eco100 term test1 with answer

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ECO
100
–
James
E.
Pesando
 Term
Test
1
–
October
18,
2013
 Answer
key
 1.

 Russia
can
produce
50
cars
per
week
or
200
computers
per
week.

Japan
can
 produce 75
cars
per
week
or
300
computers
per
week.
(14
marks)

 (a)
Calculate
the
opportunity
costs
of
cars
and
computers
for
each
country?
 Cars
 Russia
 Japan
 Computers
 4
computers
 4
computers
 ¼
cars
 ¼
cars
 (b)
What
trade
ratio(s)
will
allow
Japan
and
Russia
to
both
gain
from
trade?

 Answer:
The
trade
ratio
must
lie
between
the
opportunity
costs
of
both
countries
in
 order for
them
to
gain
from
trade.


Since
the
opportunity
costs
are
the
same,
 there is
no
trade
ratio
that
will
allow
both
countries
to
gain
from
trade.

 (c)…show more content…
Thus,
she
would
likely
have
ordered
 MORE
food.


 TFU2.
If
the
supply
curve
of
a
good
is
perfectly
elastic
and
its
demand
curve
is
 downward sloping,
an
increase
in
income
will
increase
both
consumer
and
producer
 surplus in
the
market
for
this
good.
 Answer:


Producer
surplus
will
not
change
no
matter
what
(PS
=
0),
but
the
 consumer surplus
will
rise
if
the
good
is
normal
and
fall
if
the
good
is
inferior.

 MC:
4
marks
each
(40
marks)
 MC1.

The
demand
for
a
$20
Bill
is:
 a. b. c. d. e. Elastic
 Inelastic
 Perfectly
Elastic
 Perfectly
Inelastic
 Unit
Elastic
 Answer:
c.
Perfectly
Elastic
 MC2.
The
tuition
for
Eco
100
is
$600
per
semester,
which
is
equivalent
to
$25
per
 lecture, and
you
have
already
paid
this
tuition
before
the
start
of
the
term.

You
 spent 1
hour
in
your
Eco
100
Lecture
on
Monday.

Alternatively,
you
could
have
 gone to
work
and
earned
$12,
you
could
have
watched
Netflix,
which
you
value
at
 $2,
or
you
could
have
Skyped
with
your
Mom,
which
you
value
at
$20.
Your
marginal
 benefit of
the
Eco
100
lecture
is:
 a. b. c. d. e. At
least
$59
 At
least
$45
 At
least
$34
 At
least
$25
 At
least
$20
 Answer:
e.
At
least
$20
 MC3.
The
demand
for
coffee
is
unit
elastic
and
coffee
is
a
normal
good.
Tea
is
often
 consumed instead
of
coffee.
If
there
is
an
decrease
in
the
supply
of
tea:
 a. The
total
revenue
of
coffee
will
decrease
 b. The
total
revenue
of

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