Economics MID TERM NEEDED ASAP

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Week 3 Activity 1: Midterm Exam

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Question 1

In general, what is a price index? What questions does it help answer?

Answer:

Question 2

For the perfectly competitive firm, price equals marginal revenue because _________.

Choose one answer.

	a. when another unit of the good is sold, total revenue increases by the price of the good
	b. when another unit of the good is sold, total revenue decreases by the price of the good
	c. when another unit of the good is sold, total revenue increases by less than the price of the good
	d. when another unit of the good is sold, total revenue increases by more than the price

Question 3

The law of supply states that _________.

Choose one answer.

	a. firms supply more of a product as consumer income rises
	b. firms supply more of a product as consumer income falls
	c. firms supply more of a product as the price of the product rises
	d. firms supply more of a product as the price of the product falls

Question 4

The price elasticity of demand is calculated by _________.

Choose one answer.

	a. the change in price divided by the change in quantity demanded
	b. the change in quantity demanded divided by the change in price
	c. the percentage change in price divided by the percentage change in quantity demanded
	d. the percentage change in quantity demanded divided by the percentage change in price

Question 5

Scarcity can best be defined as a situation in which _________.

Choose one answer.

	a. there are no buyers willing to purchase what sellers have produced
	b. there are not enough goods to satisfy all of the buyers’ demand
	c. resources are limited in quantity and can be used in different ways
	d. there is not enough money to satisfy consumers’ wants

Question 6

Match the description to the right curve.

is cost that varies with the level of output
is cost that does not vary with output
is the sum of total variable cost and total fixed cost
shows the additional cost of each additional unit of output a firm produces
is total cost divided by quantity.
is the firm’s variable cost per unit of output; it is total variable cost divided by quantity
which is total fixed cost divided by quantity

Question 7

State the essential difference between the classical and Keynesian schools of thought. If you were a public policymaker and received conflicting advice from a classical and a Keynesian economist, how would you choose? Explain.

Answer:

Question 8

In the short-run, ______ factors of production are fixed, while in the long-run, _____ of them are.

Choose one answer.

	a. some, none
	b. all, none
	c. no, at least some
	d. all, at least some

Question 9

When economists say a market has "barriers to entry" they refer to _________.

Choose one answer.

	a. monopolists being prohibited from selling their products to certain customers
	b. a policy that some countries establish to reduce imports from other countries
	c. factors that prevent other firms from challenging a firm with monopoly power
	d. economic profits that are positive, but too high to encourage entry

Question 10

Match each example with the right market form.

Local residential electric power
soft drinks
long-distance service
lumber

Question 11

Match the key terms and definitions.

are people or firms that consume a public good without paying for it
measures the difference between total revenue received by firms at a given quantity of output and the total cost of producing it
are resources for which no property rights have been defined
is the ability to change the market price
is the failure of private decision in the marketplace to achieve an efficient allocation of scarce resources
is the amount by which the total benefits to consumers from consuming a good exceed their total expenditures on the good

Question 12

In the long-run _________.

Choose one answer.

	a. all factors of production are fixed
	b. all factors of production are variable
	c. some factors of production are variable, while at least one factor of production is fixed
	d. at least one factor of production are fixed, and at least two factors of production are variable

Question 13

In the short-run _________.

Choose one answer.

	a. all factors of production are fixed
	b. all factors of production are variable
	c. some factors of production are variable, while at least one factor of production is fixed
	d. No factors of production are fixed, and at least two factors of production are variable

Question 14

A supply curve is defined as the relationship between _________.

Choose one answer.

	a. the price of a good and the quantity that consumers are willing to buy
	b. the price of a good and the quantity that producers are willing to sell
	c. the income of consumers and the quantity of a product that consumers are willing to buy
	d. the income of consumers and the quantity of a product that producers are willing to sell

Question 15

If the price elasticity of demand is 1, demand is _________.

Choose one answer.

	a. upward sloping
	b. inelastic
	c. unitary elastic
	d. elastic

Question 16

A demand curve is defined as the relationship between _________.

Choose one answer.

	a. the price of a good and the quantity of that good that consumers are willing to buy
	b. the price of a good and the quantity of that good that producers are willing to sell
	c. the income of consumers and the quantity of a good that consumers are willing to buy
	d. the income of consumers and the quantity of a good that producers are willing to sell

Question 17

What is the rule of profit maximization?

