Econ Exam 2

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  1. The price elasticity of demand measures...
    A) The slope of the demand curve
    B) How Frequently the market price of a good changes
    C) Both A and B (The slope of the demand curve/ the responsiveness of quantity demanded)
    D) The responsiveness of quantity demanded to changes in price
    D) The responsiveness of quantity demanded to changes in price
    (this multiple choice question has been scrambled)
  2. Doug wants to start up his own business and needs $25,000 to get it off the ground. He can either withdraw it from his savings account, where he currently earns 3%, or he can take out a loan for $25,000 and pay 5% interest. Doug should compare:
    A) The implicit cost of $750 to the explicit cost of $1,250 and choose to use his savings
    B) The implicit cost of $750 to the explicit cost of $1,250 and choose to borrow the money
    C) The explicit cost of $750 to the implicit cost of $1,250 and choose to use his savings
    D) The explicit cost of $25,750 to the explicit cost of $26,250 and choose to borrow the money
    A) The implicit cost of $750 to the explicit cost of $1,250 and choose to use his savings
    (this multiple choice question has been scrambled)
  3. When a person's income increases,
    A) The bundles of goods and services that become affordable must include more expensive goods and services
    B) The bundles of goods and services that become affordable don't change
    C) more bundles of goods and services become affordable
    D) fewer bundles of goods and services become affordable
    C) more bundles of goods and services become affordable
    (this multiple choice question has been scrambled)
  4. Given the marginal-utility-to-price ration equalization principle, MU1/P1=MU2/P2. What will happen if P1 decreases?
    A) the consumer should consume more of good 1 and less of good 2
    B) the consumer should consume more of good 2 and less of good 1
    C) total utility of good 1 is greater than total utility of good 2
    D) total utility of good 2 is greater than total utility of good 1
    A) the consumer should consume more of good 1 and less of good 2
    (this multiple choice question has been scrambled)
  5. After eating four slices of pizza, you are offered a fifth slice for free. You turn down the fifth slice. Your refusal indicates that the..
    A) marginal utility is positive for the fourth slice and negative for the fifth slice
    B) marginal utility for four pizza slices is negative
    C) total utility for five pizza slices is negative
    D) marginal utility for the fourth slice is the largest among all slices
    A) marginal utility is positive for the fourth slice and negative for the fifth slice
    (this multiple choice question has been scrambled)
  6. Hideki attends baseball games and goesto movie theaters. Assume that baseball and movie tickets are normal goods. After the price of baseball tickets goes up, which of the following is correct?
    A) The substitution effect predicts that Hideki will substitute spending toward baseball and away from movie
    B) The quantity of baseball tickets that Hideki consume will decrease
    C) The income effect will induce Hideki to increase spending on both movie and baseball tickets
    D) The quantity of movie tickets that Hideki consume will increase
    B) The quantity of baseball tickets that Hideki consume will decrease
    (this multiple choice question has been scrambled)
  7. According to the law of diminishing marginal returns, 
    A) the additional output generated by additional units of an input will diminish
    B) output will fall and then rise as additional units of input are employed
    C) employing additional inputs will diminish total output
    D) the additional inputs necessary to produce an additional unit of output will diminish
    A) the additional output generated by additional units of an input will diminish
    (this multiple choice question has been scrambled)
  8. In a two-nation world, comparative advantage in the production of a particular product means that one nation can produce:
    A) more of the product than the other nation
    B) the product at a lower domestic opportunity cost than the other nation
    C) the product with fewer inputs than the other nation
    D) the product at a lower average cost than the other nation
    B) the product at a lower domestic opportunity cost than the other nation
    (this multiple choice question has been scrambled)
  9. France and Italy can produce two goods, fish (F) and chicken (C). The cost ratios for two goods are constant and given by France: 1F=2C and Italy: 1F=4C. If these two countries specialize based on comparative advantage, 
    A) Italy will both produce chicken and catch fish
    B) France will both produce chicken and catch fish
    C) France will produce chicken and Italy will catch fish
    D) Italy will produce chicken and France will catch fish
    D) Italy will produce chicken and France will catch fish
    (this multiple choice question has been scrambled)
  10. Suppose the government has decided to impose a tax on sellers. Which of the following is correct?
    A) If supply were less elastic, the deadweight loss would be larger
    B) If demand were less elastic, the deadweight loss would not be affected
    C) If supply were less elastic, the tax revenue would be larger
    D) If demand were less elastic, the tax revenue would be smaller
    C) If supply were less elastic, the tax revenue would be larger
    (this multiple choice question has been scrambled)
  11. The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by 
    A) 7% and quantity supplied rises by 5%
    B) 8% and quantity supplied rises by 8%
    C) 5% and quantity supplied rises by 7%
    D) 10% and quantity supplied remains the same
    A) 7% and quantity supplied rises by 5%
    (this multiple choice question has been scrambled)
  12. Which of the Statement is correct?
    A) When MP is higher than AP, AP is decreasing. When MP is less than AP, AP is decreasing
    B) When MP is higher than AP, AP is increasing. When MP is less than AP, AP is decreasing
    C) When MP is higher than AP, AP is increasing. When MP is less than AP, AP is increasing
    D) When MP is higher than AP, AP is decreasing. When MP is less than AP, AP is increasing
    B) When MP is higher than AP, AP is increasing. When MP is less than AP, AP is decreasing
    (this multiple choice question has been scrambled)
  13. Mary's income increases by 10% and her demand for books decreases by 5%, all else constant. Mary's income elasticity of demand for books is _____. Thus, books are a/an _____ good and _____ for Mary.
