Question 1

Frank owns an apple farm and plans to spend 4 hours today picking apples. The number of apples he can pick per hour depends on the total number of hours he spends working in either the east orchard or the west orchard in the manner shown in the accompanying table below. $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Muurs in East } \
\text { Orchard }
\end{array} & \begin{array} { c } 
\text { Number af Apples } \
\text { Per Hour }
\end{array} & \begin{array} { c } 
\text { Hours in West } \
\text { Orchard }
\end{array} & \begin{array} { c } 
\text { Number d Apples } \
\text { Per Hour }
\end{array} \
\hline 1 & 40 & 1 & 10 \
\hline 2 & 32 & 2 & 10 \
\hline 3 & 25 & 3 & 10 \
\hline 4 & 20 & 4 & 10 \
\hline
\end{array}$$  
What is the opportunity cost to Frank of spending an additional hour picking apples in the East orchard?

Accepted Answer

A) 10 apples 
B) 20 apples 
C) 30 apples 
D) 40 apples

Question 2

The accompanying table below shows how total donations, average donations, total labor costs and average labor costs vary depending on the number of employees State U hires for its fundraising activities.    
The total labor cost with 4 employees is:

Accepted Answer

A) $21,500. 
B) $22,000. 
C) $38,000. 
D) $43,121.

Question 3

Jody has purchased a non-refundable $75 ticket to attend a Miley Cyrus concert on Friday night. Subsequently, she is asked to go to out dinner at no expense to her. If she uses cost-benefit analysis to choose between going to the concert and going out to dinner, the opportunity cost of going out to dinner should include:

Accepted Answer

A) only the entertainment value of the concert. 
B) the cost of the ticket plus the entertainment value of the concert. 
C) only the cost of concert ticket. 
D) neither the cost of the ticket nor the entertainment value of the concert.

Question 4

Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfare is $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfare is $450. If the Chicago-Atlanta round-trip air fare were $350, should you use the coupon to go to Miami?

Accepted Answer

A) No, your economic surplus would be -$50. 
B) No, your economic surplus would be -$100. 
C) Yes, your economic surplus would be $50. 
D) Yes, your economic surplus would be $400.

Question 5

You are trying to decide whether to purchase the latest Harry Potter book online or borrow it from the library. There is no charge for borrowing a book from the library, but going to the library takes more time than ordering a book online. Regardless of how you get the book, its benefit to you is the same. If the cost of buying the book online is $13, then you should:

Accepted Answer

A) borrow the book from the library because you can get it from the library for free. 
B) borrow the book from the library if the cost of doing so (in terms of the extra time it takes)is less than $13. 
C) borrow the book from the library if the cost of doing so (in terms of the extra time it takes)is greater than $13. 
D) buy the book online because it takes less time.

Question 6

Refer to the accompanying table below. The marginal benefit of the 6ᵗʰ unit of activity is:

Accepted Answer

A) $1 
B) $2 
C) $4 
D) $7

Question 7

The number of U.S. households with access to the Internet has grown is growing rapidly. Compared to 50 years ago, one would predict that when considering a major purchase, people today will gather:

Accepted Answer

A) less information because the Internet has lowered the cost of gathering information. 
B) less information because the Internet has increased the benefit of gathering information. 
C) more information because the Internet has lowered the cost of gathering information. 
D) more information because the Internet has increased the cost of gathering information.

Question 8

The economic surplus of an action is:

Accepted Answer

A) the benefit gained by taking an action. 
B) the difference between the explicit and implicit costs of taking an action. 
C) the difference between the benefit and the cost of taking an action. 
D) the money a person has left over after taking an action.

Question 9

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry's opportunity cost of attending Elite U is:

Accepted Answer

A) $70,000 
B) $50,000 
C) $20,000 
D) $15,000

Question 10

Refer to the accompanying table below. The average benefit of 2 units of activity is: $$\begin{array} { | c | r r | r | } 
\hline \text { Units of Activity } &  { \text { Tatal Cast } } & { \text { Tatal Benefit } } \
\hline 0 & \$ 0 & \$ 0 \
\hline 1 & \$ 30 & \$ 100 \
\hline 2 & \$ 40 & \$ 160 \
\hline 3 & \$ 60 & \$ 190 \
\hline 4 & \$ 100 & \$ 210 \
\hline 5 & \$150 & \$ 220 \
\hline 6 &\$210& \$ 225 \
\hline
\end{array}$$

Accepted Answer

A) $80 
B) $60 
C) $40 
D) $20

Question 11

Janie must choose to either mow the lawn or wash clothes. If she mows the lawn, she will earn $30, and if she washes clothes, she will earn $45. She dislikes both tasks equally and they both take the same amount of time. Janie will therefore choose to ________ because it generates a ________ economic surplus.

