ECON 2 Exam

(Table: Total Product and Marginal Product for Knick Knacks) Use Table: Total Product and Marginal Product for Knick Knacks. The marginal product of the seventh worker is _____ units per period. Table: Total Product and Marginal Product for Knick Knacks Labor per Day Number of Knick Knacks (per period) 0 0 1 10 2 30 3 70 4 90 5 100 6 107 7 110 8 105

(110-107) = 3

(Table: Marginal Utility per Dollar of Twix) Use Table: Marginal Utility per Dollar of Twix. The price of Twix is $2 per bag. The marginal utility per dollar of the first Twix bar is: Table: Marginal Utility per Dollar of Twix Bars Quantity of Twix bars Total utility 0 0 1 6 2 10 3 13 4 15 5 16

(13-10)/(3-2) = 3

(Table: Marginal and Total Benefit from Baseball Games) Use Table: Marginal and Total Benefit from Baseball Games. Sidney is deciding how many baseball games to attend this year. His marginal benefit from increasing the number of games he attends from three to four is: Table: Marginal and Total Benefit from Baseball Games Number of games Total benefit 0 0 1 50 2 90 3 120 4 140 5 152 6 160 7 164 8 162

(140-120) = 20

(Table: Utility from Reese's Peanut Butter Cups) Use Table: Table: Utility from Reese's Peanut Butter Cups. If Oliver consumes two peanut butter cups, his total utility will be _____ utils. Table: Utility from Reese's Peanut Butter Cups Number of peanut butter cups Marginal utility of peanut butter cups 1 22 2 18 3 14 4 12 5 9 6 6 7 3 8 0

(22+18) = 40

(Table: Cost Data for Handbags at Horatio's Handbag Factory) Use Table: Cost Data for Handbags at Horatio's Handbag Factory. The average total cost of producing 6 handbags is: Table: Cost Data for Handbags at Horatio's Handbag Factory: Number of Handbags Variable Cost of Handbags (VC) Total Cost of Handbags (TC) 0 0 50 1 50 100 2 70 120 3 100 150 4 140 190 5 190 240 6 250 300 7 320 370

(300-250) = $50.

. (Table: Labor and Output for Cappuccinos) Use Table: Labor and Output for Cappuccinos. The marginal product of the sixth worker is: Table: Labor and Output for Cappuccinos Quantity of Labor Number of Cappuccinos 0 0 1 12 2 22 3 30 4 36 5 40 6 43 7 44

(43-40) = 3

(Table: Marginal Utility per Dollar of Twix) Use Table: Marginal Utility per Dollar of Twix. The marginal utility of the second Twix bar is: Table: Marginal Utility per Dollar of Twix Bars Quantity of Twix bars Total utility 0 0 1 6 2 10 3 13 4 15 5 16

(6-10) = 4

(Table: Expected Exam Scores from Studying Microeconomics and Marketing) Use Table: Expected Exam Scores from Studying Microeconomics and Marketing. The marginal benefit of spending the first hour studying microeconomics, in terms of your microeconomics score, is _____ points. Table: Expected Exam Scores from Studying Microeconomics and Marketing Hours spent studying Micro result Marketing result 0 65 50 1 80 65 2 90 70 3 95 70

(80-65) = 15

(Table: Cost Data for Handbags at Horatio's Handbag Factory) Use Table: Cost Data for Handbags at Horatio's Handbag Factory. The average fixed cost of producing 4 handbags is: Table: Cost Data for Handbags at Horatio's Handbag Factory Number of Handbags Variable Cost of Handbags (VC) Total Cost of Handbags (TC) 0 0 50 1 50 100 2 70 120 3 100 150 4 140 190 5 190 240 6 250 300 7 320 370

a. $12.50.

