Econ 50 questions
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econ.docI. MULTIPLE CHOICE (40 questions 2 points each). Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is a microeconomic question? 1) A) Should companies pay for employees' health insurance?
B) Should Congress and the president take action to reduce the unemployment rate? C) Should the Fed attempt to influence the interest rate to control potential inflation? D) Why do some countries have higher economic growth rates than other countries?
|
Bath |
Groom |
|
0 |
6 |
|
7 |
5 |
|
13 |
4 |
|
18 |
3 |
|
22 |
2 |
|
25 |
1 |
|
27 |
0 |
Table 2.1
2) Kaitlyn and Larissa have formed a dog bathing and grooming business. The number of dogs they can bathe or groom in any given day is depicted in Table 2.1. The opportunity cost of grooming the third dog in a day is bathing dog(s). 2)
A) 3 B) 4 C) 5 D) 18
|
Hours of Operation |
Marginal Cost |
|
1 |
6 |
|
2 |
12 |
|
3 |
18 |
|
4 |
24 |
|
5 |
30 |
|
6 |
36 |
|
7 |
42 |
Table 2.2
3) Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Krystal staying open 4 hours per day. If she is following the marginal principle, what must her marginal benefit be? 3)
A) $12 B) $18 C) $24 D) $30
4) Jacinda quit her job as a blackjack dealer where she made $42,000 per year to start her own florist business. Her business expenses are $14,000 per year on rent, $21,000 per year on supplies, and $9,000 per year on part time help. As for her personal expenses, her apartment costs her $12,000 per year and her personal bills are an extra $6,000 per year. What
is Jacinda's opportunity cost of running the business? 4)
A) $104,000 B) $86,000 C) $62,000 D) $44,000
5) According to the principle of diminishing returns, if all factors of production but one are held constant and if that one factor is doubled, then eventually output will most likely: 5)
A) more than double. B) double too.
C) less than double. D) remain unchanged.
6) A U.S. company is attempting to cut costs by shifting some of its services to Thailand. This process of shifting production of products or services overseas to cut costs often results in: 6)
A) lower consumer prices on those products or services.
B) greater economic uncertainty in the market for those products and services. C) lower production quantities of those products or services.
D) greater potential for market failure for those products and services.
|
|
Hair Pins /hour |
Bandanas /hour |
|
Nigel |
4 |
10 |
|
Mia |
9 |
3 |
Table 3.3
7) Consider two individuals, Nigel and Mia, who produce hair pins and bandanas. Nigel's and Mia's hourly productivity are shown in Table 3.3. Which of the following is true? 7)
A) Mia has an absolute advantage in producing hair pins but not bandanas. B) Mia has an absolute advantage in producing bandanas but not hair pins. C) Mia has an absolute advantage in producing both goods.
D) Mia does not have an absolute advantage in producing either good.
|
|
Kites /hour |
Snowboards /hour |
|
Jesse |
8 |
1 |
|
April |
12 |
3 |
Table 3.2
8) Consider two individuals, Jesse and April, who hand paint kites and snowboards. Table 3.2 shows how much of each good Jesse and April can paint in one hour. Which of the following is true? 8)
A) April has a comparative advantage in painting kites but not snowboards. B) April has a comparative advantage in painting snowboards but not kites. C) April has a comparative advantage in painting both goods.
D) April does not have a comparative advantage in painting either good.
9) Figure 4.3 illustrates the demand for tacos. A decrease in the demand for tacos is represented by the movement from:
9)
A) point a to point b. B) point c to point b. C) D2 to D1. D) D0 to D1.
10) Suppose that a market for a product is in equilibrium at a price of $5 per unit. At any price above $5 per unit: 10)
A) there will be a shortage of that product.
B) there will be an excess demand for the product.
C) the quantity supplied of the product will be less than the quantity demanded of that product. D) there will be an excess supply of the product.
11) Suppose that a new study is released stating that consumption of orange juice (a substitute for apple juice) reduces the risk of cancer, and a major freeze destroys half of the country's apple crop. What happens to the price and quantity of apple juice? 11)
A) The price of apple juice might rise or fall and the quantity of apple juice falls. B) The price of apple juice might rise or fall and the quantity of apple juice rises. C) The quantity of apple juice might rise or fall, and the price of apple juice rises. D) The price of apple juice falls and the quantity of apple juice falls.
12) Suppose that a new advertising campaign extolling the virtues of apple juice is successful, and a major freeze destroys half of the country's apple crop. What happens to the price and quantity of apple juice? 12)
A) The equilibrium price of apple juice might rise or fall and the equilibrium quantity of apple juice falls. B) The equilibrium price of apple juice rises and the equilibrium quantity of apple juice might rise or fall. C) The equilibrium price of apple juice might rise or fall and the equilibrium quantity of apple juice rises. D) The equilibrium price of apple juice falls and the equilibrium quantity of apple juice might rise or fall.
