Exam 2 part 2, 11/15/19

41) The analysis of consumer decision making based on utility maximization is known as A) specialization analysis. B) consumption analysis. C) utility analysis. D) market analysis.

C) utility analysis.

2) Which of the following is TRUE about the long run? A) All resources are variable. B) All resources are fixed. C) At least one resource is fixed. D) none of the above

A) All resources are variable.

18) In the short run, average total cost is A) higher than average variable cost. B) equal to average variable cost. C) less than average variable cost. D) sometimes higher and sometimes lower than average variable cost.

A) higher than average variable cost.

Utility analysis helps economists understand A) how people make decisions about what they buy and how much. B) how to eliminate opportunity costs. C) how to eliminate scarcity. D) none of the above.

A) how people make decisions about what they buy and how much.

47) The change in the total utility as a result of increasing consumption by one unit is known as A) marginal utility. B) average utility. C) proportional utility. D) utils.

A) marginal utility.

5) McDonald's is a fast-food restaurant chain. Which of the following would be a long-run decision for McDonald's? A) open a new restaurant in a city B) hire one more worker in a restaurant location C) supply more hamburgers in one restaurant D) replace the manager of a restaurant

A) open a new restaurant in a city

14) If marginal product is negative, then A) total product is rising. B) total product is falling. C) marginal cost is falling. D) average profit is rising.

B) total product is falling.

The amount of pleasure or satisfaction derived from consumption of a good is called A) need. B) utility. C) consumer surplus. D) demand.

B) utility.

5) Suppose that when the level of output for the firm increases from 50 to 60 units, its variable costs increase from $500 to $700. What is the firm's marginal cost? A) $5 B) $10 C) $20 D) $115

C) $20

When economists refer to people making decisions at the margin, they mean that we compare ________ benefits with ________ costs. A) total; total B) total; incremental C) additional; additional D) additional; marginal

C) additional; additional

15) As a firm increases the level of output that it produces, short-run average fixed cost A) rises and then falls. B) remains constant since fixed costs are constant. C) decreases. D) decreases up to a particular level of output and then increases.

C) decreases.

8) Short-run total cost is defined as A) the sum of marginal cost and total variable cost. B) price of labor per unit multiplied by the number of labor units. C) total fixed cost plus total variable cost. D) total capital cost only.

C) total fixed cost plus total variable cost.

A representative unit that measures the want-satisfying power of a good is A) a margin. B) purchasing power. C) income. D) a util.

D) a util.

The term marginal means A) total. B) average. C) subjective. D) additional.

D) additional.

11) Which of the following changes a firm's production function? A) hiring additional workers B) acquiring additional physical capital C) adding a second production facility exactly like its first production site D) adopting new technology

D) adopting new technology

22) If the firm can vary all factors of production, it is operating A) at a profit. B) at a zero economic profit. C) in the short run. D) in the long run.

D) in the long run.

7) A basic distinction between the long run and the short run is that A) if a firm produces no output in the long run, it still incurs a cost. B) the opportunity costs of production are lower in the short run than in the long run. C) in the long run, some inputs are fixed, while in the short run, all inputs are variable. D) in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.

D) in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.

59) The physical output that is due to the addition of one more unit of a variable factor of production is A) average total cost. B) marginal cost. C) average product. D) marginal product.

D) marginal product.

37) A good synonym for "utility" is A) marginal. B) need. C) necessity. D) satisfaction.

D) satisfaction.

17) In economics, how long is the long run? A) more than one year B) 24 months or longer C) 5 years or more D) whatever time it takes a firm to vary all inputs

D) whatever time it takes a firm to vary all inputs

86. A preferred stock sells for $54.20 a share and has a market return of 9.68 percent. What is the dividend amount? A. $5.09 B. $5.14 C. $4.75 D. $5.42 E. $5.25

Dividend = .0968 × $54.20 = $5.25

10. Newly issued securities are sold to investors in which one of the following markets? A. Proxy B. Stated value C. Inside D. Secondary E. Primary

E. Primary

13. A broker is an agent who: A. trades on the floor of an exchange for himself or herself. B. buys and sells from inventory. C. offers new securities for sale to dealers only. D. is ready to buy or sell at any time. E. brings buyers and sellers together.

E. brings buyers and sellers together.

88. Graphic Designs has 68,000 shares of cumulative preferred stock outstanding. Preferred shareholders are supposed to be paid $1.60 per quarter per share in dividends. However, the firm has encountered financial problems and has not paid any dividends for the past three quarters. How much will the firm have to pay per share of preferred next quarter if the firm also wishes to pay a common stock dividend? A. $3.20 B. $4.80 C. $6.40 D. $7.50 E. $1.60

Preferred dividend = 4 × $1.60 = $6.40

26) The best way to think of the short run and the long run is as A) specific periods of time, although the time periods may differ across industries. B) planning terms that apply to managers. C) concepts that apply to all people who work for a firm. D) a concept that only accountants are concerned with.

