Econ Exam 2
4.Suppose there is a firm known as Rose Industries that produces a product known as "Okjians". At q=0, the total cost is $100 and then increases by $35 for each additional unit produced. What is the FC?
A.$0 B.$20 C.$35 D.$100-Correct! E.Not enough information
5.Again, consider the firm known as Rose Industries. At q=0, the total cost is $100 and then increases by $35 for each additional unit produced. For q=10, what is the ATC?
A.$0 B.$20 C.$35 D.$45-Correct! E.$100
6.Suppose we have another firm known as the Sabrina Corporation which makes a product known as "Schalks". Suppose that its FC=$2,000 and its TC=$5,000 and its AVC=$60. What is the ATC?
A.$20.50 B.$70 C.$80 D.$100-Correct! E.Not enough information
10.Consider the following information from the previous problem: FC=$2,000 and when q=19 then AVC=$500 and when q=20 then ATC=$600. If the firm decides to make 20 units (q=20), what is the MR at q=20?
A.$50 B.$100 C.$500-Correct answer! D.$1000 E.Not enough information
9.Consider the following information. Suppose FC=$2,000. Further suppose that when q=19 then AVC=$500 and when q=20 then ATC=$600. What is the MC for the 20th unit?
A.$50 B.$100 C.$500-Correct! D.$1,000 E.$2,000
6.Suppose we have the following information: P=$22; q=100; TC=$1,150 for q=0; AVC=$11 for q=100; MR=$10 What is the profit for q=100?
A.-$50-Correct! B.$0 C.$50 D.$1,100 E.Not enough information
8.Consider the following information for a firm known as "Rebecca Industries" that has a monopoly over the product known as Avetyans. q P TR TC Profit MR MC ∆Profit 0 30 5 --- --- --- 1 27 16 2 24 13 3 21 15 4 18 22 5 15 -10 How much will the firm "Rebecca Industries" produce?
A.0 B. 1 C. 3-Correct! D.4 E.5
4.Consider the following information for a firm known as "Marco Industries" that has a monopoly over the product known as Aguillons. q P TR TC Profit MR MC. ∆Profit 0 28 5 1 24 15 2 20 3 16 4 12 63 5 8 -30 How much will the firm "Marco Industries" produce?
A.0 B.2-Correct! C.3 D.4 E.5
7.Consider the following goods: beef and pork. If the price of beef goes up by 4% then demand for pork rises by 0.56%. What is the CPED?
A.0.14-Correct! B.0.28 C.0.56 D.5.6 E.Not enough information
5.Again, consider the following information for a firm known as "Marco Industries" that has a monopoly over the product known as Aguillons. q P TR TC Profit MR MC ∆Profit 0 28 5 1 24 15 2 20 16 3 16 18 4 12 63 5 8 -30 How much will be produced in the market for Aguillons?
A.2-Correct! B.4 C.8 D.16 E.Not enough information
8.Which of the following might explain why a competitive market has very few "real world" examples?
A.A competitive market is made up of firms with identical goods-Correct! B.A competitive market consists only of a few firms C.A competitive market has barriers to entry which prevent other firms from entering D.The firm's price is at least partly dependent on the demand for its product E.A competitive market consists of many firms
13.In a monopoly...
A.A firm has annual profits above $200 million B.The firm and the market are the same thing-Correct! C.Its profits are not affected by changes in tastes and preferences D.A firm is the only supplier of a good that every single person always wants so the firm always makes very high profits E.None of the above
7.According to this class, what is the main constraint on a monopoly?
A.A monopoly has no constraints on its ability to charge higher prices B.The market demand curve-Correct! C.The market supply curve D.The firms' PES E.The profits the firm has already made
1.Why are textbooks so expensive?
A.Because the book suppliers have low marginal costs B.Because textbook firms are price takers C.Because the PED for textbooks is far greater than 1 in magnitude D.Because there is a monopoly for each textbook produced-Correct! E.The behavioral bias known as the Stratton bias
3.Again, think about the market for parking spaces in downtown LA discussed in the previous problem. Who pays most of the tax burden?