13) Figure 4.5 illustrates a set of supply and demand curves for hamburgers. A increase in supply and a increase in demand are represented by a movement from: 13)
A) point c to point a. B) point a to point b. C) point d to point a. D) point d to point b.
14) If Maria spends a fixed dollar amount per week on movie rentals regardless of changes in the price, Maria's demand for movie rental can be considered: 14)
A) elastic. B) inelastic.
C) unit elastic.
D) There is no sufficient information to determine the price elasticity.
15) Which of the following goods is likely to have the most elastic demand? 15) A) movie B) electricity C) cigarettes D) gasoline
16) Suppose that the income elasticity of demand for good X is positive but less than 1. Other things being equal, which of the following statements is INCORRECT? 16)
A) A consumer buys more X as income rises and the share of income spent on good X also rises. B) Good X is a normal good.
C) The quantity demanded of good X decreases as a consumer's income declines.
D) A consumer buys more X as income rises, but the share of income spent on good X falls.
17) Suppose that an import restrictions result in the percentage change in supply is 20%, the price elasticity of demand is
3, and the price elasticity of supply is 2. What is the percentage change in the equilibrium price? 17)
A) 4% B) 5% C) 15% D) 20%
18) The quantity supplied of bagels is 100 at the unit price $1. Suppose the price elasticity of supply by the initial value method is 1.5, and you would like to induce sellers to increase the quantity of bagels supplied to 130. Then the new price for bagels must be: 18)
A) $11. B) $10.20. C) $1.20. D) $1.10.
19) Producer surplus is: 19)
A) the economic profit earned from the sale of a good, minus its marginal cost of production. B) the price a producer receives for a product minus the marginal cost of production.
C) the difference between the highest market price consumers are willing to pay for a product and the minimum amount
producers are willing to accept for that product.
D) the difference between the market price consumers are willing to pay for a product and the actual price they pay.
20) Prices below the free market equilibrium price are inefficient because the willingness to pay by someone to consume an additional unit the marginal cost to someone for producing that unit. 20)
A) exceeds
B) equals
C) is less than
D) None of the above; efficiency is defined in terms of natural resources, not market equilibrium.
21) Refer to Figure 6.4. If producers currently gain at the expense of consumers, a minimum price must have been set at:
21)
A) A. B) B.
C) C. D) There is not sufficient information.
22) Figure 6.9 depicts a hypothetical fish market with a horizontal supply curve. The consumer surplus at the initial equilibrium is shown by: 22)
A) Triangle A + Rectangle B. B) Triangle A + Rectangle B + Triangle C. C) Triangle A + Rectangle B + Rectangle D. D) Triangle A.
Table 6.1
23) Refer to Table 6.1. When quantity = 3, this market is because . 23) A) inefficient; willingness to pay > marginal cost
B) inefficient; willingness to pay < marginal cost
C) efficient; willingness to pay = marginal cost
D) producing too much consumer surplus; willingness to pay > marginal cost
Figure 7.4
The above figure represents the marginal utility per dollar for candy bars and oranges for Sophia. The price of each product is $0.50, and Sophia has a budget of $4.
24) Refer to Figure 7.4. If Sophia relies solely on gut feelings, she will purchase candy bars and oranges to maximize utility. 24)
A) 3; 5 B) 1; 5 C) 6; 2 D) 9; 0
25) If Maria gets 80 utils from consuming five cookies, 100 utils from consuming six cookies and 120 utils from consuming seven cookies, then Maria's marginal utility from the sixth cookie is: 25)
A) 100 utils. B) 80 utils. C) 40 utils. D) 20 utils.
26) A tax levied on coal-fired plants that is based on the amount of carbon released in the atmosphere is considered by the firm as a: 26)
A) fixed cost. B) sunk cost.
C) source of revenue. D) variable cost.
27) In the long run, diminishing returns would: 27) A) not exist because all inputs are held constant.
B) exist at a greater degree, because all inputs are allowed to vary. C) not exist because no input is held constant.
D) still exist at a lesser degree because inputs are allowed to vary.
28) Since a large or a small wind turbine have similar installation, operating and maintenance costs, but a large turbine has four times the generating capacity but costs less than three times as much as a small turbine, the average cost of generating electricity with wind is: 28)
A) constant at each output.
B) at first decreasing and then increasing as output rises. C) increasing as output increases.
D) decreasing as output increases.
29) Suppose that in 2012 ABC Corp. produced 500 million units of a good at an average cost of $2, and in 2013 ABC Corp. expanded its plant capacity and produced 600 million units at an average cost of $1.80. In this range, one can conclude that ABC Corp. is experiencing: 29)
A) diseconomies of scale.
B) diminishing marginal product.
C) economies of scale.
D) neither economies of scale or diseconomies of scale.
