Download AD/AS UNIT TEST 2007

AP ECONOMICS---Ippolito
Name: ________________________
Homework for A.P. Test #1 “Re-take”
Due: Monday September 28th
This is mandatory for any student who scored below a 72% on Test # 1
a) Please provide a clear written argument for each of the questions below
b) The CORRECT ANSWER is underlined in bold
c) Your Test Grade will be adjusted based on the effort in this homework
1. You run a small Hotel where all rooms rent for $100 per night. Your hotel is typically very busy and often fully
occupied. The average cost per room including all costs (cleaning, maintaining, heating etc...) is $50 per room
regardless of whether you rent the room or not. If you have 5 rooms available late one night a bus pulls up with 10
guests and they offer you $30 per room. Which is the most attractive alternative:
a.
Offer to rent the rooms for $50 so you can breakeven
b.
Stick to your price of $100 so you can earn a $50 profit
c.
Rent any room as long as the price is above $50 per room
d.
Take the $30 and rent all of your remaining rooms
e.
Lower the price of all rooms to $75 so your hotel is more likely full in the future
Argue why the answer above is the correct answer: (hint think Marginal Cost (MC))
2.
a.
b.
c.
d.
e.
If good XYZ is an inferior good, and incomes rise throughout the USA, you can conclude that:
The equilibrium price of XYZ will increase
The quantity sold of XYZ will increase
The equilibrium price of XYZ will decrease
The supply curve of XYZ will shift to the left
Both A & B are true
Argue why the answer above is the correct answer:
3. Which of the following would cause a leftward shift of the PPF curve:
a.
An increase in unemployment
b.
A decrease in the size of the labor force
c.
An increase in capital
d.
A decrease in consumer demand
e.
Both A & B
Argue why the answer above is the correct answer: (be sure to explain why choice A does not shift the PPF curve)
4. Suppose the price steel rises. You use steel and wire to produce fences. How would this price change affect your
demand for wire:
a.
It would lead to an increase in demand for wire
b.
It would lead to a change in quantity demanded for wire
c.
It would cause the demand curve for wire to shift to the left
d.
It would cause equilibrium price of wire to rise
e.
Both A & D
Argue why the answer above is the correct answer: (think determinant of demand)
Table 2-1. Production Possibilities for China
Cars
Trucks
400
0
300
200
200
320
100
420
0
500
5. Refer to Table 2-1. Which of the following statements accurately describes the production possibilities for China?
a.
The opportunity cost of an additional 100 cars is 50 trucks.
b.
The opportunity cost of an additional 100 cars is 100 trucks.
c.
The opportunity cost of an additional 100 cars is 500 trucks.
d.
The opportunity cost of an additional 100 cars decreases as more cars are produced
e.
The opportunity cost of an additional 100 cars increases as more cars are produced.
Argue why the answer above is the correct answer:
Table 3-5
Japan
U.S.
Hours needed to make one:
Car
Airplane
30
150
50
200
Amount produced in 2400 hours:
Cars
Airplanes
80
16
48
12
6. Refer to Table 3-5. If the United States and Japan trade based on the Ricardo’s economic theory, Japan will
a.
export cars and import airplanes
b.
export airplanes and import cars
c.
export cars and airplanes to the U.S.
d.
import cars and airplanes from the U.S.
Argue why the answer above is the correct answer: (explain trade theory here…)
7. An increase in the price of televisions will lead to a
a.
a rightward shift of the demand curve for televisions.
b.
a leftward shift of the demand curve for televisions.
c.
a flattening of the demand curve for televisions.
d.
a movement up along the existing demand curve
e.
a movement down along the existing demand curve
Argue why the answer above is the correct answer:
8. When supply and demand both increase, equilibrium
a.
price will increase.
b.
quantity will decrease.
c.
quantity may increase, decrease, or remain unchanged.
d.
price may increase, decrease, or remain unchanged.
e.
Both B & D
Explanation:
9) Whenever a production of a good creates positive externalities, an unregulated market will result in:
a.
too little of that good being produced
b.
society’s marginal cost being higher than the firm’s marginal cost
c.
too much of that good being produced
d.
the firm’s marginal cost being higher than society’s marginal cost
e.
Both B & C
Argue why the answer above is the correct answer:
10. The government wants people to smoke less. They hire you for help. They have 2 proposals:
(1) Increase the tax on buyers of cigarettes or (2) invest in a very effective advertising campaign that graphically
describes the negative outcomes of smoking. What should you tell them:
a.
The tax increase will not lead to decrease in demand for cigarettes
b.
The tax increase will lead to a decrease in quantity demanded for cigarettes
c.
The advertising campaign will lead to a decrease in demand for cigarettes
d.
all listed
e.
Both B & C
Argue why the answer above is the correct answer: HINT: see textbook pages 69-70 on this problem—
11) Bob gets a 10% raise in income. Argue why the following statement should be labeled FALSE or It Depends
Statement: Bob will increase his demand for the goods he currently buys.
Explanation:
12) Bob & Jane live together in a house they own. Argue why the answer to the following statement should be labeled
“It depends”.
Statement: Bob is better at painting than Jane; therefore, Bob should paint their house.
Explanation:
Short Answer Section
1) Was this homework packet helpful? (why or why not—explain)
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2) What can I do to help improve your performance in this course?
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3) What can YOU do to help improve your performance in this course?
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