The state of Texas recently saw a gasoline price increase of 5%, which brought about a fall in the quantity of gasoline purchased of 1%. The price elasticity of demand is equal to _____, and demand is described as _____. a. 0.2; inelastic b. 5; inelastic c. 0.2; elastic d. 5; elastic

a. 0.2; inelastic

For Martin, saying that you can't have too much of a good thing means that, for any good that you enjoy (for example, muffins): a. higher consumption will always lead to higher utility. b. higher consumption will cause utility to decrease at an increasing rate. c. higher consumption will increase utility but only up to a point; after that, utility will start to decrease. d. it is valid to measure utility in utils.

a. higher consumption will always lead to higher utility.

Suppose the Boston Red Sox could rent out Fenway Park (the field they play on) to local youth leagues for $11,000 per month. The $11,000 per month is the _____ cost of capital. a. implicit b. explicit c. direct d. total

a. implicit

Economic profits are calculated by: a. taking the difference between total revenue and the sum of explicit and implicit costs b. taking the difference between total revenue and explicit costs only c. taking the difference between the total revenue and implicit costs only d. summing total revenue, explicit costs, and implicit costs.

a. taking the difference between total revenue and the sum of explicit and implicit costs

An important determinant of the price elasticity of demand is the: a. time horizon available to adjust to prices changes. b. prices of substitute goods. c. level of technological innovation. d. quantity of the good supplied.

a. time horizon available to adjust to prices changes.

The marginal product is the change in _____ output resulting from a one-unit change in _____, assuming that all other factors of production are held constant. a. total; a variable input b. total; a fixed input c. total; total product d. per unit; a fixed input

a. total; a variable input

(Table: Marginal Analysis of Sweater Production I) Use Table: Marginal Analysis of Sweater Production I. Profit at the optimal quantity of sweaters produced is: Table: Marginal Analysis of Sweater Production I Quantity of shirts Total revenue Total cost 0 $0 $0 1 16 9 2 31 20 3 45 33 4 58 48 5 70 65

b. $12.

If Giordano's pizza in Chicago computed its profits without taking into account its implicit costs, it would then only be considering its _____ profit. a. explicit b. accounting c. implicit d. economic

b. accounting

If marginal cost is LESS than average total cost, then _____ cost is _____. a. average total; increasing b. average total; decreasing c. marginal; necessarily increasing d. marginal; necessarily decreasing

b. average total; decreasing

When an additional unit of a variable input adds less to the total product than the previous unit, the firm has: a. increasing returns. b. diminishing marginal returns. c. diminishing total returns. d. diminishing marginal returns and diminishing total returns.

b. diminishing marginal returns.

Bill's Balloons doubles the amount of all of the inputs it uses—the factory doubles in size, and twice as many workers are hired. After this expansion, the number of balloons produced triples. If the price of inputs is unchanged, Bill's Balloons is operating with: a. increasing marginal cost. b. economies of scale. c. increasing average total cost. d. decreasing average variable cost.

b. economies of scale.

Margaret spends her entire budget on smoothies and muffins. The last smoothie provided Margaret with 10 additional utils, and the last muffin provided her with 25 additional utils. The price of a muffin is twice that of a smoothie. Assuming that diminishing marginal utility applies to both goods, Margaret should consume _____ smoothies and _____ muffins. a. more; fewer b. fewer; more c. more; more d. fewer; fewer

b. fewer; more

An input whose quantity CANNOT be changed in the short run is: a. marginal. b. fixed. c. incremental. d. variable.

b. fixed.

Suppose the price elasticity of demand for Baconators at Wendy's is 0.6. This means that the demand for Baconators is: a. elastic. b. inelastic. c. unit-elastic. d. perfectly inelastic.

b. inelastic.

The marginal benefit of an activity: a. is the subsidiary benefit of that activity; for example, the main benefit of weight-training is an increase in muscle mass, while the subsidiary or marginal benefit might be a reduction in cholesterol. b. is the addition to the total benefit of the activity of undertaking a little bit more of it. c. is increasing if the total benefit of the activity is increasing. d. normally increases as more of the activity is undertaken.

b. is the addition to the total benefit of the activity of undertaking a little bit more of it.