A.Buyers B.Sellers-Correct answer! C.Government D.Your instructor Wesley O. E.Unclear
1.Consider a tax on a good known as Basas. If the tax is changed from being on the sellers to being on the buyers, what is the effect on the tax burden?
A.Buyers will now pay more of the tax B.Sellers will now pay more of the tax C.Government will now pay more of the tax D.No effect-Correct answer! E.Unclear
14.For which of the following does the firm produce when MR equals MC?
A.Competitive Market B.Monopoly C.Both-Correct! D.Neither E.None of the above
5.Suppose I believe that video games are very good for your physical health. I then find a huge number of studies that conclude there are many negative effects from gaming. I ignore this information and persist in my belief. Such persistence would be evidence of which cognitive bias?
A.Confirmation bias-Correct! B.Availability bias C.Framing bias D.Selena bias E.Overconfidence bias
2.What is the definition of average total cost (ATC)?
A.Cost does not change with the amount of output B.Cost of a typical unit of output-Correct! C.Cost of making a company's entire amount of goods D.Cost of an additional unit of output E.Average of only the costs that vary with output
3.What is the definition of the marginal cost (MC)?
A.Cost that does not change with the amount of output B.Cost of a typical unit of output C.Cost of making a company's entire amount of goods D.Cost of an additional unit of output-Correct! E.Average of only the costs that vary with output
1.What is the definition of the fixed cost (FC)?
A.Cost that does not change with the amount of output-Correct! B.Cost of a typical unit of output C.Cost of making a company's entire amount of goods D.Cost of an additional unit of output E.Average of only the costs that vary with output
2.Think about the market for parking spaces in downtown LA. There is some but not a lot of flexibility in terms of changing the number of parking spaces provided. On the other hand, there are many substitutes for parking in the city such as taking the train or parking just outside the city and taking a bus. If a tax is applied on parking spaces, what happens to the quantity?
A.Decreases-Correct answer! B.Increases C.Increases then decreases then increases D.No effect E.Unclear
3.Consider the debate of whether to legalize marijuana. Suppose a study is undertaken and finds the CPED of marijuana and alcohol is 0.1. Alcohol is considered to be far worse in its effects than marijuana (alcohol leads to drunk driving, wife beating, etc.). So, this study's finding would be...
A.Evidence for legalizing marijuana-Correct! B.Evidence against legalizing marijuana C.You Answered Not evidence for either side D.A total waste of people's time E.None of the above
7.Suppose we have a market where there are 100 firms and the economic profit to each firm is $10,000. If the market is competitive, what do we know will happen in the long run?
A.Five firms will exit the market B.There will be more than 100 firms in this market-Correct! C.The market price will increase even further D.The quantity produced by each firm will not change E.The market will transform into a monopoly
4.According to a recent survey in an Econ 1 class at LAVC, 11 out of 14 students rated murder as a more frequent cause of death than stomach cancer. However, stomach cancer in fact kills 5 times more people than homicide. What likely explains why these students considered murder to be more frequent?
A.Framing bias B.Availability bias-Correct! C.Confirmation bias D.Overconfidence bias E.None of the above
5.Suppose the income elasticity of demand for food is 0.4. If people's incomes rise by 12.5%, what happens to the quantity demanded for food?
A.Increases by 1.5% B.Increases by 5%-Correct! C.Increases by 7.5% D.Increases by 12.5% E.Increases by 31.25%
12.Again, suppose a competitive firm for organic farming is at a point where profits are zero. Suddenly an economic boom occurs so consumers' incomes increase. In the long run, what happens to Q?
A.Increases-Correct! B.Decreases C.Unchanged D.Unclear E.None of the above
9.Consider the following goods: toothbrushes and flash drives. Which of the following is likely true about the CPED of these two goods?
A.It is greater than 0 B.It is less than 0 C.It equals 0-Correct! D.It is elastic E.None of the above
8.Consider the following goods: an online Econ 1 course and a face to face Econ 1 course. Which of the following is likely true about the CPED of these two goods?
