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University of Calgary
ECON 201

Econ 201 Principles of Macroeconomics Dr. Phillip Miller Practice Questions for Exam 1 Spring 2003 1. Mike is thinking about going camping at Blue Mounds State Park this weekend. Earlier in the year he bought a pass for $20 that allows him into any state park in Minnesota for the year. He regularly visits state parks in Minnesota, so his decision to buy the pass was not dependent on making this particular trip. Mike will burn approximately 10 gallons of gas to make the trip (round-trip) to the campsite. Assume gas costs $1.50 per gallon. Mike usually works a 4 hour day on Saturday, but he will be gone the entire weekend if he goes camping. Mike gets paid $15.00 for each hour he works. What is Mike’s opportunity cost of this camping trip? 2. The following table summarizes the productivities of two people in cleaning rooms. Rooms per hour Vaccum Dust Sharyl 3 2 1. Jerry 1 1 b. Who has the absolute advantage in vacuuming? Who has the absolute advantage in dusting? c. Calculate each person’s opportunity cost in each task. Who has the comparative advantage in each task? d. Suppose Jerry proposes to dust 20 rooms for Sharyl if she will vacuum 25 rooms for him. In terms of rooms vacuumed, what is Sharyl’s price to have one room dusted under this proposal? What is Jerry’s price of having one room vacuumed (in terms of rooms dusted)? Is this proposal
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