Econ Final Fall 19

Economists favor the value of marginal thinking. Marginal thinking in terms of studying for an exam would be a. Analyzing the benefits of studying for an additional hour b. Analyzing the benefits of studying for five complete hours c. To analyze the opportunity costs of studying d. To accept time spent on studying as opportunity costs.

A

Equilibrium price can be best defined as a. A certain price at which quantity demanded is equal to quantity supplied b. A certain price at which quantity demanded is greater than quantity supplied c. A certain price that minimizes total surplus (given that there are no externalities) d. Both a and c

A

If marginal revenue is lower than marginal cost, you would want to __________ a. Reduce production b. Increase production c. Hold the production constant d. None of the above

A

Perfect competition is efficient and monopoly is not because in perfect competition __________ while in monopoly __________. A. P = MC; P > MC B. P < MR; P = MR C. P = MR; P < MR D. P = MC; P < MC

A

Refer to figure 10. Which of the graphs would most likely represent a profit-maximizing firm in a monopolistically competitive market? a. panel a b. panel b c. panel c d. panel d

A

Refer to figure 12. The socially efficient price and output combination is A. $5 and 7. B. $5 and 3.5. C. $19.30 and 7. D. $22.50 and 3.5.

A

Refer to figure 14. Assume the equilibrium quantity is 200. Find the profit maximizing price. A. $160 B. $180 C. $200 D. $240

A

Refer to figure 4. The opportunity cost of harvesting 1 clam, given by the dotted line is a. 2 mangoes per week b. 1 mango per week c. ½ mango per week d. 4 mangoes per week

A

Refer to figure 4. The slope of the PPF shown by the solid line is a. -1 b. -2 c. -1/2 d. 1

A

Refer to figure 7. The deadweight loss after tax is $________. a. 50 b. 75 c. 60 d. 35

A

Refer to figure 7. The tax revenue is $ _____________ a. 300 b. 250 c. 275 d. 400

A

Refer to figure 8. The black line represents a. Marginal revenue b. Average cost c. Marginal cost d. Average fixed cost

A

Refer to table 3. The average variable cost of producing four widgets is a. $2 b. $2.5 c. $4 d. $5

A

Refer to table 4. What is the marginal cost of producing fifth sandwich? a. $16 b. $12 c. $15 d. $14

A

Say tea and coffee are strong substitutes, and the tea market suffers from a supply freeze. The demand for coffee will shift towards the ____________ given the tea freeze. This will ___________ equilibrium price of coffee and ___________ equilibrium quantity. a. Right; increase; increase b. Right; decrease; increase c. Left; increase; reduce d. Left; increase; increase

A

The profit maximizing rule, P = MC, applies to A. all firms. B. monopolists only. C. monopolists and perfect competitors. D. perfect competitors only.

A

To sell an extra unit of output, a perfect competitor __________ while an imperfect competitor __________. A. does not alter price; must lower price B. must hope the market price falls; must lower price C. does not alter price; does not alter price either D. must lower price; must lower price

A

Who bears the tax burden if the demand curve is perfectly elastic? a. Sellers b. Buyers c. Government d. Both sellers and buyers

A

Refer to Table 1. If Debra divides her time equally between pizza and wings, she will be able to produce a. 30 slices of pizza and 60 pieces of wings b. 30 slices of pizza and 90 pieces of wings. c. 60 slices of pizza and 30 pieces of wings. d. 60 slices of pizza and 120 pieces of wings.

A (30 slices of pizza and 60 pieces of wings)

If France is better than Belarus at producing wine, but Belarus is better than France at producing crystal, a. Belarus should sell crystal to France, and should buy French wine. b. Belarus should impose a tariff on French wine in order to protect jobs in the Belarusian crystal industry. c. Belarus should subsidize its wine industry so that it can compete with French wine. d. Belarus should put a quota on the amount of French wine imported.

A (Belarus should sell crystal to France, and should buy French wine)

Refer to Table 1. Which of the following is true for Debra and Mike? a. Debra has an absolute advantage in both pizza and wings. b. Mike has an absolute advantage in pizza and Debta has an absolute advantage in wings. c. Mike has an absolute advantage in wings and Debra has an absolute advantage in pizza. d. Mike has an absolute advantage in both wheat and corn.

A (Debra has an absolute advantage in both pizza and wings.)

The market forces have power to cure the problem of surplus. When there is a shortage, eventually price ________________ which will ___________ the gap between quantity demanded and quantity supplied. a. Increases; lower b. Increases; increase c. Decreases; lower d. Decreases, increase

A (Increases; lower)

Refer to figure 3. Find the equilibrium price and quantity. a. P* = 2, Q* = 6 b. P* = 2, Q* = 4 c. P* = 3, Q* = 6 d. P* =4, Q* = 8

A (P*=2, Q*=6)

The curved shape of the production possibilities frontier can be explained by a. increasing cost of production. b. constant cost of production. c. scarcity. d. economic growth.

A (increasing cost of production)

Adding more workers in a Subway store will eventually decrease marginal product of labor. This can be explained by a. Constant returns of scale b. Law of diminishing marginal product of labor c. Law of decreasing returns to scale d. Economies of scale

B

Refer to figure 13. The Nash equilibrium for this game is: a. Player A play X and player B play Z b. Player A play X and player B play X c. Player B play Z and player A play Z d. Player B play Z and player A play X

B

Refer to figure 13. The dominant strategy for player A and player B is: a. X (player A) and Z (player B) b. X (player A) and X (player B) c. Z (player B) and Z (player A) d. Z (player B) and X (player A)

B

Refer to figure 6. Your fixed costs are __________ and your marginal costs are _____. a. $250/Q; 10 b. $250; 10 c. $250; 10*Q d. $250/Q; 10

B

Refer to figure 7. The _________________ curve shifts to the left after tax but _____________ curve is unchanged. a. Demand; supply b. Supply; demand c. Supply; supply d. Demand; demand

B

Refer to figure 8. The firm above is ___________ a. In loss b. In profit c. Breaking even d. Economies of scale

B

Refer to figure 9. If this monopolistic firm's marginal cost is constant at $30, its profit maximizing output is A. 50 units. B. 40 units. C. 20 units. D. 30 units

B

Refer to table 3. If this a competitive firm and price per widget is $2, what is the profit maximizing quantity of widgets? a. 3 b. 4 c. 5 d. 2

B

Refer to table 3. The marginal cost of producing the fifth widget is a. $1.00. b. $7 c. $5 d. $6

B

Refer to table 4. What is the profit maximizing quantity in this setting? a. 3 b. 4 c. 5 d. 6

B

Refer to table 5. The firm's decision will be to a. Shut down in the short run b. Operate in the short run c. Exit in the short run d. Expand in this short run

B

Refer to table 5. What is the total revenue at the profit maximizing quantity? a. 45 b. 105 c. 75 d. 120

B

Say tea and coffee are strong substitutes. Tea market suffers from supply freeze. This will shift the supply curve for tea to the ______________. This leads to ______________ equilibrium price and _____________ equilibrium quantity demanded for tea. a. Left; higher; higher b. Left; higher; lower c. Right; higher; higher d. Right; lower; higher

B

Say, the current equilibrium price of a marker is $2 and the equilibrium quantity is 4. Now, if prices increase to $6, we would encounter a situation of ____________ where ___________ is greater than _______________. a. Surplus; quantity demanded; quantity supplied b. Surplus; quantity supplied; quantity demanded c. Surplus; quantity demanded; demand d. Shortage; quantity supplied; quantity demanded

B

Suppose a competitive firm and a monopolist are both charging $5 for their respective outputs. One can infer that A. marginal revenue is $5 for both firms. B. marginal revenue is $5 for the competitive firm and less than $5 for the monopolist. C. marginal revenue is less than $5 for both firms. D. the competitive firm is charging too much and the monopolist too little.

B

Suppose you quit your job to start a business. In the first month, your total revenue was $6,500. You paid $1,000 in monthly rent for office space.$ 200 in monthly rent for equipment.$4,000 to your workers in wages for the month.$1,000 for the supplies you used that month.You determine that your true economist's profit that month was negative $500. Why? a. You did the math incorrectly. b. You accounted for lost salary of $800. c. You accounted for lost salary of $300. d. Your equipment rent is an implicit cost.

B

The relationship between marginal cost and average variable cost is such that a. Marginal cost intersects average fixed cost at the lowest point b. marginal cost interests average variable cost at the lower point c. Marginal cost is always below the average total cost d. Both b and c

B

Your business will shut-down in the short run if a. P>AVC b. P<AVC c. P>AFC d. P>AFC

B

Refer to table 2. The slope of the demand equation or m is given as: a. 2 b. -2 c. ½ d. - ½

B (-2)

If a 10% decrease in the price of good leads to a 20% increase in the quantity demanded of that good, the price elasticity of demand for that good would be _____. This represents an ___________ demand. A. -2; inelastic B. -2; elastic C. -1/2; inelastic D. -1/2; elastic

B (-2; elastic)

Refer to table 2. The y-intercept of the demand equation or c is given as: a. 8 b. 16 c. 8 d. 4

B (16)

Refer to Table 1. The opportunity cost of 1 slice of pizza for Debra is a. 3 pieces of wings. b. 2 pieces of wings. c. ½ pieces of wings. d. 3/2 slice of pizza.

