2011 - Review 3 (December).pdf

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Department
Economics
Course
Economics 1021A/B
Professor
Jeannie Gillmore
Semester
Fall

Description
THE UNIVERSITY OF WESTERN ONTARIO LONDON CANADA M. Parkin Economics 1021 A-002/004 December 5, 2011 Review 3 MULTIPLE CHOICE. Choose the one alternative that best completes the sta tement or answers the question. 1) Sally has to decide whether to study for her economics test or her accou nting test. If she chooses to study for accounting, her opportunity cost of studying accounting is A) not comparable to the value of studying economics. B) equal to the value of studying economics. C) studying economics. D) the future lost wages that will occur if she fails her accounting exam. E) less than the value of studying economics. 2) Consider the following household. In 5 hours, Bob can cook 5 meals or cl ean 6 rooms. In 5 hours, Mary can cook 30 meals or clean 10 rooms. Select the best statement. A) Bob has a comparative advantage in cooking. B) Since Mary is better at producing both goods, she should produce both. C) Bob has an absolute advantage in the production of both goods. D) Mary should specialize in cooking. E) none of the above Use the table below to answer the following question. Table 1 Production for one week by Sheila and Bruce Sheila Bruce Good X Good Y Good X Good Y 8 0 20 0 6 1 15 2 4 2 10 4 2 3 65 0 4 80 3) Given the information in Table 1, can Sheila and Bruce gain by specializ ation? A) No, not under the given circumstances. B) It depends on the wages each earns . C) Yes, if each specializes in the good in which he has a comparative advan tage. D) Only if they are married to each other. E) Yes, but only if Bruce gets paid more than Sheila. 1 4) Suppose John and Joe each have different production possibility frontiers; John specializes in cloth and Joe specializes in corn. John's island unexpectedly has exceptionally good weather, and suddenly he is twice as productive in the production corn and cloth. Select the best statement. A) There will be no change in what John and Joe specialize in, because John's comparative advantage has not changed. B) As a result, John will have an absolute advantage in both corn and cloth. C) As a result, it is possible that John and Joe will switch what they specialize in. D) This is an example of unemployed resources becoming employed. E) There will be a change in what John and Joe specialize in, because John's opportunity cost of production will have risen. 5) A technological improvement in the production of good A) increases the supply of . B) increases the demand for . C) decreases the quantity demanded of . D) decreases the equilibrium price and decreases the equilibrium quantity. E) decreases the supply of . 6) If and B are complements and the cost of a factor of production used in the production of decreases, then the price of A) both Aand B will rise. B) A will fall and the price will rise. C) A will rise and the price will fall. D) both Aand B will fall. E)A will fall and the price will remain unchanged. 2 Use the table below to answer the following question. Table 2 The Market for Car-Seat Heaters Price Quantity Demanded Quantity Supplied (dollars per heater)(heaters per month) (heaters per month) 40 500 300 50 450 350 60 400 400 70 350 450 80 300 500 90 250 550 100 200 600 7) Refer to Table 2. Suppose a problem develops with car-seat heaters - they malfunction and occasionally cause serious burns. As a result, demand decreases by 100 heaters at each price. The new equilibrium price is $________ and the new equilibrium quantity is ________ heaters per month. A) 60; 400 B) 50; 450 C) 70; 450 D) 70; 350 E) 50; 350 Use the table below to answer the following question. Table 3 Price Quantity per Volleyball Dema
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