Econ Final Review

1. In 2011, the average American earned about $48,000 while the average Nigerian earned$1,200. Which of the following statements is likely? A. The average American has better nutrition and healthcare than the average Nigerian. B. The average American has a longer life expectancy than the average Nigerian. C. The average American purchases more televisions than the average Nigerian. D. All of the above are correct. about 2. In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every B. 35 years. 3.The phrase "no such thing as a free lunch" means B. people must face tradeoffs. 4. Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself. Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper. This scenario is an example of which principle of economics? B. Trade can make everyone better off. 5. Rick buys a 1966 Mustang for $3,000, planning to restore and sell the car. He goes on to spend $9,000 restoring the car. At this point he can sell the car for $10,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $13,000. Rick should C. be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it. 6. Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct? B. The marginal cost of the 25th house, if it is built, will equal $250,000. 7. Which of the following is an example of an externality? A. A drunk driver causes an accident that injures another person. B. A paper mill dumps waste into the river. C. A neighbor's loud music disrupts sleep. D. All of the above are correct. 8. Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana A. can be thought of as the total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana. 9. People are willing to pay more for a diamond than for a bottle of water because