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Final

ECON 2001.01 Lecture Notes - Lecture 18: Fried Clams, Absolute Advantage, Comparative AdvantageExam


Department
Economics
Course Code
ECON 2001.01
Professor
Darcy Hartman
Study Guide
Final

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Prof. Sinanovic Fall19
1
Practice Questions
Exam I
1. If the U.S. can make 10 roses or 40 daffodils and Mexico can make 5 roses or 10 daffodils, then
a. no trade is possible, since the U.S. is better at producing both roses and daffodils.
b. trade would make both countries better off if the U.S. specialize in roses and Mexico in
daffodils.
c. trade would make both countries better off if Mexico specialized in roses and the U.S. in
daffodils.**
d. Mexico should buy both daffodils and roses from the U.S.
2. Therefore,
a. the US. has the absolute advantage in both products and the comparative advantage in roses.
b. the US. has the absolute advantage in both products and the comparative advantage in
daffodils.**
c. the U.S. has the absolute and the comparative advantage in both products.
d. Mexico has the absolute advantage in roses and the comparative advantage in roses.
e. Mexico has the comparative and absolute advantage in both products.
3. Both countries could be made better off by participating in trade at a price of
a. 1 rose for 5 daffodils.
b. 5 roses for 1 daffodil.
c. 1 rose for 3 daffodils.**
d. 3 roses for 1 daffodil.
e. No trade could make both countries better off.
Bob’s total benefit and total cost schedules for plates of fried clams are listed in the table below. Use it
to answer the next two questions:
Quantity
(plates)
1
2
3
4
5
6
7
8
9
Total
Benefits
8
15
21
26
29
31
32
32
30
Total
Costs
4
8
12
16
20
24
28
32
36
4. What is the marginal benefit to Bob of consuming a third plate of clams?
a. 21
b. 15
c. 12
d. 9
e. 6**

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Prof. Sinanovic Fall19
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5. How many plates of clams will Bob consume in total? (Assume he employs the marginal principle.)
a. 9
b. 8 or 7
c. 6
d. 4**
e. None of the above
6. Which would leave Bob better off (measured as ‘benefits less costs’), paying $25 for an “all the
plates of clams you can eat” buffet, or paying $4 for each plate of clams?
a. All you can eat
b. $4 per plate**
c. Indifferent
d. More information is required
7. I am considering joining a “shopper’s club”, where I pay $100 membership fee and then get a
twenty-five percent discount on all my purchases. In making my decision, I should
a. only join if I plan to make at least $100 of purchases
b. ignore the membership fee since it is a sunk cost
c. only join if I expect to get at least $100 worth of discounts**
d. only join if they promise to refund my membership fee if I’m not satisfied
8. You observe that a hot dog vendor lowers his prices in the late afternoon. Which of the following is a
plausible economic rationale?
a. The opportunity cost of the hot dogs has fallen.
b. People are less likely to buy hotdogs in the late afternoon than earlier in the day.
c. The marginal benefits of alternative activities (for example, meeting friends for a drink) rise in
the afternoon.
d. All of the above.**
9. Suppose you go to an amusement park, and rather than paying $1.50 per ride, you pay $20 for a
card that gives twenty rides. You are about to take your tenth ride. The marginal cost of that tenth
ride is
a. 0**
b. $1.50
c. $2
d. $20
e. The answer depends on benefits received.
10. What is the cost of going home after only ten rides when the card would allow you twenty rides?
a. $10, because only half the card was used.
b. $20, because much of the card was wasted.
c. $5, because you would have paid only $15 if you’d purchased ten rides individually.
d. All of the above.
e. None of the above.**

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Prof. Sinanovic Fall19
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11. If you decide to go to a movie this evening rather than study economics, you thereby demonstrate
that
a. you like movies more than economics.
b. you may like movies more than economics, but you value economics more at the margin.
c. you consider the opportunity cost of going to the movies to be less than the opportunity cost of
studying economics.
d. at the margin, you value an evening of movie watching more than an evening of economics**
e. None of the above.
12. Movie-goers who are willing to put up with long lines at a cinema to get a lower price are
a. not observing the marginal principle.
b. haven’t evaluated the marginal cost of the time they give up
c. would give up any amount of time to save a little money
d. all of the above.
e. none of the above.**
13. A person has a comparative advantage in an activity whenever she
a. can do the activity in less time than other people
b. has an absolute advantage in the activity
c. can perform the activity at a lower opportunity cost than other people**
d. All of the above
e. None of the above
14. Senior citizens deserve an income that will allow them to live in comfort for their remaining years.”
This is an example of
a. a normative statement.**
b. a positive statement.
c. neither a positive and normative statement.
d. a statement reflecting the concept of scarcity.
e. a recognition of opportunity costs.
15. After graduating from high school, Steve had three choices, listed in order of preference: (1)
matriculate at the OSU, (2) work in a printed circuit board factory, or (3) attend a rival college. His
opportunity cost of going to the OSU includes
a. the income he could have earned at the printed circuit board factory
b. the direct cost of attending the OSU (tuition, textbooks, etc.)
c. the benefits he could have received from attending the rival college
d. All of the above
e. Just a. and b.**
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