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Eco1104F Introduction to Microeconomics.docx

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University of Ottawa

Eco1104F Introduction to Microeconomics Part I Multiple Choice subtotal 45 points one point for each questionIdentify the choice that best completes the statement or answers the question1Lisa buys a 1982 BMW which she plans to restore and sell She anticipates that the cost of the car and the repairs will be 14000 and that she can sell it for 20000 When she has spent 11000 she discovers she needs to replace the engine which will cost 5000 She can sell the car without the new engine for 14000 What should Lisa doacomplete the repairs and sell the car for 20000bcut her losses and sell the car now for 14000cnever try such an expensive project againdbe totally indifferent between finishing the project and selling the car now2To improve living standards what should policymakers doaimpose restriction on foreign competitionbformulate policies designed to increase productivitycimpose tougher immigration policiesdprovide tax breaks for the middle class3In a circularflow diagram which flows are involvedaTaxes flow from households to firms and transfer payments flow from firms to householdsbIncome payments flow from firms to households and sales revenue flows from households to firmscResources flow from firms to households and goods and services flow from households to firmsdInputs and outputs flow in the same direction as the flow of dollars from firms to households4In economics what does capital refer toathe finances necessary for firms to produce their productsbbuildings and machines used in the production processcthe money households use to purchase firms outputdthe value of stock market shares to investors5Suppose there are two countries Freedonia and Sylvania that have identical amounts of resources identical technologies and identical populations Both produce two types of goods consumer goods and capital goods and they both always operate on their production possibilities frontiers The only difference is that this year Sylvania chooses to produce relatively more consumer goods than Freedonia What will happen as a resultaFreedonia will have a higher living standard this year but will grow slower than SylvaniabFreedonia will have a higher living standard this year and will grow faster than SylvaniacSylvania will have a higher living standard this year but will grow slower than FreedoniadSylvania will have a higher living standard this year and will grow faster than Freedonia
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