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The University of Alberta DEPARTMENT OF ECONOMICS Economics 101 Practice Final Exam 1 Practice Final Exam 1 For a given question to be considered an economic question, it would need to involve: explicit prices, making a choice. a graph, limited resources. limited resources and making a choice, aege ‘The use of economic models, like the cost-benefit principle, means economists believe that: this is how people explicitly choose between alternatives. this is a reasonable abstraction of how people choose between alternatives. those who explicitly make decisions this way are smarter. with enough education, all people will start to explicitly make decisions this way. this is the way the world ought to explicitly make decisions. peese ‘The distinguishing feature of microeconomics is studying: choices, the performance of national economies. the overall price level. choices made by individuals or groups in the context of individual markets. how to improve the performance of national economics peers Joe has decided to purchase his textbooks for the semester. His options are to purchase the books via the Internet with next day delivery to his home at a cost of $250, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $245. Last week he drove to campus to buy a concert ticket because they offered 20 percent off the regular price of $20. a. It would not be rational for Joe to drive to campus to purchase the books because the $5 saving is only two percent of the cost of books, and that is much less than the 20 percent he saved on the concert ticket. b. It would be rational for Joe to drive to campus because it costs less to buy the books there than via the internet. ¢. _ Ttwould be rational for Joc to drive to campus because the $5 saving is more than he saved by driving there to buy the concert ticket 4. It would not be rational for Joe to drive to campus to purchase the books because the cost of gas and his time must certainly be more than the $5 he would save. ¢. There is insufficient information to determine whether it would be rational or not. for Joe to purchase the books via the Intemet or on campus. Practice Final Exam 1 ‘The Smithville Elementary School Teachers Association petitions the Smithville School Board to provide a computer lab for their school. To support their argument the Association presents data from national studies that show when students are provided with computer training they eam an average of $5,000 of additional income during their lives. In order for the School Board to make a rational choice, it should: a, determine if other elementary schools have computer labs. b, build the computer lab because the children will be able to carn a higher income during their lives. ©. not build the computer lab because the study was not based on a study of the Smithville area, 4. build the computer lab if the additional cost per student is less than or equal to the additional income. build the computer lab if the additional cost per student is greater than or equal to the additional income. Meredith had only $16 to spend this last weekend, Initially, she was uncertain about whether to go to two movies she had been wanting to see or to buy a new CD she had recently heard. In the end she went to the movies. Which of the following statements is correct? ‘The choice of the two movies and not the CD is an example of increasing costs. The opportunity cost of the two movies is one CD. ‘The opportunity cost of the two movies is $16. None of the above. eege