<p>ECO 102 Spring 2016 Semester Quiz 2</p><p>Instructions: Read each question carefully. Select the best answer and record it on the answer sheet and on this page. Turn in only the answer sheet.</p><p>2014 Data: 2015 Data: </p><p>Production Prices Production Prices 8 pineapples $2/pineapple 10 pineapples $5/pineapple 8 coconuts $4/coconut 0 coconuts 10 fish $1/fish 60 fish $1/fish</p><p>1. Based on the information above, the 2015 GDP at 2014 prices is:</p><p> a. $80 b. $110 c. $50 d. $48 e. $58</p><p>2. Suppose I employ everyone on our island to help me fish. We catch 80 fish per day that sell for $2 per fish. I pay the workers on my fishing boat $50. I pay rent to the boat owner of $10. I pay the owner of the pier $15 to use the pier. I pay the bank $6 of interest on the loan. The total incomes earned by everyone on our island will be:</p><p> a. $81 b. $50 c. $60 d. $75 e. None of the above.</p><p>3. If a consumer is choosing which point on a production possibility frontier he/she would most like, the best point would be:</p><p> a. The highest reachable point on the horizontal axis. b. Wherever there is a “corner” on the production possibility frontier. c. Where the production possibility frontier touches the highest indifference curve that can be reached. d. Exactly in the middle of the production possibility frontier. e. The highest reachable point on the vertical axis. Pineapples</p><p>10 8</p><p>8 13 Coconuts</p><p>5. The graph above shows our Production Possibilities Frontier (PPF) for our island. The outward-bend of the PPF is due to:</p><p>(i) The fact that we have some labor that is specialized, with some workers relatively better at pineapples than coconuts. (ii) The fact that we have some land that is specialized, with some land relatively better at pineapples than coconuts. (iii) The fact that we have some capital that is specialized, with some capital relatively more suitable for producing pineapples than coconuts. a. at least one of (i), (ii), or (iii) is correct. b. (i), (ii), and (iii) all must be correct. c. only (i) is correct. d. only (ii) is correct. e. only (iii) is correct.</p><p>5. According to the PPF above, the opportunity cost of increasing pineapple production from 8 pineapples to 10 pineapples is: a. 8 coconuts b. 13 coconuts c. $2 d. 2 coconuts e. 2 pineapples</p><p>4. If we compute real GDP in 2015 and find that it is 2% higher than real GDP in 2014, then do we know that we are 2% happier in 2015?</p><p>(i) No, because the “2%” calculation is just an estimate. (ii) No, because GDP measures value of output, not “happiness”. (iii) No, because the population might change between 2014 and 2015, so we don’t know how much per person there was. (iv) No, because we don’t know whether there was any change in the distribution of GDP among the population. a. Only (i) and (iii) are true. b. Only (i) is true. c. Only (i) and (ii) are true. d. (i), (ii), (iii), and (iv) are all true. e. Only (ii) and (iv) are true.</p><p>7. Bonus extra credit question:</p><p>Below are 4 people running for US president, and my dog. Which is which?</p><p> a. (1) Ted Cruz; (2) Bernie Sanders; (3) dog; (4) Hillary Clinton; (5) Donald Trump b. (1) Bernie Sanders; (2) Donald Trump; (3) Ted Cruz; (4) dog (5) Hillary Clinton c. (1) dog; (2) Hillary Clinton; (3) Bernie Sanders; (4) Donald Trump; (5) Ted Cruz d. (1) Donald Trump; (2) Ted Cruz; (3) Hillary Clinton; (4) Bernie Sanders; (5) dog e. (1) Bernie Sanders; (2) Ted Cruz; (3) dog; (4) Donald Trump; (5) Hillary Clinton</p><p>(1) (2) </p><p>(3) (4) </p><p>(5) </p>