EC120 Study Guide - Midterm Guide: Absolute Advantage, Economic Equilibrium, Inferior Good

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Mark the one best answer to each of the following 30 multiple choice questions on the answer sheet. Be sure to mark the answer by the corresponding question number on the answer sheet. Do not make any stray marks on your answer sheet. Along a linear production possibility boundary, 1 unit of resources can produce 3 units of clothing or 1 unit of food. What is the opportunity cost of producing 1 unit of clothing? (a) 3 units of food (b) 2 units of food (c) 1 unit of food (d) 1/3 unit of food. Suppose that an equal quantity of resources can produce two radios or four cameras in the united states and one radio or three cameras in italy. Consider the following two statements. (1) an increase in the price of eggs will cause a decrease in the demand for eggs. (2) an increase in the price of eggs will cause a decrease in the demand for bacon.

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3. A decision at the margin

Van is a hard-working college senior. On Thursday, he decides to work nonstop until he has answered 200 practice problems for his economics course. He starts work at 8:00 AM and uses a table to keep track of his progress throughout the day. He notices that as he gets tired, it takes him longer to solve each problem.

Time	Total Problems Answered
8:00 AM	0
9:00 AM	80
10:00 AM	140
11:00 AM	180
Noon	200

Use the table to answer the following questions.

The marginal, or additional, gain from Van's first hour of work, from 8:00 AM to 9:00 AM, is:

The marginal gain from Van's third hour of work, from 10:00 AM to 11:00 AM, is:

Later, the teaching assistant in Van's economics course gives him some advice. Based on past experience, the teaching assistant says, working on 30 problems raises a student's exam score by about the same amount as reading the textbook for 1 hour. For simplicity, assume students always cover the same number of pages during each hour they spend reading.

Given this information, in order to use his 4 hours of study time to get the best exam score possible, how many hours should he have spent working on problems, and how many should he have spent reading?

1 hour working on problems, 3 hours reading

2 hours working on problems, 2 hours reading

3 hours working on problems, 1 hour reading

4 hours working on problems, 0 hours reading

goldsalmon356

Carol holds a two-digit number X and wants Alice and Bob to recover the number. She gives them the following information.

Both Alice and Bob know that the number held by Carol is one of the following.

21 26
31 32 35
42 44
52 54 57
62 67

Alice knows the number of ones of X but not the number of tens.
Bob knows the number of tens of X but not the number of ones.

Alice and Bob exchange the following messages.

(a) Bob to Alice: ’You might know X’.
(b) Alice to Bob: ’I did not, but, after what you have said, I do’.

Based on the above information, please answer the following questions. For each question, please accompany your answer with a short explanation of why your believe your answer is correct. Marks will not be awarded for answers without any explanation.

(a) Based on the statement of Bob it is possible to narrow down candidates for the number of tens from the initial five possibilities down to just two. What are these two possibilities? (7 marks)
(b) Based on the ’I did not’ statement of Alice, the number of candidates for X can be narrowed down to just three. What are these candidates (6 marks)
(c) The remaining part of Alice’s statement allows to identify X precisely. What is X? (7 marks)

cerisewombat429

Microeconomics Multiple Choice four-part question. Give a short explanation for each part of how or why the answer is correct.

Part A.

After Rachene bought a magazine subscription, she does not enjoy the articles in the magazine. However, she dutifully reads the entire magazine every month because she had already paid for the subscription, and she feels the money will be wasted if she does not read it. What psychological factor associated with behavioral economics explains Rachene's behavior?

	a. overconfidence
	b. the sunk cost fallacy
	c. a framing bias
	d. overvaluing the present relative to the future

Part B. Bayram had the opportunity to choose between two investments. The first investment was described as having a 30% chance of succeeding, while the second investment was described as having a 70% chance of failing. Bayram opted for the first investment because he thought it sounded less risky than the second investment. The chances of succeeding and failing are the same for the two investments, however, which implies that Bayram is subject to:

a. overvaluing the present relative to the future.

b. a framing bias.

c.a sunk cost fallacy.

d. overconfidence.

Part C: Because they are so sure of their ability to pick winners, some people hang on to a stock even in the face of overwhelming evidence that its price is going to drop. These people are subject to:

a. overvaluing the present relative to the future.

b. a sunk cost fallacy.

c. overconfidence.

d, a framing bias.

Part D: Ryan stayed out late last night and is very tired. He plans to skip his 8 A.M. economics class, even though he knows his professor will cover material that will be on the final exam. Ryan is subject to:

a. overconfidence.

b. overvaluing the present relative to the future.

c. a sunk cost bias.

d. a framing bias.

crimsonfrog156

EC120 Study Guide - Midterm Guide: Absolute Advantage, Economic Equilibrium, Inferior Good

EC120 Full Course Notes

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