A) specific periods of time, although the time periods may differ across industries.

38) The concept of utility is A) subjective so that there can be no true measurement of someone's utility. B) subjective so measurement of someone's utility must be done scientifically. C) objective so that devices can be developed that would measure a person's utility. D) objective so that psychologists can measure utility and compare one person's utility with that of another person.

A) subjective so that there can be no true measurement of someone's utility.

71) In economics, the term "marginal" refers to A) total. B) a change in the total. C) average change. D) inverse.

B) a change in the total.

8) During the short run, a firm cannot A) increase its use of labor. B) change its plant size. C) purchase more raw materials. D) change its variable costs.

B) change its plant size.

1) Production functions indicate the relationship between A) factor costs and output prices. B) factor inputs and the quantity of output. C) the value of inputs and average costs. D) factor inputs and factor prices.

B) factor inputs and the quantity of output.

36) Production A) is a process by which resources are produced. B) is a process by which resources are transferred into goods and services. C) only applies to manufacturing of goods. D) is carried on by corporations, but not by sole proprietorships.

B) is a process by which resources are transferred into goods and services.

36) Fixed costs include all but A) a normal rate of return on investment. B) temporary labor. C) property tax on the existing buildings. D) machines that have been producing output.

B) temporary labor.

13) Marginal utility is A) the utility received from consuming one unit of a good. B) the change in total utility due to a one-unit change in the quantity of a good consumed. C) the total utility received from consuming a certain quantity of a good divided by the quantity. D) the utility received by the last consumer of a good.

B) the change in total utility due to a one-unit change in the quantity of a good consumed.

11) The time period during which a firm's capital is fixed but its labor is variable is called A) the planning horizon. B) the short run. C) the long run. D) the very long run.

B) the short run.

34) Consumers are most satisfied when A) all of their income has been saved. B) the total level of utility is as high as possible. C) goods are bought "on sale." D) they save more than they spend.

B) the total level of utility is as high as possible.

3) Which of the following is a short-run decision for a firm? A) downsizing the firm's manufacturing plant B) expanding the firm's distribution network of long-haul freight trucks and smaller delivery trucks C) firing workers D) investing in a new addition to the firm's manufacturing plant

C) firing workers

11. What is the market called that facilitates the sale of shares between individual investors? A. Primary B. Proxy C. Secondary D. Inside E. Initial

C. Secondary

8. Dividends are best defined as: A. cash payments to shareholders. B. cash payments to either bondholders or shareholders. C. cash or stock payments to shareholders. D. cash or stock payments to either bondholders or shareholders. E. distributions of stock to current shareholders.

C. cash or stock payments to shareholders.

18. Most trades on the NYSE are executed: A. by floor brokers on the exchange floor. B. independent brokers on the exchange floor. C. electronically. D. by designated market makers of the floor of the exchange. E. by dealers.

C. electronically.

17) When a company produces 5,000 units, total costs equal $150,000 and total variable costs equal $75,000. At this level of output, what is that company average fixed cost? A) $75,000 B) $30 C) $225,000 D) $15

D) $15

10) For a hotdog vendor, the hotdog buns represents his A) fixed input. B) variable input. C) sunk cost. D) none of the above.

B) variable input.

74) Total satisfaction is maximized when A) marginal utility is positive. B) marginal utility is negative. C) marginal utility is zero. D) marginal utility is equal to average utility.

C) marginal utility is zero.

25) For a wheat farmer in the middle of harvesting system, a fixed input would be A) workers hired. B) combines rented. C) the land that had been planted. D) trucks rented to haul the wheat.

C) the land that had been planted.

16) Average fixed costs will A) rise as output rises. B) fall then rise as output rises. C) rise then fall as output rises. D) fall as output rises.

D) fall as output rises.

18) The short run is A) a year or less. B) up to three years. C) the period of time in which the firm can vary its rate of output. D) the period of time in which the firm cannot change its use of at least one input.

D) the period of time in which the firm cannot change its use of at least one input.

6) When a firm uses technological improvements to increase output from the same amount of inputs, the result is A) a new production function. B) losses. C) guaranteed profits. D) diseconomies of scale.

A) a new production function.

9) For a hotdog vendor, the hotdog stand represents his A) fixed input. B) variable input. C) diseconomies of scale. D) none of the above.

A) fixed input.

7) The concept of the production function implies that a firm using resources inefficiently will A) obtain less output than the theoretical production function shows. B) obtain more output than the theoretical production function shows. C) obtain exactly the amount that the theoretical production function shows. D) not be subject to diminishing marginal product.

