F) II, III and IV only

G) I and II and III and IV

9. Which of the following involves a tradeoff?

A) Going to college.

B) Buying a new car.

C) Watching a football game on Friday night.

D) Searching for a new boyfriend or girlfriend.

E) All of the above.

F) Not all of the above, but more than one situation involves a tradeoff.

10.

Number of basketballs	Total cost

On the basis of information in the table above, which is a definitely correct statement about the costs of basketball production?

A) If the fixed cost is 100, the marginal cost of the fourth basketball is 14.

B) The marginal cost curve falls and then rises.

C) The total variable cost when 3 units are produced is 17.

D) The marginal cost of the first basketball is 103.

E) The marginal cost curve rises and then falls.

F) All the statements are incorrect.

11.

	2 workers	4 workers	6 workers
1 shovel	3 trees	4 trees	5 trees
2 shovel	5 trees	6 trees	7 trees
3 shovel	6 trees	8 trees	10 trees

The table above indicates the number of trees that can be planted per hour using different combinations of inputs. All the information in the table is fully consistent with

A) constant returns to scale

B) diminishing marginal returns

C) constant marginal returns

D) economies of scale

E) decreasing returns to scale

F) none of the above

12. Suppose a person has a full-time job, and he earns $35,000 per year. He also has $100,000 on his bank deposit and interest rate is 6%. He has two options: change his job (at new job he will earn $40’000 per year) or use all money from his bank deposit to open own business with annual profit $43,000. In the latter case he will have to quit his current job and manage his business full time. The opportunity costs of opening business equal to (annually):

A) $35,000

B) $40,000

C) $41,000

D) $43,000

E) $46,000

F) $47,000

G) None of the answers is correct

13. Vasya Pupkin makes two statements:

I. Short-run average total cost curve always lies above the short-run average variable cost curve.

II. Long-run average total cost curve always lies above the long-run average variable cost curve.

A) Both statements are correct.

B) Statement I is correct, but statement II is incorrect.

C) Statement I is incorrect, but statement II is correct.

D) Both statements are incorrect.

14. Vasya Pupkin makes two statements:

I. A profit-maximizing firm should set marginal cost equal to price only if price equals marginal revenue.

II. A profit-maximizing firm will never produce at a point where its marginal revenue is negative.

A) Both statements are correct.

B) Statement I is correct, but statement II is incorrect.

C) Statement I is incorrect, but statement II is correct.

D) Both statements are incorrect.

15. John Q. Public spends all his money on 2 newspapers and 4 bottles of beer. Knowing that the price of beer is $1 per bottle, and the slope of his budget constraint (with beer on the vertical axis) is -2, John’s income must be:

A. 4

B. 6

C. 5

D. 8

E. Impossible to determine

16. For all consumption bundles (q_x, q_y) belonging to the same indifference curve:

A. MRS_XY must be constant.

B. Cross-price elasticity must be constant.

C. Consumer spending must be constant.

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