ECON 312 Week 4 Midterm Solutions (Version 1

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ECON 312 Principles of Economics

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(TCO 1) As a consequence of the condition of scarcity
(TCO 1) The opportunity cost of constructing a new public highway is the
(TCO 1) A nation can increase its production possibilities by
(TCO 1) Which expression is another way of saying "marginal benefit"?
(TCO 1) The individual who brings together economic resources and assumes the risk of
business ventures in a capitalist economy is called the
6. (TCO 1) The Soviet Union economy of the 1980s would best be classified as
7. (TCO 1) The simple circular-flow model shows that workers, entrepreneurs, and the
owners of land and capital offer their services through
8. (TCO 1) Consumers express self-interest when they
9. (TCO 1) Which is not one of the five fundamental questions that an economy must deal
with?
10. (TCO 1) The major "success indicator" for business managers in command economies
like the Soviet Union and China in the past was
11. (TCO 2) An increase in demand means that
12. (TCO 2) At the point where the demand and supply curves intersect
13. (TCO 2) Black markets are associated with
14. (TCO 2) An increase in demand for oil along with a simultaneous increase in supply of
oil will
15. (TCO 2) If Product Y is an inferior good, a decrease in consumer incomes will
16. (TCO 2) If the price elasticity of demand for a product is equal to 0.5, then a 10 percent
decrease in price will increase quantity demanded by
17. (TCO 2) Total revenue falls as the price of a good is raised, if the demand for the good is
18. (TCO 2) You are the sales manager for a software company and have been informed that
the price elasticity of demand for your most popular software is less than 1. To increase
total revenues, you should:
19. (TCO 2) A state government wants to increase the taxes on cigarettes to increase tax
revenue. This tax would only be effective in raising new tax revenues if the price
elasticity of demand is
20. (TCO 2) When universities announce a large tuition increase and follow it with an
announcement that more financial aid will be available, they are assuming that students
who pay full tuition
21. (TCO 3) Suppose that you could prepare your own tax return in 15 hours, or you could
hire a tax specialist to prepare it for you in two hours. You value your time at $11 an
hour. The tax specialist will charge you $55 an hour. The opportunity cost of preparing
your own tax return is
22. (TCO 3) Economic profits are equal to
23. (TCO 3) The main difference between the short run and the long run is that
24. (TCO 3) The law of diminishing returns only applies in cases where
25. (TCO 3) Marginal cost can be defined as the
26. (TCO 3) If the price of a fixed factor of production increases by 50 percent, what effect
would this have on the marginal-cost schedule facing a firm?

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