Exam (elaborations)
ECON 201 FINAL EXAM QUESTIONS AND ANSWERS
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ECON 201 FINAL EXAM QUESTIONS AND ANSWERSTable 2.1 Kaitlyn and Larissa have started a dog bathing and grooming business. The
table below shows the number of dogs they can bathe and/or groom on any given day.
The opportunity cost of grooming the third dog in a day is giving up the bath for ________
dog(s).
a. 3
b. 4
c. 5
d. 18 - Answer b. 4
Assume you own a house. What is the opportunity cost of living in the house?
a. There is no opportunity cost unless you could set up a business in the house.
b. The opportunity cost is the rent you could have received from a tenant if you didn't
live there.
c. The opportunity cost is the cost of your monthly mortgage payment plus bills.
d. You have no opportunity cost since you are the owner of the house. -Answer b. The
next best alternative is giving it out for rent to a tenant so the opportunity cost is the lost
rent.
Kaitlyn and Larissa have opened a dog bathing and grooming business. The number of
dogs they are able to bathe and/or groom on any given day is given in Table 2.1. The
opportunity cost of grooming the first dog in a day is the forgone bath for ________
dog(s). a. 1 b. 2 c. 24 d. 25 - Answer b. 2
Steven lives in a big city where there is little parking available. He has a driveway in
which he parks his car. Which of the following statements is most accurate?
a. The opportunity cost depends on how big Steven's mortgage payment is.
b. Steven has a lower opportunity cost of owning a car than his neighbor, who has to
,rent a parking spot.
c. There is zero opportunity cost from using the spot because Steven owns the house
d. The opportunity cost of using the parking spot is the price he could charge someone
else for using the spot. Answer d. The opportunity cost of using the parking spot is the
price he could charge someone else for using the spot.
Table 2.4 The law of diminishing returns kicks in with the addition of the tank of fertilizer.
a. second
b. third
c. fourth
d. fifth - Answer a. second
Diminishing returns occurs because
a. consumers don't buy enough of the products produced.
b. not enough people have jobs
c. two people have not satisfied their self-interests.
d. one of the inputs in the production process is fixed.-Answer d. one of the inputs in the
production process is fixed.
In table 2.3 the law of diminishing returns initially takes hold when ________workers are
hired.
a. 2 b. 3 c. 4 d. 5 -Answer c. 4
The law of diminishing returns states that an additional worker reduces total output.
a. True b. False - Answer b. False
Kaitlyn and Larissa have opened a dog bathing and grooming business. The number of
dogs they are able to bathe and/or groom on any particular day is given in Table 2.1. The
opportunity cost of grooming the sixth dog in a day is the forgone bath of ________dog(s).
,a. 0 b. 5 c. 6 d. 7 - Answer d. 7
If the demand for jelly decreases, and the price of grapes rises that is used to make jelly
a. Equilibrium price of jelly may rise or fall and the equilibrium quantity of jelly
decreases.
b. Equilibrium price of jelly rises and the equilibrium quantity of jelly may rise or fall
c. Equilibrium price of jelly may rise or fall and the equilibrium quantity of jelly rises.
d. the equilibrium price of jelly falls and the equilibrium quantity of jelly may rise or fall.
Demand Down [P Q ], Supply Down from P(inputs) Up [P, Q ] P ~, Q - Answer a. the
equilibrium price of jelly may rise or fall and the equilibrium quantity of jelly falls.
Fig. 4.2 Supply and demand for T-shirts If the current price of T-shirts is $15 we would
predict that a. supply will increase until quantity demanded equals quantity supplied. b.
demand will decrease until quantity demanded equals quantity supplied. c. price will fall
until quantity demanded equals quantity supplied.
d. the price won't change because the market is in equilibrium. - Answer c. price will fall
until quantity demanded = quantity supplied.
Suppose that a new advertising campaign touting the benefits of apple juice succeeds,
& a severe freeze wipes out half of the nation's apple crop. What happens to the price &
quantity of apple juice?
a. Equilibrium price of apple juice may increase or decrease & equilibrium quantity of
apple juice decreases. b. Equilibrium price of apple juice decreases & equilibrium
quantity of apple juice may increase or decrease. c. Equilibrium price of apple juice
increases & equilibrium quantity of apple juice may increase or decrease.
d. the equilibrium price of apple juice may increase or decrease & the equilibrium
quantity of apple juice increases.
Demand UP, Supply Down.
Ad campaign Demand UP Major Freeze Supply DOWN - Answer c. the equilibrium price
, of apple juice increases & the equilibrium quantity of apple juice may increase or
decrease.
Assume that 3 million plasma TVs were purchased in 2011 at $950 each and that 4
million plasma TVs were purchased in 2012 at $800 each. What might have caused this
movement?
a. The technology used to produce plasma TVs improved.
b. The price of LCD TVs-a substitute for plasma TVs-fell.
c. There was a decrease in the number of workers employed to produce plasma TVs.
d. The price of LCD TVs a substitute for plasma TVs increased.
Price, Quantity SUPPLY increase. - Answer a. There was an advance in plasma TV
manufacturing technology.
When demand decreases & the demand curve shifts to the left, equilibrium price
________ & equilibrium quantity ________.
a. increases; increases
b. decreases; increases
c. decreases; decreases
d. increases; decreases - Answer c. decreases; decreases
Suppose that in October the price of a cup of cafe latte was $2.50 & 400 lattes were
consumed. In November the price of a latte was $2.00 & 600 lattes were consumed.
What might have
caused this change?
a. The price of coffee beans (an input of production of cafe lattes) fell.
b. The price of coffee beans (an input of production of cafe lattes) rose.
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