macro exam 3

each additional unit of an input will increase output, but by smaller and smaller amounts as inputs increase

"Diminishing marginal returns" means that:

50;10

(Scenario: Tom's Budget Constraint) Use Scenario: Tom's Budget Constraint. The combination of _____ music downloads and _____ movies lies OUTSIDE Tom's budget line (meaning Tom cannot afford this combination). Scenario: Tom's Budget Constraint Tom is trying to decide how to allocate his $50 budget for music downloads and online movie streaming when the price of a music download is $1 and the price of a movie is $5.

20; 10

11. (Figure: Marginal Benefits and Marginal Costs) Use Figure: Marginal Benefits and Marginal Costs. More time spent studying economics adds points to economics scores (MB) but subtracts points from accounting scores (MC). When Claudia studies economics for four hours, the marginal benefit is _____ points; when she studies for 6 hours, the marginal benefit is _____ points.

the difference between total benefits and total costs is maximized

12. (Figure: Marginal Benefits and Marginal Costs) Use Figure: Marginal Benefits and Marginal Costs. More time spent studying economics adds points to economics scores (MB) but subtracts points from accounting scores (MC). At 4 hours of study, Claudia will maximize her benefit from study time because:

average total

13. (Figure: Short-Run Costs) Use Figure: Short-Run Costs. B is the _____ cost curve.

average fixed

14.(Figure: Short-Run Costs) Use Figure: Short-Run Costs. The vertical difference between curve B and curve C at any quantity of output is _____ cost.

average variable

15. (Figure: Short-Run Costs) Use Figure: Short-Run Costs. C is the _____ cost curve.

marginal

16. Figure: Short-Run Costs) Use Figure: Short-Run Costs. A is the _____ cost curve.

51

17. (Figure: Marginal Product of Labor) Use Figure: The Marginal Product of Labor. The total product for three workers is _____ bushels.

increase; vertical; toward

20. (Figure and Table: The Budget Line) Use Figure and Table: The Budget Line. A(n) _____ in the price of potatoes would rotate the budget line, changing the intercept on the _____ axis and moving it _____ the origin.

increase; horizontal; toward

21. (Figure and Table: The Budget Line) Use Figure and Table: The Budget Line. A(n) _____ in the price of clams would rotate the budget line, changing the intercept on the _____ axis and moving it _____ the origin.

4

32. (Figure: The Marginal Analysis of Cell Phones) Use Figure: The Marginal Analysis of Cell Phones. You are considering purchasing cell phones. How many cell phones will you consume?

increasing

37. (Table: Marginal Cost of Sweatshirts) Use Table: Marginal Cost of Sweatshirts. The marginal cost of producing sweatshirts is an example of _____ marginal costs.

$11

38. (Table: Marginal Cost of Sweatshirts) Use Table: Marginal Cost of Sweatshirts. The marginal cost of the second sweatshirt is:

$16

39. (Table: Marginal Analysis of Sweatshirt Production II) Use Table: Marginal Analysis of Sweatshirt Production II. The profit at the optimal quantity of sweatshirts is:

export; Qr-Cr

42. Figure: The Market for Tea in Sri Lanka) Use Figure: The Market for Tea in Sri Lanka. In autarky, the price is P1. When the economy is opened to trade, the price rises to PW. Sri Lanka will _____ tea and the volume of trade will equal _____.

rises; G+H+I+J+K

43. (Figure: The Market for Tea in Sri Lanka) Use Figure: The Market for Tea in Sri Lanka. In autarky, the price is P1. When the economy is opened to trade, the price rises to PW, and producer surplus _____ to _____.

rises; D+E

47. (Figure: Domestic Market for Digital Cameras) Use Figure: The Domestic Market for Digital Cameras. Assume that PA is the autarky price and PW is the world price. Total surplus after international trade _____ by the area _____.

13

48. (Table: Utility from Oranges and Star Fruit) Use Table: Utility from Oranges and Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. Calvin has $26 to spend. If Calvin spends all of his money on oranges, how many pounds of oranges can he buy?

3; 4; no money

49. (Table: Utility from Oranges and Star Fruit) Use Table: Utility from Oranges and Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. The table shows Calvin's total utility from eating various amounts of oranges and star fruits. If Calvin has $26, he should eat _____ oranges and _____ pounds of star fruit, and he will have _____ left over.

$216

5. (Figure: The Average Total Cost Curve) Use Figure: The Average Total Cost Curve. The total cost of producing three pairs of boots is approximately:

280

50. Table: Utility from Oranges and Star Fruit) Use Table: Utility from Oranges and Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. Calvin has $26 to spend. If Calvin buys 4 pounds of star fruit and 3 pounds of oranges, how much is his total utility?

3

54. Table: Marginal Analysis of Sweatshirt Production I) Use Table: Marginal Analysis of Sweatshirt Production I. The optimal quantity of sweatshirts to produce is:

$13

59. (Table: Marginal Benefit of Sweatshirts) Use Table: Marginal Benefit of Sweatshirts. The marginal benefit of producing the fourth sweatshirt is:

A+B

63. (Figure: The Market for Laptops) Use Figure: The Market for Laptops. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of consumer surplus when a tariff raises the domestic price from the world price to PT.

