ECO 112 Quiz Chapter 5 & 6

Which of the following is NOT a characteristic of a perfectly competitive market? a) Each firm in the market sells a somewhat different variant of the good. b) There are many sellers, each of which sells only a small fraction of the total quantity exchanged. c) Buyers and sellers are well-informed. d) Sellers can easily buy and sell the productive resources needed to enter the market.

a) Each firm in the market sells a somewhat different variant of the good.

Suppose Jamal's marginal utility from the first taco he eats is 15, and his marginal utility from the second taco he eats is 12. One can infer that: a) Jamal's total utility from eating two tacos is 27. b) Jamal's should eat one taco. c) Jamal's average utility from eating two tacos is 27. d) Jamal's should eat two tacos.

a) Jamal's total utility from eating two tacos is 27.

Which of the following is the most likely to be a fixed factor of production at a farm? a) The land on which the farm is located b) The number of workers hired to harvest the crops c) The amount of fertilizer used each week d) The amount of water used each day

a) The land on which the farm is located

Which of the following is the most likely to be a variable factor of production at a university? a) The number of librarians b) The size of the football stadium c) The size of the student union d) The location of the university

a) The number of librarians

During Thanksgiving you participated in a pumpkin pie-eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. Your total utility ______ with the first three pies you ate. a) increased b) decreased c) stayed the same d) first increased than decreased

a) increased

The difference between the price a seller actually receives for a good and the seller's reservation price is a) producer surplus. b) profit. c) variable cost. d) consumer surplus.

a) producer surplus.

Hector wants to maximize his utility. At his current level of consumption, Hector's marginal utility from an additional cup of coffee is 15 utils, and his marginal utility from an additional can of soda is 11 utils. If the price of a cup of coffee is $3 and the price of a can of soda is $2, Hector should: a) reallocate his spending away from coffee and towards soda. b) reallocate his spending away from soda and towards coffee. c) not change his consumption of either coffee or soda. d) decrease his spending on both coffee and soda.

a) reallocate his spending away from coffee and towards soda.

Average total cost is defined as: a) total cost divided by total output. b) total cost divided by price. c) variable cost divided by total output. d) variable cost divided by price.

a) total cost divided by total output.

The price equals marginal cost rule for profit maximization is a specific example of which core principle? a) The Scarcity Principle b) The Cost-Benefit Principle c) The Principle of Comparative Advantage d) The Efficiency Principle

b) The Cost-Benefit Principle

The long run is best defined as a) one year or more. b) a period of time sufficiently long that all factors of production are variable. c) the period of time between annual accounting reports. d) a period of time sufficiently long that at least one factor of production is fixed.

b) a period of time sufficiently long that all factors of production are variable.

A technological innovation that reduces a firm's cost of producing additional units of output will lead to: a) an increase in the quantity supplied by the firm, but no change in the firm's supply. b) an increase in the firm's supply. c) a decrease in the quantity supplied by the firm, but no change in the firm's supply. d) a decrease in the firm's supply.

b) an increase in the firm's supply.

A rational seller will sell another unit of output: a) whenever the seller is earning a profit. b) if the cost of making another unit is less than the revenue gained from selling another unit. c) as long as the quantity demanded is greater than zero. d) if the seller can charge more than the equilibrium price.

b) if the cost of making another unit is less than the revenue gained from selling another unit.

The additional utility gained from consuming an additional unit of a good is called: a) total utility. b) marginal utility. c) costly utility. d) a util.

b) marginal utility.

During Thanksgiving you participated in a pumpkin pie-eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ______ utility from eating the first pie than from eating the third pie. a) less b) more c) the same amount of d) less variable

b) more

As the market price of a service increases, more potential sellers will decide to perform that service because a) higher prices result in higher revenue. b) more potential sellers will find that the market price exceeds their reservation price. c) it's more prestigious to produce high-priced services. d) higher prices lead to lower opportunity costs.

b) more potential sellers will find that the market price exceeds their reservation price.

A seller's supply curve shows the seller's: a) willingness to pay for an additional unit of output at each quantity. b) opportunity cost of producing an additional unit of output at each quantity. c) hourly wage for producing an additional unit of output at each quantity. d) profit from producing an additional unit of output at each quantity.

b) opportunity cost of producing an additional unit of output at each quantity.