Accepted Answer

A) mow the lawn; bigger 
B) wash clothes; bigger 
C) mow the law; smaller 
D) wash clothes; smaller

Question 12

The accompanying table below shows how total donations, average donations, total labor costs and average labor costs vary depending on the number of employees State U hires for its fundraising activities.    
The President of State U decides to hire fundraising employees as long as their average benefit exceeds their average cost. This results in ________ employees being hired and a net benefit (total donations minus total labor costs)of ________.

Accepted Answer

A) 5; $17,080 
B) 5; $67,080 
C) 4; $60,000 
D) 4; $22,000

Question 13

Due to the fact that Curly used his frequent flyer miles to fly to visit Moe, Curly told Moe that it didn't cost him anything to visit. Is Curly correct?

Accepted Answer

A) Yes, because Curly's frequent flyer miles made the trip free. 
B) Yes, because Curly could stay at Moe's house for free. 
C) No, because Curly could have used his frequent flyer miles to go somewhere else instead. 
D) No, because Curly had to pay for earlier trips in order to earn the frequent flyer miles.

Question 14

Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for $175, then your economic surplus is:

Accepted Answer

A) $250. 
B) $175. 
C) $75. 
D) $0.

Question 15

Which of the following would not be studied in macroeconomics?

Accepted Answer

A) The causes of the Great Depression. 
B) The growth rate of the U.S. economy. 
C) How a sharp increase in gasoline prices is likely to affect SUV sales. 
D) The impact of government spending on the economy.

Question 16

In deciding how many guitars to buy for his shop before the Christmas season, Mark is making a(n)________ decision.

Accepted Answer

A) microeconomic 
B) macroeconomic 
C) normative 
D) irrational

Question 17

Suppose the total benefit of watching 1 baseball game is 100, the total benefit of watching 2 games is 120, and the total benefit of watching 3 games is 125. In this case, the marginal benefit of watching the 3ʳᵈ game is:

Accepted Answer

A) 125 
B) 5 
C) 41.67 
D) 375

Question 18

All else equal, relative to a person who earns minimum wage, a person who earns $30 per hour has:

Accepted Answer

A) a higher opportunity cost of working an additional hour. 
B) a higher opportunity cost of taking the day off work. 
C) a lower opportunity cost of driving farther to work. 
D) the same opportunity cost of spending time on leisure activities.

Question 19

You paid $35 for a ticket (which is non-refundable)to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Your economic surplus from going to work instead of seeing SPAM on Saturday is:

Accepted Answer

A) $0 
B) $1 
C) $35 
D) $36

Question 20

A firm pays Pam $40 per hour to assemble personal computers. Each day, Pam can assemble 4 computers if she works 1 hour, 7 computers if she works 2 hours, 9 computers if she works 3 hours, and 10 computers if she works 4 hours. Pam cannot work more than 4 hours day. Each computer consists of a motherboard, a hard drive, a case, a monitor, a keyboard, and a mouse. The total cost of these parts is $600 per computer. If the firm sells each computer for $650, then how many hours a day should the firm employ Pam to maximize its net benefit from her employment?

Accepted Answer

A) 1 hour 
B) 2 hours 
C) 3 hours 
D) 4 hours

Exam 1: Thinking Like an Economist

The accompanying table below shows how total donations, average donations, total labor costs and average labor costs vary depending on the number of employees State U hires for its fundraising activities. The total labor cost with 4 employees is:

Refer to the accompanying table below. The marginal benefit of the 6ᵗʰ unit of activity is:

The number of U.S. households with access to the Internet has grown is growing rapidly. Compared to 50 years ago, one would predict that when considering a major purchase, people today will gather: