Econ 371 > Answers to Sample Exam 1 Questions
| 1. B |
| 2. A |
| 3. D |
| 4. A |
| 5. D |
| 6. C |
| 7. B |
| 8. C |
| 9. A |
| 10. D |
| 11. C |
| 12. A |
| 13. B |
| 14. B |
| 15. C |
| 16. B |
| 17. A |
| 18. B |
| 19. A |
| 20. C |
21. Uncertain. It depends on the strength of the SE and IE. [You should be able to explain what happens to hours of work in this situation depending on the SE and IE.]
22. Think in terms of the labor-leisure model: what impact will each of the factors have on either the shape of the indifference curves or the shape of the budget line? Anything that tends to make indifference curves steeper (high MRS) implies that the individual is a leisure seeker (or rather spend time away from market work, such as caring for children). Anything that lowers the reservation wage will cause more people to opt out of the labor force.
23. See the answers to #8 for a starter.
24. The breakeven level of income is $400. I'll leave the graphs to you.
25. False (or Uncertain). The $500,000 is a not discounted. One must discount the future earnings back to present values before you can make a judgment that a college education is worth the investment.