B (2 pieces of wings)

Refer to Table 1. Which of the following is true for Debra and Mike? a. Debra has a comparative advantage in both pizza and wings. b. Debra has a comparative advantage in pizza and Mike has a comparative advantage in wings. c. Debra has a comparative advantage in wings and Mike has a comparative advantage in pizza. d. Mike has a comparative advantage in both wheat and corn.

B (Debra has a comparative advantage in pizza and Mike has a comparative advantage in wings)

In the case of a perfectly competitive firm a. Firm's Demand = cost b. Demand is perfectly elastic c. Demand is perfectly inelastic d. Both c and b

C

Increase in price leads to higher______________ but decreases __________________. a. Producer surplus; total surplus b. Total surplus; consumer surplus c. Producer surplus; consumer surplus d. Consumer surplus; total surplus

C

Refer to figure 12. The firm illustrated in the graph is a (n) A. oligopolist. B. perfect competitor. C. monopolist D. None of the above

C

Refer to figure 12. To profit maximize, the firm will choose to produce __________ units and charge a price of __________. A. 3.5; $33.50 B. 7; $19.30 C. 3.5; $22.50 D. 3.5; $5

C

Refer to figure 4. The opportunity cost of producing mangoes in both production possibility frontiers (PPFs) in Figure above a. Increases as the number of clams harvested increase b. Decreases as the number of clams harvested increase c. Stays constant throughout the different level of production of clams d. Varies with production levels of clams

C

Refer to figure 4. The production possibility frontier as shown by the solid line is possible given a. Improvements in technology to harvest mangoes b. Improvements in technology to harvest both mangoes and clams c. Improvements in technology to harvest clams d. No improvements in technology

C

Refer to figure 6. As you increase production of T-shirts your average fixed costs _____ and your marginal costs ________. a. decrease; increase b. increase; decrease c. decrease; stay the same d. stay the same; increased

C

Refer to figure 6. If you make 50 t-shirts, the average total cost is __________. a. $16 b. $20 c. $15 d. $10

C

Refer to figure 7. After the tax the buyers pay $ _________ and seller receives $ ____________ . a. 5; 5 b. 9; 9 c. 9; 5 d. 5; 9

C

Refer to figure 7. The tax amount is paid by _______________ a. The seller b. The buyer c. Both seller and buyer d. No one

C

Refer to figure 8. The green curve represents a. Marginal revenue b. Marginal cost c. Average total cost d. Average fixed cost

C

Refer to figure 8. The profit maximizing quantity is at a. 8 b. 6 c. 4 d. 2

C

Refer to table 4. Your best friend wants to enter the market. What is the price she will be charging? a. $14 b. $16 c. $15 d. She can set her own price

C

Refer to table 5. If the market price $15, how many units of output will this firm produce? a. 3 b. 5 c. 7 d. 8

C

Salt has _____________ demand. This is mainly because of ________________ and it takes a small portion of the budget. a. Inelastic demand; lack of complements b. Elastic demand; lack of substitutes c. Inelastic demand; lack of substitutes d. Elastic demand; lack of complements

C

Which one the following is not a characteristics of a perfectly competitive firm. a. Identical product b. Too many sellers and buyers c. Differentiated product d. Free entry and exit

C

Refer to table 2. The demand equation is given as: a. Qd = -2P + 8 b. Qd = - ½ P + 16 c. Qd = -2P + 16 d. Qd = ½ P + 16

C (-2P+16)

Say, higher cigarette prices decrease the consumption of monthly number of alcoholic beverage consumed by young adults. Cigarettes and alcohol are _________________. This works through the mechanism of rise in cigarette prices _______________________. a. Complements; Raising the price of alcohol b. Substitute; Lowering the price of alcohol c. Complements; Shifting the demand of alcohol towards the left, as alcohol is complement for cigarettes d. Substitute; Shifting the demand of alcohol towards the left, as alcohol is a substitute for cigarettes

C (Complements; Shifting the demand of alcohol towards the left, as alcohol is complement for cigarettes)

Which of the following concepts is NOT illustrated by the production possibilities frontier? a. Efficiency b. opportunity cost c. Equity d. Tradeoffs

C (Equity)

If a firm collects $90 in revenues when it sells 4 units, $100 in revenues when it sells 5 units, and $105 when it sells 6 units, one can infer the firm is likely to be A. a perfect competitor. B. a cost minimizer. C. a perfect competitor or a monopolist. D. a monopolist.

