Econ: Supply and Demand and Fewer Electric Guitars

Topics: Supply and demand, Economics, Marginal cost Pages: 10 (991 words) Published: September 17, 2010
ECON 5103 Sample Mid Session
 | 1. To say that a country possesses an absolute advantage means that:  |

A.  | it is relatively more endowed with natural resources than another country.|

B.  | it is relatively more efficient at producing some but not all goods and services than another country.|

C.  | it is relatively more efficient at producing goods and services than another country.|

D.  | there are no gains to specialisation for this country.| | |

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2. | Use the table to answer the question. Employee| Electric guitars per hour| Acoustic guitars per hour| Mark| 10| 1|
Glenn| 8| 8|
Dennis| 2| 20|
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The opportunity cost of an extra acoustic guitar for Mark is: |

A.  | 0.01 fewer electric guitars.|

B.  | 0.69 fewer electric guitars.|

C.  | 1 fewer electric guitar.|

D.  | 10 fewer electric guitars.|
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3. | Shane and Barry live in the same house and share the washing and cooking duties around the house. Shane can either prepare four meals or do 16 washes and Barry can either prepare 16 meals or do eight washes in an hour. If they want to specialise and trade their work load, what would be a relative exchange of work in terms of meals and washes for Shane and Barry so that they both benefit? |

A.  | 4 meals per wash|

B.  | 3 meals per wash|

C.  | 2 meals per wash|

D.  | 1 meal per wash|
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4. | As the price of a good rises: |

A.  | firms earn larger profits.|

B.  | more firms can cover their opportunity costs of producing the good.|

C.  | firms find they can raise price by even more.|

D.  | consumers become more willing to purchase the good.| | |
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5. | Suppose the marginal cost of producing the third TV is $200 and the total cost of producing three TVs is $750. TVs are sold for $250 each. What is the seller's reservation price for the third TV? |

A.  | $50|

B.  | $200|

C.  | $500|

D.  | $750|
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6. | If the price of cheese falls by one percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese has a value of: |

A.  | .03.|

B.  | .30.|

C.  | 3.|

D.  | 30.|

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 | 7. When the price of cars is $15 000 each, 11 000 cars are sold every month. After increasing the price to $16 500 each, 10 000 cars are sold every month. At the original price, what is the price elasticity of demand for cars? |

A.  | 1.5|

B.  | 1|

C.  | 0.75|

D.  | 0.67|

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8. |

The marginal utility of the second roller coaster ride is: |

A.  | 25.|

B.  | 50.|

C.  | 75.|

D.  | 100.|

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| 9. For the two good case, the rational spending rule requires that: |

A.  | total expenditures on the two goods be equal.|

B.  | the ratio of marginal utility to price be equal for the two goods..|

C.  | average utility from the two goods be equal.|

D.  | the extra utility from the last dollar spent on one good is greater than the extra utility from the first dollar spent on the other good.| | |

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 | 10. A profit-maximising, perfectly competitive firm must decide: |

A.  | only on what price to charge, taking output as fixed.|

B.  | both what price to charge and how much to produce.|

C.  | only on how much to produce, taking the price of the good as fixed.|

D.  | only on which industry to join, taking price and output as fixed.|

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| 11. At the local pizza parlour, pizzas sell for $10 a pie. Consider the following information:

The pizza shop earns a __________ of __________ when it uses three workers per day. |

A.  | loss, $550|

B.  | profit, $550|

C.  | loss, $950|

D.  | profit, $ 950|

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 | 12. Consider the...
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