ECO 2023 Exam 2
b
39. For every hour you spend studying for your economics exam, you will improve your grade by 3 points. For every hour you spend studying for your physics exam, you will improve your grade by 4 points. For every hour your friend Albert spends studying for his economics exam, his grade will improve by 8 points. For every hour he spends studying for his physics exam, his grade will improve by 16 points. Which of the following is correct? a. your opportunity cost of studying enough to improve your grade on your economics exam by 1 point is 1 1/3 points on your physics exam, and you have a comparative advantage in economics b. Albert's opportunity cost of studying enough to improve his grade on his economics exam by 1 point is 2 points on his physics exam, and he has a comparative advantage in economics c. you have have an absolute advantage in studying for physics d. you can both benefit by specializing according to comparative advantage and trading points
b
Suppose a monopoly is earning positive economic profits. As a result of technological change, the monopoly's costs fall. What happens? a. price rises and qty rises b. price falls and qty rises c. price falls and qty falls d. price rises and qty falls
a
Suppose it's 2,500 B.C.E. and the market for wheat in Egypt is in equilibrium. Two things happen at the same time. First, the Nile fails to flood that year, so it doesn't deliver vital nutrients to the land around the river. Second, the Pharaoh imposes a tax of one senyu per bushel on wheat, to be paid by consumers. Which of the following is correct? a. the price rises and qty is indeterminate b. the price is indeterminate and qty falls c. the price is indeterminate and qty rises d. price rises and qty falls
d
Equilibrium is efficient bc... a. total surplus is maximized b. marginal benefit = marginal cost c. every unit that is produced has a benefit to consumers greater than (or equal to) the cost of its production d. all of the above
a
If a person's income goes up, and that person buys more chicken sandwiches, then we can conclude that for this person... a. chicken sandwiches are a normal good b. chicken sandwiches are an inferior good c. chicken sandwiches are substitutes d. chicken sandwiches are complements
2
If the opportunity cost of watching one episode of your favorite show on Netflix is the $5 you would've earned from working for half an hour, then the opportunity cost of working for an hour is watching ___ episodes of your favorite show on Netflix.
b
If the price of chicken feed (which is fed to chickens) goes up, which of the following will happen in the market for chicken sandwiches? a. supply will shift to the right, and price will fall b. supply will shift to the left, and price will rise c. demand will shift to the left, and price will rise d. demand will shift to the left, and price will fall
b
If the surgeon general announces that wearing shoes is bad for your posture, which of the following will occur? a. demand for shoes will shift to the right b. demand for shoes will shift to the left c. qty of shoes demanded will rise d. the supply of shoes will fall
$20
If you are willing to pay $40 for Top Hat access but a guy in an alley sells you a black market access code for $20, your consumer surplus is...
a
In a decreasing cost industry, as firms exit the industry and industry output decreases, costs will... a. rise b. stay the same c. fall d. rise, then fall e. fall, then rise
d
In equilibrium... a. total surplus is maximized b. quantity supplied = quantity demanded c. supply intersects demand d. all of the above
b
In the long run in a perfectly competitive market, economic profit will tend to converge toward, and stay around a. positive economic profit b. zero economic profit c. negative economic profit d. this is a trick question; profit doesn't tend to move toward any particular level
$6
In your spare time you drive for Uber. You pick up a passenger and take her to Madison Social, for which you are paid $15. You would have been willing to drive her there for $9. Your producer surplus is...
a
Of the following goods, which is likely to have the most elastic demand? a. candy b. heroine c. antiretroviral drugs for treating HIV d. gasoline
c
The efficient amt of output is where the marginal cost to society is equal to the marginal benefit to society. Is this where the monopolist produces? a. yes, bc they produce at MC = MR b. yes, bc they maximize profit, and are therefore efficient by definition c. no, the efficient output is where MC = D, bc Demand represents the marginal benefits to society d. no, bc firms earning a profit must be inefficient
c
The graph below depicts a monopoly. Which of the following correctly describes what the monopoly should do to maximize profit/minimize loss? a. continue to produce in the long runb b. exit in the short run but produce in the long c. produce in the short run, but exit in the long run d. exit in the short run
c
The graph below shows a firm making some kind of profit (zero/positive/negative). If the demand curve shifts to the right, what will happen to the firm's profits? a. profits become negative b. profits become zero c. profits become positive d. all of the above
b
The graph below shows you the AVC and ATC when output is 10,000 units. Which is correct? a. TC is $200,000 and VC is $280,000 b. TC is $280,000 and VC is $200,000 c. TC is $28,000 and VC is $20,000 d. TC is $28 and VC is $20
c
The graph depicts a tax placed on a good or service. Which of the answers below is correct? a. A + E is deadweight loss, B is consumer surplus, and C is producer surplus b. A+ C is producer surplus, B is consumer surplus, and E is deadweight loss c. A is tax revenue, B is consumer surplus, C is producer surplus, and E is deadweight loss d. A is a rectangle, and B, C, and E are right triangles
b
The graphs below show a competitive firm. What is the firm's economic profit? You should be able to calculate an exact number using the graphs. a. $90,000 b. $-20,000 c $-30,000 d. $11,900,000 e. $60,000
a
The market for russet potatoes is in equilibrium and it's a perfectly competitive increasing-cost industry. The price for potatoes is currently $6 per 100-pound sack. Low carb diets suddenly become popular and many ppl substitute cauliflower and other veggies for potatoes. As a result, demand for potatoes falls. What will happen to the price of potatoes in the short and long run? a. in the short run, the price falls below $6, perhaps to $4 and in the long run it rises a bit, perhaps to $5 b. in the short run, the price falls below $6, perhaps to $4 and in the long run it falls even lower than that, perhaps to $3 c. in the short run, the price falls below $6, perhaps to $4 and in the long run it rises back up to the original price of $6 d. in the short run, the price falls below $6 and in the long run it rises above $6
b
The opportunity cost for you to prepare a decent meal is one hour of work, which would earn you $10. The opportunity cost of Chef Enzo to prepare a decent meal is five minutes of work, which would earn him $2. Which of the following terms of trade would benefit you and Chef Enzo? a. Chef Enzo prepares a meal for you for $1 b. Chef Enzo prepares a meal for you for $8 c. Chef Enzo prepares a meal for you for $20 d. You prepare a meal for Chef Enzo, who pays you $5
d
The opportunity cost for you to prepare a decent meal is one hour of work, which would earn you $10. The opportunity cost of Chef Enzo to prepare a decent meal is five minutes of work, which would earn him $2. Which of the following terms of trade would benefit you and Chef Enzo? a. Chef Enzo prepares a meal for you for $1 b. Chef Enzo prepares a meal for you for $8 c. Chef Enzo prepares a meal for you for $20 d. You prepare a meal for Chef Enzo, who pays you $5
b
The table below shows the marginal revenue and marginal cost of various output levels a firm could choose to produce. At what level(s) of output is (are) profit(s) maximized? a. 3 units b. 3 or 4 units c. 4 units d. 4 or 5 units e. 5 units f. 5 or 6 units g. 6 units
d
The value of the best thing you give up to get something is... a. marginal cost b. sunk cost c. fixed cost d. opportunity cost
d
What is the title of the official in charge of making sure markets reach equilibrium? a. Secretary of Treasury b. Chairman of the Federal Reserve c. President of the Chamber of Commerce d. None of the above
c
What kind of economic profit is the firm on the graph below earning? a. positive b. zero c. negative
a