30) You observe that at your current production of lunch boxes, the average total cost of producing lunch boxes is $5 and the marginal cost of producing lunch boxes is $2. What should always happen if you increase lunch box production?
30)
A) Average total cost will rise. B) Marginal cost will rise. C) Average total cost will fall. D) Marginal cost will fall.
31) A perfectly competitive firm is producing a good at a level where P = $30 and MC = $30. The firm will continue to produce in the short run as long as: 31)
A) ATC is greater than $30. B) AVC is less than $30. C) price does not increase. D) AFC is less than $30.
32) Figure 9.2 shows the cost structure of a firm in a perfectly competitive market. Suppose the current market price is $10 and the firm produces the profit maximizing output level. If the firm's total fixed cost increases due to a new government regulation, the short-run response of the firm should be to:
Note: since the question does not restrict the firm's response to the short run, we can't rule out that the rise in fixed cost will push the firm below the breakeven point and that the firm will exit the industry in the long run, thus decreasing its current output level. 32)
A) decrease its current output level. B) increase its current output level. C) produce its current output level. D) There isn't sufficient information.
33) If the demand for a product in an increasing cost perfectly competitive industry decreases, we would expect that price in the long run would and the number of firms in the market would . 33)
A) decrease; decrease B) increase; decrease
C) increase; increase D) decrease; increase
Figure 9.3
34) Figure 9.3 shows the cost structure of a firm in a perfectly competitive market. If the market price is $3 and the firm produces the output where MR = MC, its profit is: 34)
A) -$300. B) -$600. C) -$900. D) -$1,200.
Table 10.2
35) Table 10.2 contains price, demand, and cost data for the Capri Theater, the only first-run movie theater in a small town. What is its revenue from non-students under the single price policy? 35)
A) $300 B) $360 C) $450 D) $540
36) Table 10.2 contains price, demand, and cost data for the Capri Theater, the only first-run movie theater in a small town. What is its total profit under the single price policy? 36)
A) $300 B) $360 C) $450 D) $540
37) When a monopolist sells two units of output its total revenues are $100. When the monopolist sells three units of output its total revenues are $120. When the monopolist sells three units of output, the price per unit is: 37)
A) $6.67. B) $20. C) $33.33. D) $40.
38) Under the conditions of monopolistic competition: 38) A) economic profit is zero in the long run.
B) price equals marginal cost.
C) average costs of production are the same in the short run as they are in the long run. D) firm profits are higher in the long run than in the short run.
39) In a monopolistically competitive market, there: 39) A) are substantial barriers to entry.
B) are many firms that have slight control over the price they charge for their product. C) is only one firm that sells many similar yet slightly different products.
D) are many firms selling an identical product.
40) Which of the following characteristics of the monopolistically competitive and the perfectly competitive market will cause the firm to earn zero profits in the long run? 40)
A) many buyersB) no barriers to entry
C) price taker D) homogeneous product
41) Figure 13.1 shows a demand and costs of an unregulated monopoly. At the profit maximization output, the firm earns a profit of: 41)
A) $0. B) $10,000. C) $50,000. D) $80,000.
42) Consider a cable TV company which is subject to an average-cost pricing regulation. If the number of subscribers decreases: 42)
A) the company will have to operate at a smaller profit unless it suffers an economic loss. B) the company will charge more per customer as its average cost increases.
C) the company will have to charge a relatively low price as the demand curve facing the firm shifts to the left.
D) none of the above
Table 17.2
43) Refer to Table 17.2. The marginal product of the fifth unit of labor is: 43) A) 50. B) 40. C) 30. D) 20.
44) If labor productivity increases, the marginal revenue product curve will shift and the profit maximizing quantity of labor demanded will . 44)
A) up; decrease B) up; increase C) down; increase D) down; decrease
45) Suppose that the steelworkers' association introduces a new steel worker licensing requirement. What do you expect will happen? 45)
A) Fewer steelworkers will be employed, at a higher wage. B) More steelworkers will be employed, at a higher wage. C) More steelworkers will be employed, at a lower wage. D) Fewer steelworkers will be employed, at a lower wage.
II. SHORT ANSWER. (5 questions 2 points each). Please write a separate paragraph to explain your answer to each of the following questions.
46) Explain what would happen to the equilibrium price and quantity of oranges if the supply of oranges increased while the demand for oranges decreased. 46)
47) Will a price ceiling always result in a reduction in efficiency? 47)
48) How does the introduction of cognition into a consumer's choice between healthy and unhealthy food affect marginal utility per dollar and the quantity of healthy and unhealthy food consumed? Assume utility is maximized. 48)
49) When an electronics company advertises on the local newspaper a 10% discount coupon , is this an example of price discrimination? Why or why not? 49)
50) Describe how if a price-fixing game is repeated over and over, the cooperative outcome might be attained. 50)
