4.  Books cost $20 each today, and were $10 each in 1987. CDs, the best alternative to books, cost $20 today and were $30 in 1987. The opportunity cost of a book has ..
CDs are the best alternative: in 1987, $20 would buy one book or 2/3 of a CD, so the opportunity cost of a book [in terms of CDs] was 2/3 of a CD;

Now, $30 buys one book or 3 CDs, so the opportunity cost of a book is 3 CDs.

So, the opportunity cost of a book has risen, from 2/3 of a CD to 3 CDs. Only 35% of you got that; half of you said it had fallen, looking at the $ price without asking what it would buy in terms of the best alternative.
 

20    Resource use is efficient when
The right answer is D, we produce the combination of goods we value most highly. Only 37% of you got this, and there was little difference between students who scored well on the rest of the test and those who did not. The most popular response was B, "we produce the goods with the lowest opportunity cost." That is what is known as a distractor, but it seems to have been too good a one. Always read all the possible responses; B is wrong because it says 'goods' -- plural -- what can that mean? Goods plural can't all have the lowest opportunity cost. D is the closest to the definition of efficiency. Probably not a very good question, but remember D as a good definition of efficiency.
 

18   In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter [so his opportunity cost of a loaf of bread is 1/3 of a pound of butter]. In an eight hour day, Bob can produce either 8 loaves of bread or 8 pounds of butter [so Bob's opportunity cost of a loaf of bread is one pound of butter]. We know that Andy has a comparative advantage in the production of

1. bread [his opportunity cost is lower, 1/3 versus 1 pound of butter], while Bob has comparative advantage in the production of butter [his opportunity cost is lower, 1 loaf versus 3 loaves]. 39% of you got this, but 55% said "neither has a comparative advantage in the production of butter" -- in these circumstances, that cannot be true -- there are only two of them, and their productivities differ in bread, so their comparative advantages must also differ in butter [where their absolute productivities are the same].

6.   When you buy a $6 movie ticket,

C) this expenditure generates incomes of exactly $6. 46% of you got this, which is right [check the book if you are unsure about it].
 
 

15.  A nation can consume at a point outside its PPF

The key word here is consume; it doesn't say produce, it says consume. Remember the slides; the great benefit of trade is that it allows us to consume outside our PPF even though we cannot produce outside it, the right answer is

A) when it trades with other nations. 46% of you got it right, 44% said 'never' -- I guess you read 'consume' as produce, they are not the same.
 
 

9.  Which of the following is a normative statement?

Remember, normative implies opinion, value judgement, what should be; positive is about what is, facts. The distractors all had words like 'will' 'will' 'is' in them, whereas the right answer was

C) the government's cuts in welfare spending impose an unfair hardship on the poor.

'Unfair' should have been the give-away -- that has to be opinion.