When profit is positive, price must be... a. greater than ATC b. equal to ATC c. less than ATC d. it depends
d
Which market structure is most likely to result in positive economic profits that cannot be competed away? a. perfect competition b. monopolistic competition c. oligopoly d. monopoly
d
Which of the following answers correctly ranks the markets from most competitive to least competitive? a. potatoes, onions, cavendish bananas b. diamonds, 24K gold, sapphires c. smartphones, organic chicken, organic beef d. common wheat, fast food, cable interest service
b
Which of the following companies is not likely to be able to benefit from significant economies of scale? a. Tesla, a car company that plans to sell electric cars to the masses b. Taylor's Tailors, a company that make custom suits for men c. HTC, a company that used to make phones but now plans to be the number one producer of VR headsets d. HT Apparel, a company that plans to use robotic sewing machines to produce standardized textiles at a lower cost than ever before
b
Which of the following goods (or services) is likely to have inelastic supply? a. memory chips, which are produced in big factories that can also produce central processors and graphics processors b. higher education, which requires instructors w/a PhD (which usually take 4 to 6 years to complete) c. bawdy stories in army barracks or a sports locker room d. mass produced notebook paper
b
Which of the following goods best fits the assumptions underlying perfect competition? a. prescription eyeglasses b. common wheat c. pickup trucks d. wine
e
Which of the following is correct? a. Average Fixed Cost declines as output rises b. Marginal Cost falls as Marginal Product initially rises, but when diminishing returns set in, Marginal Cost rises as Marginal Product falls c. Marginal Cost passes thru the min of AVC and ATC d. Average Total Cost is the sum of AVC and AFC e. None of the above
c
Which of the following is correct? a. a monopoly's profit-maximizing output is efficient b. ATC pricing regulation results in the efficient amt of output c. a monopoly that doesn't have enough revenue to pay its variable costs will shut down immediately d. imposing marginal cost pricing on a monopoly will increase its profit
b
Which of the following is correct? a. equilibrium in monopolistic competition is never efficient bc of deadweight loss b. equilibrium in perfect competition is efficient c. equilibrium in monopoly is efficient if the firm has maximized profit d. equilibrium in oligopoly is always efficient bc firms cannot collude
d
Which of the following statements is correct? a. in an increasing cost industry, the long run supply curve slopes upward b. in a constant cost industry, the long run supply curve is horizontal c. in a decreasing cost industry, the long run supply curve slopes downward d. all of the above
b
You are operating a house painting business with currently yourself and two other employees and you can now paint a total of 2 rooms per day. Adding a fourth worker will allow you to paint an additional 0.5 rooms per day. What does adding the fourth worker do to your average produce? a. average produce rises b. average produce stays the same c. average product falls d. average produce falls, then rises
c
You are repainting your house and currently can paint one room each day. You call a friend in, and you can now paint 1.5 rooms per day. The marginal product of your friend is... a. 1.5 rooms per day b. 1 room per day c. 0.5 rooms per day d. 0 rooms per day
-0.5
You are running a business producing faux leather wallets. Your current accounting costs are $2 million. Your current revenue is $2.5 million. If you were to switch to making faux leather belts, you estimate that your accounting profit would be $1 million. What is your current economic profit, in millions?
c
You go to the bookstore, or go to an online vendor, and find that they will offer you an academic discount for software. You have to present a faculty/student ID. What kind of price discrimination is this? a. first degree b. second degree c. third degree
$2
You increase production at your ice cream factory by 50 gallons per day. This requires you to pay an additional $100 in costs for cream, natural and artificial flavoring, sugar, guar gum, and tapioca starch. What's the marginal cost of this increase in production?
$100,000
You're running a business producing fridge magnets. Each sells for $2. If you produce 50,000, what is your total revenue?