Choose one answer.

	a. Produce where MR = MC
	b. Produce where MR > MC
	c. Produce where MR < MC
	d. Produce where TR > TC

Question 18

Suppose the marginal benefit of an activity exceeds the marginal cost. What does the marginal decision rule say a maximizing decision maker will do?

Answer:

Question 19

A firm will not shut down in the short-run as long as _________.

Choose one answer.

	a. price exceeds average fixed cost at the level of output where marginal revenue equals marginal cost
	b. price exceeds average variable cost at the level of output where marginal revenue equals marginal cost
	c. price exceeds marginal cost at the level of output where marginal revenue equals marginal cost
	d. price exceeds total revenue at the level of output where marginal revenue equals marginal

Question 20

Describe the concept of the invisible hand.

Answer:

Question 21

Figure 1.2

Sotoland is a small country that produces two types of products, air conditioners, and snowmobiles. Its production possibilities frontier is illustrated in Figure 1.2. Which combination of air conditioners and snowmobiles is unattainable?

Choose one answer.

	a. 200 air conditioners and 700 snowmobiles
	b. 400 air conditioners and 500 snowmobiles
	c. 600 air conditioners and 300 snowmobiles
	d. More than one combination is unattainable

Question 22

Factors of production are the _________.

Choose one answer.

	a. resources used to produce goods and services
	b. processes used to produce goods and services
	c. places where goods and services are produced
	d. tradeoffs involved in producing goods and services

Question 23

A monopoly is defined as an industry where a firm is _________.

Choose one answer.

	a. one of a small number of firms and there is a barrier to entry
	b. one of a large number of firms and there is a barrier to entry
	c. one of a large number of firms and there are no barriers to entry
	d. the single seller of a good and there is a barrier to entry

Question 24

Why does the fact that something is scarce require that we make choices? Explain what is meant by the opportunity cost of a choice.

Answer:

Question 25

The opportunity cost of going to college _________.

Choose one answer.

	a. is zero if your parents pay your tuition
	b. is equal to the cost of tuition, room and board, and other expenses
	c. includes wages you lose by going to school instead of working
	d. is the same for all students at a particular school who pay full tuition

Question 26

When consumers are willing to buy more than producers are willing to sell _________.

Choose one answer.

	a. there is excess supply of the product in the market
	b. there is excess demand for the product in the market
	c. the market is in equilibrium
	d. the demand curve will shift until the quantity supplied equals the quantity demanded

Question 27

Economics is best defined as the study of _________.

Choose one answer.

	a. financial decision-making
	b. how consumers make purchasing decisions
	c. choices made by people faced with scarcity
	d. inflation, unemployment and economic growth

Question 28

The opportunity cost of something is _________.

Choose one answer.

	a. the cost of the labor used to produce it
	b. the best alternative you sacrifice to get it
	c. the price charged for it
	d. the search cost required to find it

Question 29

A market failure is when markets do not bring about profit maximization.

Answer:

True False

Question 30

Which of the following goods or services are public? Which are private?

Libraries
National defense
Fire protection
pepperoni pizza
cable television
designer shoes

Question 31

Match the key terms and definitions.

a situation in which there are too few resources to meet all human wants
the value of the best alternative opportunity forgone
a model that shows the various combinations of two goods the economy is capable of producing
a model of the economy that depicts how the flow of money facilitates a counter flow of resources, goods, and services in the input and output markets
the ability to produce a good at a lower opportunity cost (other goods forgone) than other could do
the ability to produce a good with fewer resources than other producers

Question 32

Use the graph below to match the questions.

supply and demand for final exam

At a price of $1.50 per dozen, how many bagels are demanded per month?
At a price of $1.50 per dozen, how many bagels are supplied per month?
At a price of $3.00 per dozen, how many bagels are demanded per month?
At a price of $3.00 per dozen, how many bagels are supplied per month?
What is the equilibrium price of bagels?
What is the equilibrium quantity per month?

Question 33

A market served by only one firm is called a _________.

Choose one answer.

	a. perfectly competitive market
	b. monopoly
	c. oligopoly
	d. Any of the above could be correct

Question 34

Resources are _________.

Choose one answer.

	a. produced only by firms
	b. unlimited
	c. used to produce goods and services
	d. only provided by nature, not made by human beings

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