Economics 220 City University Dr.

Tanova
October 2005 Quiz # 1
I. Basic Literacy. Circle the letter of the alternative that best answers or completes each
question. Each question counts 5 points.

1500
1400
1300
1200
1100
1000
900
800
junk

700
600
500
400
300
200
100
0
widgets 0 200 400 600 800 1000

1. Consider the above production possibilities curve of Leisureland. We can conclude that:
a) the opportunity cost of producing 800 units of widgets instead of zero is 1000 units of
junk;
b) the opportunity cost of producing 1500 units of junk is 1000 units of widgets;
c) the opportunity cost of producing 1400 units of junk instead of 900 is 400 units of
widgets;
d) all the above are true.
2. The country produces 900 units of junk and 600 units of widgets. This means that:
a) this combination is efficient;
b) this combination is inefficient;
c) this combination is unattainable;
3. If the country experiences significant technological improvements in the production of
widgets:
a) the opportunity cost of producing junk will fall;
b) the opportunity cost of producing junk will rise;
c) the opportunity cost of producing junk will not be affected.
4. Because human wants are unlimited, every society must:
a) solve the problem of distribution of goods but not of production;
b) determine where production takes place but not how output is distributed;
c) make choices what is produced, how and for whom;
d) all of the above.
5. Assume that given available factors of production and existing knowledge, it is possible
to produce more of one good without forgoing the opportunity to produce some another
good. Economists would characterize this situation as:
a) inefficient;
b) efficient;
c) a point outside the available maximum production;
d) none of the above.
6. A free good is not scarce because:
a) individuals can have all they desire at zero opportunity cost.
b) price rations the good so that all individuals willing to pay the market price
can buy the good and it is, therefore, not scarce.
c) human desires for the good exceed the amounts available at a zero money
price.
d) all of the above
7. All of the following are examples of opportunity cost of going to college
except:
a) the leisure time sacrificed to study for an exam;
b) the price of food consumed during the semester;
a) the tuition fees paid to a university;
b) the income which could have been earned by a college student had
he or she worked full time instead of attending college
8. The opportunity cost of installing a traffic light at a dangerous intersection is:
a) negative, since it will reduce accidents;
b) the best possible alternative bundle of other goods or services that must be
foregone in order to build and install the traffic light;
c) the time lost by drivers who approach the intersection when the light is red;
d) the cost of the stoplight plus the cost savings from a reduction in the number of
accidents.

II. Analysis. (each case counts 6 points.)

9. Build the production possibilities schedule of Leisureland using the data
given in question 1.
10. Use the data given in question one to prove the law of increasing marginal
opportunity cost (take junk’s opportunity cost as an example)
11. Draw the case described in question 3
12. Assume that there is a significant number of unemployed in Leisureland. Use
the PPF model to show where the actual level of production would be
located.
13. The following two alternatives exist for a student who has one evening in
which to prepare for two exams on the following day:
Alternative Score in Microeconomics Score in Management
A 95% 78%
B 81% 92%
Determine the opportunity cost of receiving 92%, rather than 78% on the
Management exam in terms of percentage foregone in Microeconomics