A.It is greater than 0-Correct! B.It is less than 0 C.It is equal to 0 D.It is inelastic E.None of the above
2.Consider the market for new cars. During the Great Recession, demand for this product fell by a lot. From this information, we can infer which of the following about this good's Income Elasticity of Demand?
A.It is less than zero B.It equals zero C.It is greater than zero-Correct! D.It is between -0.1 and 0.1 E.There is no such thing as the Income Elasticity of Demand
3.Which of the following is FALSE regarding Behavioral Economics?
A.It is opposed by many economists B.It does not believe in people being a "Homo Economicus" C.It cannot explain all human behavior D.It is more theoretical than traditional economics-Correct! E.Some of its main supporters (researchers) have won Nobel Prizes in Economics
10.Suppose a firm in a competitive market is earning zero economic profits. As a result, what will it do in the long run?
A.It will leave the market B.It will not leave the market but will temporarily stop production C.It will remain in the market but keep production unchanged-Correct! D.It will boost its production E.There is no such thing as economic profit
11.Suppose a competitive firm for organic farming is at a point where profits are zero. Suddenly an economic boom occurs so consumers' incomes increase. In the short run, what happens to the P and q?
A.P and q both increase-Correct! B.P increases; q decreases C.P is unchanged; q is unchanged D.P and q both decrease E.P unclear; q decreases
15.Suppose the company of AB InBev which supplies beer to consumers is making positive profits initially. Its market is a monopoly. Due to the recession caused by Covid-19, income has plunged. In the long run, what happens to the P and q for this beer company?
A.P increases; q decreases B.P is unchanged; q is unchanged C.P and q both decrease-Correct! D.You Answered P and q both increase E.P unclear; q decreases
5.Suppose that you consider two ways that banks lose money: from bank robberies and from employees. When asked which is more likely to explain lost money in banks, most would say bank robberies. They can readily recall bank robberies on TV shows, the news or in movies. But in fact most bank theft is instead from employees. What type of bias might be relevant here?
A.Planning fallacy B.Overconfidence bias C.Confirmation bias D.Availability bias-Correct! E.Framing bias
4.Suppose I did a poll of my students in my Economics courses. I asked each student to rate himself/herself relative to the other students in the class. I then found 90% of students rated themselves above average. What type of bias is relevant here?
A.Planning fallacy B.Overconfidence bias-Correct! C.Confirmation bias D.Social proof bias E.Framing bias
3.In terms of which of the following is the competitive market similar to a monopoly?
A.Price B.The number of firms C.P=ATC in the long run D.Prevalence-Correct! E.None of the above
8.Consider the company Luxottica which is responsible for almost all of the production of eyeglasses in the world. To compete with this company, a newcomer would need a huge amount of money - for example, just to start an assembly line. These high fixed costs can be considered an example of what concept of this course?
A.Price taker B.Price maker C.Barrier to entry-Correct! D.Availability bias E.None of the above
2.Consider the following quote describing human nature: "The desire to be right and the desire to have been right are two desires, and the sooner we separate them the better off we are. The desire to be right is the thirst for truth. On all counts, both practical and theoretical, there is nothing but good to be said for it. The desire to have been right, on the other hand, is the pride that goeth before a fall. It stands in the way of our seeing we were wrong, and thus blocks the progress of our knowledge." Which of the following is this quote likely relevant to?
A.Rationality B.Overconfidence bias C.Confirmation bias-Correct! D.Availability bias E.Framing bias
6.Suppose you're talking to a friend and she recommends to you a YouTube video. You are reluctant to watch it until you see that there have already been 1,000,000 views and as a result you conclude it must be worth watching. What cognitive bias might be relevant here?
A.Social proof bias-Correct! B.Overconfidence bias C.Confirmation bias D.Framing bias E.Availability bias
7.Your instructor drove his family to a party with friends. However, along the way his wife criticized him for getting there late. The reason why? He always underestimates how long it takes to get ready. What type of bias in Behavioral Economics does your instructor suffer from?