    A) -2.0, normal, neither a luxury or a necessity
    B) 0.5, normal, a necessity
    C) 2.0, inferior, a luxury
    D) -0.5, inferior, a necessity
    D) -0.5, inferior, a necessity
    (this multiple choice question has been scrambled)
  14. Maggie decides to become a full-time fashion blogger and quits her job. Her previous job paid her $45,000 a year. SHe spent $10,000 buying a camera and fashion apparel. She earns $80,000 in her first year as a blogger. What is Maggie's economic profit as a blogger?
    A) $25,000
    B) $35,000
    C) $70,000
    D) $80,000
    A) $25,000
    (this multiple choice question has been scrambled)
  15. Suppose a firm's marginal product of labor of producing the 3rd unit of a good is equal to 2. Additionally, suppose a firm pays its workers $10. What is the firm's marginal cost of producing the 3rd unit?
    A) $5
    B) $10
    C) $20
    D) $2
    A) $5
    (this multiple choice question has been scrambled)
  16. Assume that we know that the cross elasticity of demand between goods A and B is 0.5. If the price of B increases, the demand for A ____ because A and B are ____
    A) Decreases, complements
    B) Decreases, substitutes
    C) Increases, compliments
    D) Increases, substitutes
    D) Increases, substitutes
    (this multiple choice question has been scrambled)
  17. Which of the following makes supply more elastic?
    A) The producer has unused capacity when price change happens
    B) There is limited availability of input goods
    C) The product is complex to manufacture.
    D) The producer has little time to respond to price changes
    D) The producer has little time to respond to price changes
    (this multiple choice question has been scrambled)
  18. The long-run average total cost curve:
    A) will rise if economies of scale are incurred
    B) is based on the assumption that all resources are variable
    C) will fall if diminishing returns are encountered
    D) will rise if diminishing returns are encountered
    B) is based on the assumption that all resources are variable
    (this multiple choice question has been scrambled)
  19. At a price of $10, the quantity demanded of wine is 1,250 bottles. When the price increases to $30, the quantity demanded of wine is 750 bottles. The price elasticity of demand for wine is:
    A) -1/2, and demand is inelastic
    B) -4/3, and demand is inelastic
    C) -4/3, and demand is elastic
    D) -1/2, and demand is elastic
    A) -1/2, and demand is inelastic
    (this multiple choice question has been scrambled)
  20. Do we expect to observe the law of diminishing returns in the short run or long run? Why?
    A) We observe diminishing returns in the long run, because marginal product of a variable will always decrease in the long run
    B) We observe diminishing returns in the short run, because in the long-run the average cost will always decrease
    C) We observe diminishing returns in the short run, because there is sufficient time for inputs to alter in the long run
    D) We observe diminishing returns in both the long run and short run, because average cost could increase in both cases
    C) We observe diminishing returns in the short run, because there is sufficient time for inputs to alter in the long run
    (this multiple choice question has been scrambled)
  21. Why is the minimum efficient scale important for a firm's decision making?
    A) Minimum efficient scale denotes the point where long-run average costs are minimized
    B) Minimum efficient scale tells firms when to stop increasing production in the short run
    C) Minimum efficient scale denotes the point after which firms experience constant returns to scale forever
    D) Minimum efficient scale denotes the point from which firms can enjoy decreasing long-run average cost as they increase output
    A) Minimum efficient scale denotes the point where long-run average costs are minimized
    (this multiple choice question has been scrambled)
  22. Image Upload
    Consider the diagram below. Suppose the World price of coffee is $2 per pound. What is the quantity of coffee imports for the U.S. (in millions of pounds)?
    A) 120
    B) 320
    C) 220
    D) 200
    D) 200
    (this multiple choice question has been scrambled)
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    What is the increase in economic surplus from autarky to free trade?
    A) 200
    B) 150
    C) 50
    D) 100
    A) 200
    (this multiple choice question has been scrambled)
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    If the world price of the product is $6 and a tariff of $1 per unit imported is imposed, then the quantity of output that would be supplied domestically would be
    A) 1,600 units, and the quantity of output that would be imported would be 400 units
    B) 1,600 units, and the quantity of output that would be imported would be 800 units
    C) 1,400 units, and the quantity of output that would be imported would be 800 units
    D) 1,400 units, and the quantity of output that would be imported would be 400 units
    A) 1,600 units, and the quantity of output that would be imported would be 400 units
    (this multiple choice question has been scrambled)
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    What is the total variable cost of producing 4 units?
    A) $22
    B) $10
    C) $28
    D) $5.5
    A) $22
    (this multiple choice question has been scrambled)
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    Which of the following is correct?
