the same price
E. Keep the same output level (WA)

????
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Monopolists exhibit

60

64. Consumer surplus is equal the area below the _________ and above___________

A. Price; Supply Curve
B. Demand Area; Price
C. Demand Curve; Supply Curve
D. Price; Demand Curve
E. Supply Curve; Demand Curve

B

61

65. An unregulated negative production externality will cause a private market to
(It’s a negative production)
A. Produce less than is socially optimal (More Likely)
B. Produce more than is socially optimal
C. Produce more than market equilibrium
D. Produce less than market equilibrium (WA)
E. Produce the amount that is socially optimal

Most likely A

62


67. On the foreign exchange market, an increase in a country’s exchange rate (Might not be complete sentence)
Because once the price goes up demand goes down.
A. Decrease the quantity demand of its currency (Prob this)
B. Increase the quantity demand of its currency (WA) (Prob right?)
C. Has no effect on the quantity demand of its currency
D. Decrease the quantity supplied of its currency
E. has no effect of the quantity supplied of its currency

A/B

63

68. If you want to know the long-run equilibrium output of one perfectly competitive firm, and you are permitted to see only one curve, which one below is most helpful?

A. Demand
B. Marginal Cost
C. Average total cost
D. Average Fixed cost
E. Average Variable cost

C

64

69. An increase in demand for a product will

d. draw more resources into the production of the good

65

P1 = 4.5, P2= 5.5 Q1 = 55, Q2= 45
What is the elasticity of demand

10/50 / 1/5 = 1


66

the entry of new firms into a competitive industry will very likely
a. shift the short run industry supply curve to the right
b. cause the market price to fall
c. reduce the profits of firms in the industry
d. cause the market quantity sold to rise
e.all of the above (positive correct

E

67

which of the following would cause an increase in the demand for us dollars.
a. An interest rate cut in the US
b. An interest rate cut in Europe (positive correct
c. An interest rate increase in Europe
d. A recession in Europe
e. Less desire by Europeans for US goods

B

68

bob could do 3 broken legs and 7 bandage wounds, James can do 2 broken legs and 5 bandages wounds

What does bob have?

Bob has both absolute advantage

69

Itchy Scratchy
Bread 10 8
Meat 6 4

Scratchy has both Comparative advantage(WA)

?? U know how to do these
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Another opportunity cost problem.

Itchy: 1 meat = 1.67 bread
Scratchy: 1 meat = 2 bread

Itchy has a lower opportunity cost for bread (gives up less bread for meat) so he has a comparative advantage in bread.

Scratchy has comparative advantage in meat.

Itchy has the absolute advantage in producing both bread and meat (2 more in bread and meat).

70

pyshcologist can be college professors or private therapist. If then

ALL OF THE ABOVE

71

the 10th house is 8,000,000 and the 11th house is 9,000,000

1,000,000

72

81 chart


Where is the consumer surplus (KNOW THE COMMON SURPLUS)

B+C

73

A positive consumption externality occurs when ;
A. When jack receives a benefit from johns consumption of a certain good
B. When jack receives personal benefit from his own consumption of a certain good (WA)
C. When jack benefits exceed johns benefits wo…………
D. When jack consumes of a good is not beneficial to john
E. None

A

74

Video store gave an estimate it will cost 500,000 and to quit her job she makes 50,000 and the revenue will be 530,000 what is her econ profit?
50 k
20k
30k
None (WA)

Should be negative
500-530-50=-20k
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Revenue - Explicit - Implicit Costs
530 - 500 - 50 = -20k