ECON 101 FINAL EXAM PRACTICE QUESTIONS And Correct
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3. Suppose Susan can wash three windows per hour or she can iron six shirts per hour.
Paul can wash two
windows per hour or he can iron five shirts per hour. After specialization, suppose that
Susan and Paul
trade with each other and Susan washes 15 windows for Paul. In order for both Susan
and Paul to
benefit from trade, Paul must iron at least how many shirts for Susan?
A) 15
B) 75
C) 30
D) 0, because Paul has the comparative advantage in washing windows.
C
4. A minimum wage that is set above a market's equilibrium wage will result in
A) an excess supply of labor, that is, unemployment.
B) an excess supply of labor, that is, a shortage of workers.
C) an excess demand for labor, that is, unemployment.
D) an excess demand for labor, that is, a surplus of workers.
A
,5. Which of the following is NOT a characteristic of a perfectly competitive market?
A) Buyers and sellers are price setters.
B) There are many buyers.
C) There are many sellers.
D) The good/service is homogeneous
A
6. Your professor loves her work, teaching economics. She has been offered other
positions in the
corporate world that would increase her income by 25 percent, but she has decided to
continue working
as a professor. Her decision would not change unless the marginal
A) benefit of a corporate job decreased.
B) benefit of teaching increased.
C) cost of a corporate job increased.
D) cost of teaching increased.
D
7. Generally, a firm is more willing and able to increase quantity supplied in response to a
price change
when
A) the firm is experiencing capacity problems.
B) the relevant time period is long rather than short.
C) the relevant time period is short rather than long.
D) supply is inelastic.
B
, 8. Suppose that an MBA degree creates no externality because the benefits of an MBA
are internalized by
the student in the form of higher wages. If the government offers subsidies for MBAs,
then which of the
following statements is correct?
A) The equilibrium quantity of MBAs will be less than the socially optimal quantity of
MBAs.
B) The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs.
C) The equilibrium quantity of MBAs will be greater than the socially optimal quantity of
MBAs.
C
9. You are the mayor of a town with 20,000 residents. The head of your economic
development agency
recently conducted a survey in which the 20,000 residents said that a small public library
in the center of
town would be worth $40 to each of them. Because the cost to build the library is only
$500,000, you
arrange to have the library built. Everyone in town enjoys the library, but when you asked
for donations
to pay for the library, you only collected $100,000. You are convinced that
A) the survey must have overstated how much the library was worth to each resident;
otherwise, you
would have collected $500,000 in donations.
B) most residents of the town are probably free-riders at the library.
C) the cost of the library exceeded the social benefits.
D) the library was an example of the Tragedy of the Commons.
B
Answers (Verified Answers) Already Graded A+ ||
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3. Suppose Susan can wash three windows per hour or she can iron six shirts per hour.
Paul can wash two
windows per hour or he can iron five shirts per hour. After specialization, suppose that
Susan and Paul
trade with each other and Susan washes 15 windows for Paul. In order for both Susan
and Paul to
benefit from trade, Paul must iron at least how many shirts for Susan?
A) 15
B) 75
C) 30
D) 0, because Paul has the comparative advantage in washing windows.
C
4. A minimum wage that is set above a market's equilibrium wage will result in
A) an excess supply of labor, that is, unemployment.
B) an excess supply of labor, that is, a shortage of workers.
C) an excess demand for labor, that is, unemployment.
D) an excess demand for labor, that is, a surplus of workers.
A
,5. Which of the following is NOT a characteristic of a perfectly competitive market?
A) Buyers and sellers are price setters.
B) There are many buyers.
C) There are many sellers.
D) The good/service is homogeneous
A
6. Your professor loves her work, teaching economics. She has been offered other
positions in the
corporate world that would increase her income by 25 percent, but she has decided to
continue working
as a professor. Her decision would not change unless the marginal
A) benefit of a corporate job decreased.
B) benefit of teaching increased.
C) cost of a corporate job increased.
D) cost of teaching increased.
D
7. Generally, a firm is more willing and able to increase quantity supplied in response to a
price change
when
A) the firm is experiencing capacity problems.
B) the relevant time period is long rather than short.
C) the relevant time period is short rather than long.
D) supply is inelastic.
B
, 8. Suppose that an MBA degree creates no externality because the benefits of an MBA
are internalized by
the student in the form of higher wages. If the government offers subsidies for MBAs,
then which of the
following statements is correct?
A) The equilibrium quantity of MBAs will be less than the socially optimal quantity of
MBAs.
B) The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs.
C) The equilibrium quantity of MBAs will be greater than the socially optimal quantity of
MBAs.
C
9. You are the mayor of a town with 20,000 residents. The head of your economic
development agency
recently conducted a survey in which the 20,000 residents said that a small public library
in the center of
town would be worth $40 to each of them. Because the cost to build the library is only
$500,000, you
arrange to have the library built. Everyone in town enjoys the library, but when you asked
for donations
to pay for the library, you only collected $100,000. You are convinced that
A) the survey must have overstated how much the library was worth to each resident;
otherwise, you
would have collected $500,000 in donations.
B) most residents of the town are probably free-riders at the library.
C) the cost of the library exceeded the social benefits.
D) the library was an example of the Tragedy of the Commons.
B