If two firms are identical in all respects except that one has more capital than the other, the total product curve of the firm with more capital will: a. be equivalent to the total product curve of the firm with less capital. b. lie above the total product curve of the firm with less capital. c. lie below the total product curve of the firm with less capital. d. not exhibit diminishing marginal returns.

b. lie above the total product curve of the firm with less capital.

If quantity demanded does not respond significantly to a relatively large change in price, demand is: a. price-elastic. b. price-inelastic. c. positively sloped. d. insensitive to changes in price.

b. price-inelastic

Average variable cost is: a. variable cost per unit multiplied by output. b. total variable cost divided by output. c. the difference between average total cost and total variable cost. d. the difference between total cost and total variable cost.

b. total variable cost divided by output.

Which statement BEST describes why a decrease in the price of LED televisions leads to an increase in the quantity of LED televisions demanded, according to the substitution effect? a. Buyers have more real income. b. Buyers always purchase fewer substitute goods for LED televisions. c. Buyers tend to purchase more of the now less expensive LED televisions. d. Buyers tend to purchase more goods that are complementary to LED televisions.

c. Buyers tend to purchase more of the now less expensive LED televisions.

34. The price elasticity of demand for fresh cilantro has been estimated to be 2.22. If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh cilantro crop, how will that affect total revenue from fresh cilantro, all other things equal? a. Total revenue will remain unchanged. b. Total revenue will fall. c. Total revenue will rise. d. The information is insufficient to answer the question.

c. Total revenue will rise.

If the University of Michigan decreases the price of tickets to Wolverines' football games to collect more revenue, it is assuming that the demand for tickets is: a. unstable. b. inelastic. c. elastic. d. unit-elastic.

c. elastic

In economics, the short run is: a. less than one week. b. less than one month. c. enough time to vary output but not plant capacity. d. enough time to change all inputs.

c. enough time to vary output but not plant capacity.

Accountants use only _____ costs in their computations of short-run total cost. a. opportunity b. implicit c. explicit d. variable

c. explicit

Marginal cost is the change in: a. total product resulting from a one-unit change in a variable input. b. total cost resulting from a one-unit change in quantity of a variable input. c. total cost divided by the change in output. d. average cost resulting from a one-unit change in output.

c. total cost divided by the change in output.

The _____ curve shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input. a. total input b. marginal input c. total product d. average total quantity

c. total product

Gabriel has a weekly income (N) of $50, which he uses to purchase cupcakes (C) and tea (T). If the price of a cupcake is $1, and the price of tea is $2.50, his budget constraint can be expressed as: a. C ≤ 50 + 2.50T. b. C ≤ 50 - 25T. c. C ≤ 50 - 0.25T. d. C ≤ 50 - 2.50T.

d. C ≤ 50 - 2.50T

Suppose Ignacio's income suddenly increases. Which of the following will NOT occur? a. His budget line will shift away from the origin. b. The horizontal intercept will increase. c. The vertical intercept will increase. d. The slope of the budget line will change.

d. The slope of the budget line will change

The term diminishing returns refers to a: a. falling real rate of interest that can be expressed relative to the marginal product of labor b. reduction in profits from producing to the point where marginal revenue is less than marginal cost c. decrease in total output due to the firm hiring unskilled workers d. decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

d. decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant

Janelle owns a small hotel in San Francisco near Fisherman's Wharf. She pays $30,000 per year in insurance, $418,000 in wages, and $43,000 in supplies. She forgoes $30,000 per year she could make as a police officer. Her total revenue last year equaled $560,000. That means her economic _____ equaled _____. a. profit; $9,000 b. losses; $9,000 c. losses; $39,000 d. profit; $39,000

d. profit; $39,000

How much _____ Savannah obtains from eating sushi is a measure of the utility of sushi for her. a. efficiency b. usefulness c. cost d. satisfaction

d. satisfaction

At the quantity at which total utility is maximized, marginal utility is: a. rising. b. at its average value. c. at a maximum. d. zero.

d. zero