D

In Figure 7, the tax is being levied to the _____________. a. Third party b. Buyer c. Government d. None of the above

D

In our classroom discussion, we emphasized the concave production possibility frontier, one that bows outside. The opportunity cost of producing more units of cars a. Increases because increased production of cars require the economy to use resources that would otherwise be more productive in producing computers b. Increases due to the shape of production possibility frontier, which is bowed outside from the origin c. Stays constant due to the linear structure of the PPF d. Both a and b

D

Refer to Figure 11. At a price of $8 per unit of output the total revenue for the monopolist is ____, and the marginal revenue earned from the last unit sold is ____. A. $8; 8 B. $24; 8 C. $32; 4 D. $40; 0

D

Refer to Table 3. The average fixed cost of producing five widgets is: a. $2 b. $4 c. $5 d. $8

D

Refer to figure 12. At the point of profit maximization, the monopolist A. earns a profit of $38.50. B. incurs a loss of $11.20. C. earns a profit of $11.20. D. incurs a loss of $38.50.

D

Refer to figure 14. What is the profit when you follow question 21. (Hint: profit = total revenue - total cost, so first find total revenue and total cost) A. $32,000 B. $25,000 C. $28,000 D. $30,000

D

Refer to figure 5. The initial production possibility frontier for country A, shown in Figure above, is given by the solid line. Now, the shift is the PPF as shown by the dotted line is possible because of ________________ a. Increase in technology for producing guns b. Increase in technology for producing butter c. A reduction in opportunity cost of producing butter d. Economic growth

D

Refer to figure 7. The amount of tax is __________________. a. $1 b. $3 c. $2 d. $4

D

Refer to figure 7. The consumer surplus after tax is $ __________. a. 300 b. 167.5 c. 178 d. 187.5

D

Refer to figure 7. The consumer surplus before tax is $ _________. a. 250 b. 600 c. 500 d. 300

D

Refer to figure 8. The average total cost at the profit maximizing quantity is a. Between $4 and $5 b. $4 c. None of the above d. Between $5 and $6

D

Refer to figure 8. The brown line (upward sloping line) represents: a. Marginal revenue b. Average cost c. Average fixed cost d. Marginal cost

D

Refer to table 3. The average total cost of producing two widgets is a. $11.5 b. $10 c. $22 d. $21.5

D

Suppose a firm is collecting $100 in total revenues when it sells 10 units and it receives $110 in total revenues when it sells 11 units. The firm is a(n) A. pure monopolist. B. oligopolist. C. monopolistic competitor. D. perfect competitor.

D

The income elasticity of demand for Ramen noodles is -0.44. In this case, if your income increases, the demand for ramen noodles would _______________. This ___________ the new equilibrium quantity of Ramen noodles. Ramen noodles is considered ______________ good. a. Shift towards the right; increases; normal b. Shift towards the right; decreases; inferior c. Shift towards the left; decreases; normal d. Shift towards the left; decreases; inferior

D

Which of the following situations will come closest to perfect price discrimination? A. Charging a different price on different days B. Charging a different price at the end of the year C. Negotiating a price with a group of consumers D. Negotiating a price with each individual consumer

D

You prefer a burger for dinner rather than ramen noodles. Say, there is a boost in your income. Given that burger is a normal good, the _____________ for ramen noodle will shift towards the ____________ . This will ______________ the equilibrium price and quantity for ramen noodles. a. Demand; left; increase b. Supply; left; increase c. Demand; right; lower d. Demand; left; lower

D

If the price of cheese falls by one percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese has a value of A. 30 B. 0.30 C. 0.333 D. 3.

D (3)

Refer to figure 3. If the market price is set at $4, the quantity demanded is _________________ and quantity supplied is ______________. If the price is set at $4 it creates _______________ in the market. a. Qd = 0, Qs = 8, shortage b. Qd = 2, Qs=4, shortage c. Qd = 0 , Qs = 8, surplus d. Qd=4, Qs = 10, surplus

D (Qd=4, Qs=10, surplus)

All of the factors below create a change in demand for alcohol except: a. Change in cigarette prices given that cigarettes and alcohol are substitutes b. Rise in anti-drinking sentiments across the country c. Increase in risk of liver cirrhosis associated with alcohol consumption d. Rise in price of alcohol e. Rise in income of alcohol consumers (alcohol is a normal good)

D (Rise in price of alcohol)

The long run average cost curve decreases due to a. A reduction in short run marginal cost b. A reduction in short run average cost curves c. Economies of scale d. Both a and b e. Both b and c

E

Kessler and Roth (2011) in their research finds that "allocation policy giving priority on waiting lists to those who previously registered as donors has a significant positive impact on registering" as organ donors. This finding states that: a. There should be a strict policy that makes registering for organ donation mandatory b. People are altruistic in nature and they will voluntarily register for organ donation c. Registration of organ donation can be increased by reducing the cost of registration. d. The findings just do not make any sense e. People respond to incentive and they will be willing to register if proper incentives are provided

E (People respond to incentive and they will be willing to register if proper incentives are provided)