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1

I am considering joining a “shopper’s club”, where I pay $100 membership fee and then get a twenty-five percent discount on all my purchases. In making my decision, I should

A. only join if I plan to make at least $100 of purchases

B. ignore the membership fee since it is a sunk cost

C. only join if I expect to get at least $100 worth of discounts

D. only join if they promise to refund my membership fee if I’m not satisfied

C

2

You observe that a hot dog vendor lowers his prices in the late afternoon. Which of the following is a plausible economic rationale?

A. The opportunity cost of the hot dogs has fallen.

B. People are less likely to buy hotdogs in the late afternoon than earlier in the day.

C. The marginal benefits of alternative activities (for example, meeting friends for a drink) rise in the afternoon.

D. All of the above

D

3

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

A. you like movies more than economics.

B. you may like movies more than economics, but you value economics more at the margin.

C. you consider the opportunity cost of going to the movies to be less than the opportunity cost of studying economics.

D. at the margin, you value an evening of movie watching more than an evening of economics

E. None of the above.

D

4

. Movie-goers who are willing to put up with long lines at a cinema to get a lower price are

A. not observing the marginal principle.

B. haven’t evaluated the marginal cost of the time they give up

C. would give up any amount of time to save a little money

D. all of the above.

E. none of the above.

E

5

For which of the following is there a market?

A. Orange juice.

B. Pedigree dogs.

C. Hiking in national forest land.

D. All of the above.

E. Just a and b.

D

6

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

A. can’t be determined without knowledge of the price.

B. are $28.

C. are $12.

D. are $16.

E. are $40.

D

7

Buyers and sellers communicate primarily

A. through surveys.

B. through government agencies.

C. through advertising.

D. through their willingness to buy and sell at various prices.

E. All of the above.

D

8

If the supply of “roots” (an input) increases, what would we expect to happen in the market for root beer?

A. Demand to increase.

B. Demand to decrease.

C. Supply to increase.

D. Supply to decrease.

C

9

If equilibrium price in a market has risen from $10 to $25 and the equilibrium quantity has fallen from 50,000 to 35,000, we would know that

A. demand has increased.

B. supply has decreased.

C. demand has decreased.

D. supply has increased.

E. both supply and demand have decreased.

B

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