A.The "marriage is worthwhile" fallacy B.Overconfidence bias C.Availability bias D.Framing bias E.Planning fallacy-Correct!
6.Think about the market for cosmetics. According to research, women bought more cosmetics during the Great Recession. What can we conclude from this information?
A.The good is normal B .The good's IED is above zero but below one C.The good's IED is above one D.The good's IED is below zero-Correct! E.None of the above
1.What is the definition of behavioral economics?
A.The study of decision making of how to allocate scarce resources at the national level B.The study of how any form of human behavior is due to being rational C.The branch of economics that includes anthropology in economic models D.A part of microeconomics focused on the analysis of supply and demand to determine the price for a good or service E.The branch of economics that incorporates psychology into economic models-Correct!
1.Consider a product known as Vivars. Note the following two facts: 1. Its PES = 0.5. 2. The product is not considered essential but more of a luxury with many substitutes. If a tax is placed on this product, what can we say about the tax burden?
A.The tax burden is paid by only one side of the market B.The tax burden is determined by who the tax is levied on C.The tax burden will fall equally on the buyers and sellers D.The tax burden will fall mostly on the buyers E.The tax burden will fall mostly on the suppliers-Correct!
6.Which of the following is true concerning the Prize Linked Savings Accounts (PLSAs)?
A.They have been adopted in only one state in the US because of how damaging they are to a state's poorer population B.They were blocked by many states because the state governments had a monopoly on lotteries-Correct! C.They help people to spend more money D.They are far worse than regular savings accounts in every possible way which explains why no one uses PLSAs E.PLSAs have not been presented in this course's material
8.How are people harmed by the availability bias?
A.They underestimate how boring Economics courses are B.They make mistakes by not thinking but only following what other people are doing C.They form incorrect opinions that are not based on data-Correct! D.They make bad purchasing decisions because they are swayed by how information is presented to them rather than what the information is E.They are usually late because they underestimate the difficulty of and time needed for various tasks and projects
9.Which of the following is an example of where Behavioral Economics is being used?
A.To discourage texting, a huge tax is placed on its use B.To encourage people to buy more hamburgers, a firm lowers its price C.To encourage people to buy an item, you don't just show its price but show the price as being marked down from a higher price-Correct! D.To discourage people from using plastic bags at grocery stores, people are suddenly charged $0.50 per plastic bag E.No example can be given because Behavioral Economics does not exist
According to the lecture slides, which market was an example of a monopoly?
A.Toothpaste B.Computers C.Water bottles D.Kleenex E.Diamonds-Correct!
9.Luxottica has a monopoly over eyeglasses and is making high profits. Then, suppose there is an increase in the number of people getting corrective eye surgery. What happens to the firm's quantity and profits in the long run as a result of this change in people's tastes?
A.q increases, profits decrease B.q increases, profits increase C.q unchanged, profits unchanged D.Answer q decreases, profits decrease-Correct! E.q decreases, profits increase
10.According to studies, the average number of firms in many industries is declining. As a result, many industries are converging to a monopoly. This trend means that these markets will become more efficient (as defined in this class) and be better for consumers.
True or False?-False
10.An important threshold for interpreting the PED and PES is one (in absolute value). An important threshold for interpreting the IED and CPED is zero.
True or False?-True
7.Suppose you go out to dinner. But you are really hungry when you order and buy too much food. By the time you get to dessert, you are stuffed. You cannot get a refund on the dessert, and it will rot before you can take it home. According to the lecture, you should eat the dessert anyway.
True or false?-False
10.Behavioral Economics has been used to help people make better choices without depriving them of the right to make their own decisions.
True or false?-True
4.Recall the product of gas which we said was inelastic. Suppose more and more alternatives to gas become available to consumers to power their cars. In terms of a gas tax, this increase in alternatives would mean less of the tax burden would fall on the buyers.
True or false?-True
9.According to this course, a competitive market is more efficient than a monopoly. True or false?
True or false?-True