ECO 2301 Test 3

Refer to the accompanying figure. The marginal utility of the 7th pizza is

-5

At her current level of consumption, Jess gets half as much marginal utility from an additional bagel as from an additional muffin. If the price of muffin is $2 each, then Jess is maximizing her utility if the price of a bagel is:

$1.00

Refer to the accompanying figure. At the equilibrium price, total consumer surplus in this market is:

$12,000 per day

Refer to the accompanying figure. At the equilibrium price, total consumer surplus is:

$7.50 per day

At a price of $15 per unit, what would be the total consumer surplus in this market each day?

$75

For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. If the market consists of 50 identical sellers, each with the same opportunity cost as the seller depicted in the figure, then how many units would be supplied in the market at a price of $14 per unit?

17,500

Refer to the accompanying table. If the price of Good A is $5 and the price of Good B is $4, then the rational spending rule is satisfied when the consumer purchases ______ units of Good A and ______ units of Good B.

1; 3

Taylor's marginal utility from watching movies and from eating out (in utils) is shown in the accompanying table. Taylor spends exactly $100 every month on these two forms of entertainment; the price of each movie is $10 and the price of each dinner is $20.

2 movies and 4 dinners.

Refer to the accompanying figure. The marginal utility of the 6th pizza is:

5

Suppose Sarah owns a small company that makes wedding cakes. The accompanying table shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day.

5

Refer to the accompanying figures. If Mallory and Rick are the only two consumers in this market and the price of soda is $0.75 per can, then what will be the market demand for soda each month?

50

Refer to the accompanying figure. If Laura and Chris are the only two consumers in this market, then at a price of $2.00 per pound, the market demand for hamburger is:

6 pounds per week.

Refer to the accompanying table. The marginal utility of the 3rd dinner is:

60

Refer to the accompanying table. The law of diminishing marginal returns becomes evident after ______ units of output are produced.

66

Refer to the accompanying figure. Total utility increases with each additional pizza up to the ______ and then declines, but marginal utility ______ with each additional pizza consumed.

6th pizza; decreases

Fran runs a doughnut shop in a tiny 3-person town. The accompanying table shows the quantity demand by the three townspeople at various prices.

9 doughnuts

The dollar price of a good relative to the average dollar price of all other goods is the good's:

real price.

Which of the following will cause an increase market supply?

A technological innovation that lowers the marginal cost of producing the good.

Which of the following is a defining characteristic of all perfectly competitive markets?

All firms sell the same standardized product.

Which of the following is NOT true of a perfectly competitive firm?

It seeks to maximize revenue.

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell?

The opportunity cost of picking up cans is higher for wealthy people than for poor people.

One implication of the shape of the demand curve facing a perfectly competitive firm is that:

One implication of the shape of the demand curve facing a perfectly competitive firm is that:

If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to:

a decrease in the firm's supply.

The long run is best defined as:

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

The short run is best defined as:

a period of time sufficiently short that at least one factor of production is fixed.

According to the law of diminishing marginal utility:

as you consume less of something, your marginal utility from consuming that good will increase.

Refer to the accompanying figure. Suppose a law is passed requiring restaurants to charge no more than $25 per meal. This law would

decrease producer surplus

Refer to the accompanying figure. For Jeff, the consumption of movies reflects the law of:

diminishing marginal utility.

If a firm shuts down in the short run, then its:

economic loss will equal its fixed costs.

If a perfectly competitive firm produces an output level at which price is greater than marginal cost, then the firm should:

expand output to earn greater profits or smaller losses.

An increase in the price a firm receives for its output will lead the firm to:

expand output.

To produce 150 units of output, a firm must use 3 employees per day. To produce 300 units of output, the firm must use 8 employees per day. Apparently, the firm is:

experiencing diminishing returns.

When the price of a good rises, marginal utility per dollar spent on that good ______, leading consumers to purchase ______ of that good.

falls; less

Refer to the accompanying table. Total utility ______ as additional apples are consumed, but marginal utility ______ with each additional apple consumed.

first increases then decreases; decreases

A price-taker faces a demand curve that is:

horizontal at the market price

For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. As the market price of this good increases, the quantity produced by this seller will ______.

increase

A variable factor of production:

is variable in both the short run and the long run.

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 fourth pie than from eating the second pie.

less

The primary objective of most private firms is to:

maximize profit.

The rational spending rule is derived from the consumer's desire to:

maximize utility.

For two goods, coffee and scones, suppose that MU(coffee)/P(coffee) = 4 and MU(scones)/P(scones) = 3. To maximize your total utility from these two goods, you should purchase:

more coffee and fewer scones.

Suppose that at a firm's profit-maximizing level of output, its total revenue is $1,250, the total cost of its variable factors of production is $1,000, and its total fixed cost is $500. This firm will ______ in the short run, and will ______ in the long run.

not shut down; exit the industry

Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then at this firm's profit maximizing level of output, the firm will earn an economic ______ of ______ per day.

profit; $8

Suppose that Cathy spends all of her income on 20 units of good X and 25 units of good Y. Cathy's marginal utility from the 20th unit of good X is 9 utils, and her marginal utility from the 25th unit of good Y is 19 utils. If the price of good X is $0.50 per unit and the price of good Y is $1.00 per unit, then to comply with the rational spending rule, Cathy should:

purchase less than 20 units of good X and more than 25 units of good Y.

Alex wants to maximize his utility. At his current level of consumption, Alex'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, Alex should:

reallocate his spending away from coffee and towards soda

The goal of utility maximization is to allocate your ______ in order to maximize your ______.

resources; satisfaction

When the price of a good falls, marginal utility per dollar spent on that good ______, prompting consumers to purchase ______ of that good.

rises; more

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will:

shift into producing good Y.

Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm:

should not shut down if its total variable cost is less than $750.

Marginal cost is calculated as:

the change in total costs divided by the change in output

The accompanying figure shows a single consumer's demand for ice cream at the student union.

the market demand curve for ice cream from the student union to shift to the right.

Last year, Casey grew fresh vegetables, which she sold at her local farmers market, but this year, Casey did not plant any vegetables and went to work at a bank instead. If Casey's decision to change careers did not affect the price of vegetables at the farmers market, then this suggests that:

the market for vegetables is perfectly competitive.

The term marginal utility denotes the amount by which ______ changes when consumption changes by ______ unit(s).

total utility; 1

Individual supply curves generally slope ______ because ______.

upward; of increasing opportunity costs.