Total revenue minus both explicit and implicit costs defines a firm's a) gross earnings. b) profit. c) marginal earnings. d) net worth.

b) profit.

The goal of utility maximization is to allocate your ______ in order to maximize your ______. a) utility; spending b) resources; satisfaction c) time; work d) resources; desires

b) resources; satisfaction

Suppose that when a firm produces the level of output at which price equals marginal cost, the firm's total revenue is less than its variable cost. In this case, the firm should a) not change its level of output even if it's earning an economic loss in the short run. b) shut down. c) produce more so that its total revenue increases. d) purchase more fixed factors of production.

b) shut down.

The tendency for marginal utility to decline as consumption increases beyond some point is called: a) the law of demand. b) the law of diminishing marginal utility. c) the rational spending rule. d) utility maximization.

b) the law of diminishing marginal utility.

According to economists, the satisfaction people get from their consumption activities is called: a) demand. b) utility. c) a need. d) a want.

b) utility.

Which of the following would be considered a factor of production in the provision of bus service? a) The revenue from the sale of bus tickets b) The amount it costs to provide bus service between two locations c) Bus drivers d) The hourly wage paid to bus drivers

c) Bus drivers

The absolute price of a good in dollar terms is the good's: a) market price. b) equilibrium price. c) nominal price. d) marginal price.

c) nominal price.

Sejal's reservation price for her economics textbook is $100. The week before the semester begins, Sejal finds a copy of her textbook online for $75. Sejal's consumer surplus from buying the textbook online is: a) $125. b) $100. c) $75. d) $25.

d) $25.

For two goods, A and B, the rational spending rule is expressed as: a) MUA = MUB. b) MUA × MUB = PA × PB. c) (MUA/PB) = (MUB/PA). d) (MUA/PA) = (MUB/PB).

d) (MUA/PA) = (MUB/PB).

When the price of a good rises, marginal utility per dollar spent on that good ______, leading consumers to purchase ______ of that good. a) rises; more b) falls; more c) rises; less d) falls; less

d) falls; less

A profit-maximizing firm will only produce a positive amount of output if a) its total revenue is greater than its total cost. b) its total revenue is greater than its fixed cost. c) its total revenue equals its total cost. d) its total revenue is greater than or equal to its variable cost.

d) its total revenue is greater than or equal to its variable cost.

The tendency for consumers to purchase more of a good or service as its price falls is captured by the: a) law of supply. b) law of increasing cost. c) Low-Hanging Fruit Principle. d) law of demand.

d) law of demand.

A perfectly competitive firm's supply curve is the portion of its ______ cost curve that lies above its ______ cost curve. a) average total; marginal b) average variable; marginal c) marginal; average total d) marginal; average variable

d) marginal; average variable

If a consumer buys two different goods, the rational spending rule requires that the: a) total expenditure on the two goods be equal. b) ratio of total utility to price be equal for the two goods. c) ratio of average utility to price be equal for the two goods. d) ratio of marginal utility to price be equal for the two goods.

d) ratio of marginal utility to price be equal for the two goods.

The law of demand indicates that as the cost of an activity: a) falls, less of the activity will occur. b) rises, more of the activity will occur. c) rises, the level of the activity may or may not increase depending on the individual. d) rises, less of the activity will occur.

d) rises, less of the activity will occur.

Marginal cost is calculated as: a) total revenue minus total costs. b) the change in output divided by the change in total costs. c) the percentage change in total costs divided by the percentage change in output. d) the change in total cost divided by the change in output.

d) the change in total cost divided by the change in output.

Consumer surplus measures: a) the increase in a buyer's total utility when the buyer purchases additional units of a good. b) the difference between the quantity demanded and the quantity supplied at a given price. c) the difference between a buyer's marginal utility from consuming a product and the price actually paid. d) the difference between the most a buyer would be willing to pay for a product and the price actually paid.

d) the difference between the most a buyer would be willing to pay for a product and the price actually paid.

Individual supply curves generally slope ______ because ______. a) downward; sellers become more efficient with practice b) upward; profits increase with quantity c) downward; inputs are cheaper when purchased in high volume d) upward; of increasing opportunity costs

d) upward; of increasing opportunity costs