A) obtain less output than the theoretical production function shows.

32) In the long run, a firm can change A) nothing. B) only one input, such as plant size. C) all inputs. D) None of the above are correct.

C) all inputs.

21) Ajax Corporation has recently finished building a new factory. They moved into the factory a month ago and found that it is the perfect size given the amount they want to produce. Ajax is now operating in the A) production time. B) corporation time. C) long run. D) short run.

C) long run.

4. Which one of the following types of securities has the lowest priority in a bankruptcy proceeding? A. Convertible bond B. Senior debt C. Common stock D. Preferred stock E. Straight bond

C. Common stock

9) In economics, a fixed cost is a cost that A) is present only in the short run. B) goes up as the level of output goes up. C) goes down as the level of output goes up. D) does not vary with the level of output.

D) does not vary with the level of output.

20) The time period during which all factors of production can be varied is the A) production time. B) calendar year. C) long run. D) short run.

C) long run.

23) The difference between the short run and the long run is A) economic profits are negative in the short run and positive in the long run. B) economic and accounting profits are not equal in the short run but are equal in the long run. C) that in the short run at least one factor of production cannot be varied while in the long run all factors of production can be varied. D) the short run is a period less than a year while the long run is a period greater than a year.

C) that in the short run at least one factor of production cannot be varied while in the long run all factors of production can be varied.

33) Marginal utility is defined as A) the increase in utility divided by the total number of units consumed. B) the total utility divided by the total number of units consumed. C) the change in total utility divided by the change in number of units consumed. D) the number of units consumed divided by the total utility.

C) the change in total utility divided by the change in number of units consumed.

46) Marginal utility is A) the utility received by the last consumer of a good. B) the total utility received from consuming a given quantity of a good divided by the number of units consumed. C) the change in total utility from consuming an additional unit of a good. D) the utility received from consuming the first unit of a good.

C) the change in total utility from consuming an additional unit of a good.

1) In economics, another term for satisfaction is A) scarcity. B) need. C) utility. D) return.

C) utility.

64) When you buy something, you do so because of the satisfaction you expect to receive from having and using that good. Another term that can be used for satisfaction is A) need. B) purchasing power. C) utility. D) price elasticity.

C) utility.

31) When the total utility from consuming one good is maximized, marginal utility is A) maximized. B) minimized. C) zero. D) positive.

C) zero.

38. Dividends are: A. payable at the discretion of a firm's president. B. treated as a tax-deductible expense of the issuing firm. C. paid out of after-tax profits. D. paid only to preferred stockholders. E. only partially taxable to high-income individual shareholders.

C. paid out of after-tax profits.

19) The time period during at least one input cannot be changed is the A) production time. B) calendar year. C) long run. D) short run.

D) short run.

The rate of change in total utility equals A) marginal utility. B) the change in marginal utility associated with eating all the quantities a person can handle. C) the change in marginal utility divided by the change in quantity. D) the rate of change in marginal utility divided by the price.

A) marginal utility.

1) Economists generally define the short run as being A) that period of time in which at least one of the firm's inputs, usually plant size, is fixed. B) that period of time in which all inputs are variable. C) any period of time less than one year. D) any period of time less than six months.

A) that period of time in which at least one of the firm's inputs, usually plant size, is fixed.

4) The focus of firm decisions in the short run is primarily on A) variable inputs. B) capital investment. C) plant size. D) economies of scale.

A) variable inputs.

12. An agent who buys and sells securities from inventory is called a: A. floor trader. B. dealer. C. commission broker. D. broker. E. floor broker.

B. dealer.

6) Which of the following would NOT be a short-run decision for the firm? A) Recall workers who were previously laid-off. B) Have labor work two hours overtime each day in order to expand output C) Build another wing on the plant in order to add a new assembly line. D) Place an order with a supplier for additional raw materials.

C) Build another wing on the plant in order to add a new assembly line.

12) The long run is defined as the time period in which A) the firm can vary only one input. B) the firm can make positive economic profits. C) all factors of production can be altered. D) the firm can alter its rate of production.

C) all factors of production can be altered.

1) The firm's short-run costs contain A) only variable costs. B) only fixed costs. C) both variable and fixed costs. D) only opportunity costs.

C) both variable and fixed costs.

13) A fixed resource is one that A) is physically tied to a specific location. B) costs more than the average daily revenue of the firm. C) cannot be varied in the short run. D) can be disposed of only if the firm goes out of business.

C) cannot be varied in the short run.

70) Marginal utility is calculated as A) total utility/number of units consumed. B) change in total utility/number of units consumed. C) change in total utility/change in number of units consumed. D) total utility/change in number of units consumed.

C) change in total utility/change in number of units consumed.