    A) Average variable cost is $8 when 6 units are produced
    B) Average fixed cost is $6 when 3 units are produced
    C) Average total cost is $6.8 when 5 units are produced
    D) Marginal cost is $8 when 1 unit is produced
    A) Average variable cost is $8 when 6 units are produced
    (this multiple choice question has been scrambled)
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    Suppose the country is originally in autarky. Please note that the world price is $5 and that S and D represents domestic supply and demand. What is the transfer from producer surplus to consumer surplus if imports are allowed?
    A) A+B
    B) C+D
    C) A+B+C+D+E+F
    D) G
    B) C+D
    (this multiple choice question has been scrambled)
  28. Image Upload
    Chile and Argentina each have 600 workers available. The table shows how many workers it takes to produce grapes and how many workers it takes to produce beef in each country. Argentina has ___.
    A) a comparative advantage in both grapes and beef
    B) a comparative advantage in beef
    C) a comparative advantage in neither grapes nor beef
    D) a comparative advantage in grapes
    D) a comparative advantage in grapes
    (this multiple choice question has been scrambled)
  29. Image Upload
    Suppose in autarky, Chile produces 75 tons of grapes and 150 tons of beef and Argentina produced 100 tons of grapes and 75 tons of beef. After specialization and trade, Chile trades 100 tons of beef to Argentina for 100 tons of grapes. Which of the following is true?
    A) Argentina will gain 25 tons of beef
    B) Chile will gain 100 tons of grapes
    C) Chile will e worse off after trading with Argentina
    D) Only Argentina will gain from this trade
    A) Argentina will gain 25 tons of beef
    (this multiple choice question has been scrambled)
  30. Image Upload
    Which of the following terms of trade would make trade beneficial for both Chile and Argentina?
    A) 1/4 ton of grapes for 1 ton of beef
    B) 1/4 ton of beef for 1 ton of grapes
    C) 3 tons of beef for 1 ton of grapes
    D) 1 ton of grapes for 1 ton of beef
    D) 1 ton of grapes for 1 ton of beef
    (this multiple choice question has been scrambled)
  31. Image Upload
    The price of an apple is $1; the price of a banana is $2. You have $4 to spend. What is the optimal consumption of apples and bananas?
    A) 2 apples and 2 bananas
    B) 3 apples and 3 bananas
    C) 4 apples and 0 bananas
    D) 2 apples and 1 banana
    D) 2 apples and 1 banana
    (this multiple choice question has been scrambled)
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    The price of an apple is $1; the price of the banana is $1 and you have $4 to spend. What is the optimal consumption?
    A) 2 apples and 2 bananas
    B) 4 apples and 4 bananas
    C) 2 apples and 1 banana
    D) 3 apples and 3 bananas
    A) 2 apples and 2 bananas
    (this multiple choice question has been scrambled)
  33. Image Upload
    An increase in the quantity of product X demanded from 14,000 to 16,000 units implies that the price of product X was...
    A) increased and the demand is elastic
    B) increased and the demand is inelastic
    C) reduced and the demand is elastic
    D) reduced and the demand is inelastic
    D) reduced and the demand is inelastic
    (this multiple choice question has been scrambled)
  34. Image Upload
    In the picture below, curve ___ represents the Average Variable Cost curve and curve ___ represents and the Marginal Cost curve.
    A) 1,3
    B) 3,1
    C) 2,1
    D) 3,4
    B) 3,1
    (this multiple choice question has been scrambled)
  35. Image Upload
    The below supply curve is:
    A) Semi Elastic
    B) Perfectly Elastic
    C) Perfectly Inelastic
    D) Unit Elastic
    B) Perfectly Elastic
    (this multiple choice question has been scrambled)
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    Which of the following graphs is implying the law of diminishing marginal utility? (Numbers next to each curve represent total utility)
    D
  37. Image Upload
    Suppose the price decreases from $8 to $4. Calculate the price elasticity of demand using the midpoint formula.
    A) -1
    B) -2
    C) -0.8
    D) -1/2
    A) -1
    (this multiple choice question has been scrambled)
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    The table below shows Bob's total utility from consuming slices of pizza. What is the marginal utility of Bob's 4th slice of pizza?
    A) 7
    B) 8
    C) 1
    D) 40
    A) 7
    (this multiple choice question has been scrambled)
  39. Image Upload
    Based on the table, which of the following is correct?
    A) Marginal returns to each input unit are all greater than 0
    B) Diminishing marginal returns set in with the addition of the third unit of input
    C) As marginal return increase, output increases up to 6 units
    D) Output can increase indefinitely by increasing input
    B) Diminishing marginal returns set in with the addition of the third unit of input
    (this multiple choice question has been scrambled)
  40. Image Upload
    What is the marginal product of labor when labor input is 4?
    A) 1
    B) 3
    C) 4
    D) 2
    A) 1
    (this multiple choice question has been scrambled)

Card Set Information

Author:
Zaqxz
ID:
326635
Filename:
Econ Exam 2
Updated:
2016-12-10 03:56:56
Tags:
economics
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Micro Final Practice
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