ECON 2110 Exam 1 Practice Questions And Answers

ECON 2110 Exam 1 Practice Questions
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ECON 2110 Exam 1 Practice Questions And
Answers
1. If you decide to go to a movie this evening rather than study economics, you th
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ereby demonstrate that:
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a. you do not care about getting good grade
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b. you hate economics q q


c. you would rather have fun than fulfill your responsibilities
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d. at the margin, you value two hours of movie watching more than two hours of
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studying economics
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e. none of the above.: d. at the margin, you value two hours of movie watching more tha
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n two hours of studying economics
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(Application of the marginal principle.) q q q q


2. The costs that influence decisions are always:
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a. average costs q


b. marginal costs q


c. sunk costs q


d. total costs: b. marginal costs
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(We take decisions based on the additional (marginal) costs that are imposed be-
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qcause of the decision (Marginal Principle). Sunk costs don't influence our decisions sin
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e they can't be retrieved.)
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3. The real cost of any action
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a. depends upon the number of suppliers q q q q q


b. is the cost to consumer plus the cost to producer
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c. is the value of the alternative sacrificed
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d. All of the above: c. is the value of the alternatice sacrificed
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(Real cost of something = Marginal cost = Opportunity cost)
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, ECON 2110 Exam 1 Practice Questions
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4. You see this deal at the supermarket: one frozen pizza for $3.00, two for
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$5.00. Your marginal cost for the second pizza is:
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a. $5
b. $3
c. $2.50
d. $2.00: d. $2.00
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(Application of marginal principle. ($5 -$3 = $2))
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, ECON 2110 Exam 1 Practice Questions q q q q q


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5. You were considering renting a car and driving to New York for Christmas. W
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hich of the following would be considered as Marginal costs for you in making
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your decision?
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a. The car rental price q q q


b. Price of gasoline q q


c. The enjoyment of driving q q q


d. All of the above q q q


e. Only a and b: e. Only a and b q q q q q q q q




(The enjoyment of driving is a Marginal Benefit and not a Marginal Cost. It is an additio
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al benefit to your action.)
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6. If you are searching for a new pair of skis, it makes sense to keep looking as
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qlong as: q




a. the shopping time matters less to you than the lower price you expect to g
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et.
b. you have yet to find the lowest price available.
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c. there are stores left that you still need to check. q q q q q q q q q


d. you face no opportunity costs at all. q q q q q q


e. All of the above: a. the shopping time matters less to you than the lower price yo
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u expect to get.
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(The Marginal cost of your decision to search is the additional time you spend shoppin
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and searching. The Marginal Benefit is the lower price you get/ expect to get. So clearly
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if MB > MC, then you do it. Option a talks about that)
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7. The marginal costs of your European vacation include:
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a. your passport application fee if you would not have gotten a passport o
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therwise
b. your plane ticket to Europe. q q q q


c. all the food you consume in general to stay alive.
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d. All of the above q q q


e. Just a and b.: e. Just a and b. q q q q q q q q




(Similar problem discussed in class. Food is a generic category.You can't do away with
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ood. So, it is not an additional cost.)
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8. 8. The economic way of thinking would lead us to conclude that obesity ra
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tes would rise if: q q q




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