a
Your business is producing bags of potato chips. Marginal product is falling. Marginal cost is $2. The price is $2.50. What should you do to maximize profits? a. increase production b. leave production unchanged c. decrease production d. raise the price
a
Your company produces 5000 doodads at a total cost of $2 million. It sells them for $600 each. What is your company's profit? a. $1 million b. $2 million c. $3 million d. $5 million
c
Your current business is providing an economic profit of -$150,000 per year. If this is representative of your future profit, what would an economist tell you to do? a. cut costs by laying off staff and using innovative tech b. invest in a larger ice cream production facility c. exit the ice cream market and do something else instead d. lobby the gov for a bailout
b
Your height is 60 inches, but you lose your shins in a tragic gardening accident. As a result, your new height is 48 inches. The percent change in your height is... a. -25% b. -20% c. -12% d. 12%
a
Your income rises by 10%, and the qty of raisins that you purchase falls by 5%. Which of the following is correct? a. the income elasticity of demand for raisins in -0.5, and raisins are an inferior good b. the income elasticity of demand for raisins is 0.5, and raisins are a normal good c. the income elasticity of demand for raisins is -2, and raisins are an inferior good d. the income elasticity of demand for raisins is 2, and raisins are a normal good
a
Producer Surplus is... a. the area above the supply curve and below the price b. the area above the demand curve and below the price c. the dif between the demand and supply d. the dif between what consumers are willing to pay adn what they actually pay
b
A $1 per pound tax is imposed on cucumbers. The own-price elasticity of demand for cucumbers is 1.5, and the elasticity of supply for cucumbers is 0.7. Which of the following is correct? a. the burden of the tax will fall mostly on consumers b. the burden of the tax will fall mostly on producers c. the burden of the tax will fall equally on consumers and producers d. the burden of the tax will be zero
a
A country with a comparative advantage in producing a good... a. has the lowest opportunity cost of production b. has the highest opportunity cost of production c. can produce more of the good than any other country d. will be poorer as a result of trading with its neighbors for other goods
b
A monopoly produces at MC = MR, resulting in a price of $50, qty of 1,000 units, ATC of $30, and AVC of $20. What should this firm do? a. produce in the short run, but shut down in the long run b. produce in the short run and the long run c. shut down in the short run, but produce in the long run d. shut down in the short and long run
b
A new program to teach computer science more effectively graduates its first class of computer scientists, resulting in a significant increase in the number of programmers and software engineers available. Which of the following will occur? a. the wages of programmers will rise b. the supply of software will shift to the right c. the supply of software will shift to the left d. the demand for software will shift to the left
c
A tornado destroys several carpet factories in North Georgia. Which of the following occurs? a. the qty of carpet supplied rises b. the price of carpet falls c. the carpet supply curve shifts to the left d. the carpet supply curve shifts tot he right
a
Consider the supply curve for sour cream. If the price of sour cream falls, then... a. the qty supplied will fall b. the qty supplied will rise c. the supply will rise d. none of the above
d
Consumer Surplus is... a. the area above the supply curve and below the price b. the area above the demand curve and below the price c. the dif between price and cost of production d. the dif between what consumers are willing to pay and what they actually pay
$14
Suppose I buy a nice dinner for $15. I was willing to pay $25 for it, and the restaurant would have been willing to sell it for as little as $11. What is the total gain to both sides?
a
Suppose the administration of FSU decides to fire all advisors and administrators, leaving only faculty, cleaning staff, and support staff, and by doing so it manages to cut costs significantly. The price of one year's tuition at FSU falls from $6,500 to $4,000. Which of the following will occur, ceteris paribus? a. the qty of students who choose to attend FSU will rise b. the qty of students who choose to attend FSU will fall c. other universities will lower their tuition d. cars will become more fuel efficient
c
Suppose the equilibrium price of toilets is $250. The government imposes a $600 minimum price for each toilet. Which of the following if not likely to occur? a. toilet manufacturers produce more toilets than consumers are willing to buy b. consumers prefer to keep old, inefficient, unreliable toilets rather than replacing them w/new ones c. toilet manufacturers produce the lowest-quality toilets possible, while also complying w/regulations d. the market in used toilets grows larger
d
Suppose the government imposes a maximum annual tuition on bachelor's degree-granting institutions of $2,000 per year. Which of the following is not likely to occur? a. Universities will cut costs, resulting in a lower-quality educational experience. b. There will be more ppl trying to get into colleges and universities than these schools can handle, resulting in long wait-lists for admissions. c. Some ppl will set up fake/fraudulent bachelor's degree programs to attempt to make money off of the increased number of would-be students. d. Universities will compete for students more intensely, resulting in more and larger scholarships.
