MSU EC 201 Kang Final Exam EOC
Questions and Answers 2026 Update
1.04) The U.S. government is evaluating a project to build a
new lighthouse in South Carolina. The cost will be $5 million.
The estimated value of all the benefits (including
nonmonetary benefits) of the lighthouse is $8 million.
Describe how you would use the concept of opportunity cost
to determine whether the lighthouse should be built? -
Correct Answers ✅The benefits should be compared to the
opportunity cost. The opportunity cost is the value of the best
forgone alternative. The opportunity cost in this example is
the value of the benefits to be gained by spending the $5
million on the next most desirable project. If those benefits
are greater than $8 million, then the other project makes
sense and it should be done before the lighthouse. If they are
less than $8 million, then the lighthouse makes sense.
1.11) The making of the movie Waterworld cost a total of
$180 million. It generated a total of $130 million in revenues.
$70 million was spent and then the set sank. An additional
$60 million was spent to rebuild the set. An additional $50
million was spent to finish the movie.
The sunk cost, once the movie set sank, was _______. -
Correct Answers ✅$70 million
2.01) If the economy is producing at a point inside the
production possibilities frontier, which of the following must
be true? - Correct Answers ✅More of both goods can be
produced
, MSU EC 201 Kang Final Exam EOC
Questions and Answers 2026 Update
2.02) Which points represent a production level that could be
economically efficient? - Correct Answers ✅B and C (points
on the curve)
2.10) Which of the following graphs shows the correct change
in the production possibilities frontier curve if a new
technology is invented that increases the productivity of
watch manufacturing? - Correct Answers ✅Option B
(Increase in number of watches)
2.17) Looking at the production of handbags and phones
once again, if a firm has 6 workers with three workers
producing handbags and three workers producing phones,
what is the marginal cost of producing one additional phone if
a worker changes from handbag production to phone
production? - Correct Answers ✅1.25 handbags
2.19) A pizza parlor can make 100 pizzas in an evening. They
make 40 pepperoni pizzas and 60 extra cheese pizzas. 100
people order pizza, but 50 people would like a pepperoni
pizza and 50 would like an extra cheese pizza. This pizza
parlor is what? - Correct Answers ✅Technically efficient,
but not allocatively efficient nor economically efficient
4.08) Indicate which of the following will cause a movement
along a demand curve. Which will shift the demand curve to
the left? Which will shift the demand curve to the right? Will
demand increase or decrease? - Correct Answers ✅An
Questions and Answers 2026 Update
1.04) The U.S. government is evaluating a project to build a
new lighthouse in South Carolina. The cost will be $5 million.
The estimated value of all the benefits (including
nonmonetary benefits) of the lighthouse is $8 million.
Describe how you would use the concept of opportunity cost
to determine whether the lighthouse should be built? -
Correct Answers ✅The benefits should be compared to the
opportunity cost. The opportunity cost is the value of the best
forgone alternative. The opportunity cost in this example is
the value of the benefits to be gained by spending the $5
million on the next most desirable project. If those benefits
are greater than $8 million, then the other project makes
sense and it should be done before the lighthouse. If they are
less than $8 million, then the lighthouse makes sense.
1.11) The making of the movie Waterworld cost a total of
$180 million. It generated a total of $130 million in revenues.
$70 million was spent and then the set sank. An additional
$60 million was spent to rebuild the set. An additional $50
million was spent to finish the movie.
The sunk cost, once the movie set sank, was _______. -
Correct Answers ✅$70 million
2.01) If the economy is producing at a point inside the
production possibilities frontier, which of the following must
be true? - Correct Answers ✅More of both goods can be
produced
, MSU EC 201 Kang Final Exam EOC
Questions and Answers 2026 Update
2.02) Which points represent a production level that could be
economically efficient? - Correct Answers ✅B and C (points
on the curve)
2.10) Which of the following graphs shows the correct change
in the production possibilities frontier curve if a new
technology is invented that increases the productivity of
watch manufacturing? - Correct Answers ✅Option B
(Increase in number of watches)
2.17) Looking at the production of handbags and phones
once again, if a firm has 6 workers with three workers
producing handbags and three workers producing phones,
what is the marginal cost of producing one additional phone if
a worker changes from handbag production to phone
production? - Correct Answers ✅1.25 handbags
2.19) A pizza parlor can make 100 pizzas in an evening. They
make 40 pepperoni pizzas and 60 extra cheese pizzas. 100
people order pizza, but 50 people would like a pepperoni
pizza and 50 would like an extra cheese pizza. This pizza
parlor is what? - Correct Answers ✅Technically efficient,
but not allocatively efficient nor economically efficient
4.08) Indicate which of the following will cause a movement
along a demand curve. Which will shift the demand curve to
the left? Which will shift the demand curve to the right? Will
demand increase or decrease? - Correct Answers ✅An