c
Suppose the market for coffee is in equilibrium. An FDA report is released documenting a variety of significant health benefits of drinking coffee every day. What happens in the market for coffee? a. supply shifts to the right, price falls, quantity rises b. supply shifts to the right, price rises, quantity falls c. demand shifts to the right, price rises, quantity rises d. demand shifts to the left, price rises, quantity falls
a
Suppose the market for onions is perfectly competitive, and it's an increasing cost industry. Also suppose firms are making positive economic profits. When this market reaches a long run equilibrium, will the price be higher or lower than it is right now? a. lower b. higher c. the price will be the same d. not enough info to determine
c
Suppose the market for potato chips is in equilibrium, and then two things happen at the same time: The price of potatoes (used to make potato chips) goes up, and a big sporting and social event occurs. Eating lots of potato chips is traditional at this big sporting event. Which of the following is correct? a. price rises, quantity falls b. price falls, quantity is indeterminate c. price rises, quantity is indeterminate d. price is indeterminate, quantity rises
a
Suppose the market for smartphones is in equilibrium. A new battery technology is invented which makes phones last a week without needing to be recharged. What happens in the market for smartphones? a. demand shifts to the right, price rises, quantity rises b. demand shifts to the left, price falls, quantity falls c. supply shifts to the right, price falls, quantity rises d. supply shifts to the left, price falls, quantity rises
a
Suppose the market for wheat is in equilibrium, w/firms earning zero economic profit. Scientists discover that eating lots of carbohydrates is actually good for you, and everyone begins eating a lot more bread. Which of the following will occur? a. demand for wheat rises, driving the price up, and causing firms to enjoy positive economic profits b. demand for wheat falls, driving the price down, and causing firms to suffer negative economic profits c. the supply of wheat falls as firms exit, driving the price down, and causing profits to fall d. the marginal cost curve for wheat farms shifts upward
b
Suppose you are going to a movie. You would've paid up to $30 to go to this movie, though you actually paid $12. While you're driving to the theater, you get a call from a friend who tells you your fav musical artist is performing a surprise show at a local tavern. If you turn around right now, you can make it. It will cost you $12 to get into the tavern. You would be willing to pay up to $120 to see this artist. What is the economically rational thing to do? a. go to the movie b. go to the musical performance c. watch part of the movie and then leave to see part of the performance d. skip both and go home
c
Suppose you have a box that has a height of 40 inches and a width of 10 inches. What is its area? a. 10 square inches b. 40 square inches c. 400 square inches d. 4,000 square inches
b
Suppose you're a monopolist. You currently sell 4 units of output every month. You want to sell 8 per month. To do this, you will have to lower your price from $15 to $10. What is your Marginal Revenue? That is, what is MR when output foes form 4 units to 8 units? a. TR = TC b. MR = MC c. price > AVC d. produce at the min of ATC
d
Suppose your company has $1 million in explicit costs, and could rent out its buildings to earn a revenue of $0.5 million. Its equipment could be rented out for another $0.25 million. What is your economic cost? a. $1 million b. $1.25 million c. $1.5 million d. $1.75 million
b
The price of internet access rises from $50 per month to $70 per month. The quantity of streaming service subscriptions falls from 200 million to 175 million. What is the Arc Cross-Price Elasticity of Demand? a. 0.4 b. -0.4 c. -0.3125 d. 0.3333
c
The shutdown rule implies that only the MC curve above AVC is relevant. This section of the MC curve is upward sloping, and the Equimarginal Principle means that as price rises, the qty of output a firm produces will rise. This relationship between price and qty produced is known as... a. the Law of Diminishing REturns b. the First Law of Demand c. the Law of Supply d. the Law of Unintended Consequences e. the Second Law of Demand