3

64. (Table: Marginal Utility per Dollar of M&Ms) Use Table: Marginal Utility per Dollar of M&Ms. The price of M&Ms is $2 per bag. The marginal utility per dollar of the first bag of M&Ms is:

decrease

65. (Table: Marginal Utility per Dollar of M&Ms) Use Table: Marginal Utility per Dollar of M&Ms. The price of M&Ms is $2 per bag. If the price of M&Ms increases to $3 per bag, the marginal utility per dollar for each bag of M&Ms will:

rises; G+H

66. (Figure: A Tariff on Oranges in South Africa) Use Figure: A Tariff on Oranges in South Africa. When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from PW to PT and domestic producer surplus _____ to _____.

reduction; I+K

67. (Figure: A Tariff on Oranges in South Africa) Use Figure: A Tariff on Oranges in South Africa. When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from PW to PT and there's a net _____ to total surplus of _____.

c2-q2

68. (Figure: A Tariff on Oranges in South Africa) Use Figure: A Tariff on Oranges in South Africa. When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from PW to PT and the volume of imports falls to:

C

7. (Figure: Budget Lines for Tea and Scones) Use Figure: Budget Lines for Tea and Scones. For months now, Agnes has had $20 per month to spend on tea and scones. The price of each cup of tea and each scone has been $1. Which chart shows what will happen to her budget line if her income decreases to $10?

economies of scale

72. (Figure: Long-Run Average Cost) Use Figure: Long-Run Average Cost. This firm has _____ in the output region from 0 to A.

constant returns to scale

73. (Figure: Long-Run Average Cost) Use Figure: Long-Run Average Cost. This firm has _____ in the output region from A to B.

1;6

74. (Table: Marginal Utility per Dollar II) Use Table: Marginal Utility per Dollar II. If Manuel has $18 to spend on potatoes and clams, then the utility-maximizing combination is _____ pound(s) of clams and _____ pound(s) of potatoes.

second

77. (Table: The Utility of Pecan Rolls) Use Table: The Utility of Pecan Rolls. Marginal utility begins to diminish with the _____ roll.

$550

78. (Table: Production Function for Soybeans) Use Table: Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The total cost of producing 70 bushels of soybeans is:

$150

79. (Table: Production Function for Soybeans) Use Table: Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The fixed cost of producing 25 bushels of soybeans is:

decreasing

81. (Figure: The Total Product) Use Figure: The Total Product. Between points A and B the marginal product of labor is:

variable

A factor of production whose quantity can be changed in the SHORT run is a(n) _____ factor of production.

increases; increases

A tariff _____ the price received by domestic producers and _____ the price paid by domestic consumer

intensive; abundant

According to the Heckscher-Ohlin model, Brazil will have a comparative advantage in oranges if the factors that are _____ in the production of oranges are _____.

a choice between two activities

An "either-or" decision entails:

tax of 10% of the value of each Honda automobile imported from japan

An example of a tariff is a:

labor-abundant

An urbanized country has 100 million workers living on 100 square miles of land. A country that is principally rural has 1 million workers living on 10 square miles of land. From this information we know that the urbanized country is _____ relative to the rural country.

diminishing marginal returns

Ashley Bakery expects its marginal cost curve will eventually slope upward because, as with most production processes, baking has:

more; less

Assume that diminishing marginal utility applies to both dish soap and floor wax and that Minh is spending all of her income. If Minh purchases a combination of dish soap and floor wax such that MUDish soap/ /PDish soap = 50 and MUFloor wax/ /PFloor wax = 30, to maximize utility, Minh should buy _____ soap and _____ floor wax.

10,000; -20,000

Bessie wants to calculate the accounting and economic profits of her cattle farm in Nebraska. She pays $30,000 per year in overhead, $80,000 in wages, and $20,000 in insurance. She forgoes $30,000 per year that she could make as a teacher. If her total revenue equals $140,000, that means her accounting profit is _____ and her economic profit is _____.

the role of increasing returns

Both the United States and Canada produce automobiles and their components; however, each particular model or component is produced in only one of the two countries. Which factor explains this pattern of production and trade?

chucks budget line will be unaffected

Chuck spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. If the price of each good doubles and Chuck's income doubles:

implicit costs

Costs that are included in the economic concept of cost but that are NOT explicit costs are:

utility

Economists identify the satisfaction a person derives from the consumption of goods and services as:

not possible to determine from info provided

Feng is thinking of mowing lawns over the summer. His friend Jason mows lawns, and he says the marginal cost of mowing the fourth lawn in a day is $40. Feng thinks about it and realizes that the total cost of mowing four lawns is:

less than accounting profit

For MOST firms, economic profit is:

marginal utility is less than 0

Freddy has eaten three corn dogs at the county fair, and if he eats another, he will get sick on the roller coaster. Knowing this, and ignoring any impact that price might have on his decision, we can say that, for the fourth corn dog, the:

rise; fall

If labor is abundant in South Africa but capital is scarce, when South Africa opens to trade, the price of labor will _____ and the price of capital will _____.

average total cost is increasing

If marginal cost is GREATER than average total cost:

will lie above the total product curve for the firm with less capital

If two firms are identical in all respects except that one has more of the fixed input capital than another, the total product curve for the firm with more capital:

the result that the optimal quantity of an activity is that at which marginal benefit is equal to marginal cost

In economic analysis, the principle of marginal analysis refers to:

enough time to vary output but not plant capacity

In economics, the short run is:

choose the activity that results in the greater economic profit

In making an "either-or" decision:

variable

In the long run, all costs are:

consume more candy boxes and fewer baseball card packs

Juan spends all of his income on packs of baseball cards and boxes of candy. At his current consumption bundle, the marginal utility of baseball card packs is 20 and the marginal utility of candy boxes is 10. Assuming that diminishing marginal utility applies to both goods, if the price of baseball card packs is $10 and the price of candy boxes is $2, Juan should:

down; up

Kawamura, a careful utility maximizer, consumes peanut butter and ice cream. Assume that both peanut butter and ice cream are normal goods and that diminishing marginal utility applies to both goods. Right after he achieves the utility-maximizing level of consumption of the two goods, the price of peanut butter falls. After he adjusts to this event, the marginal utility of peanut butter goes _____ and that of ice cream goes _____.

increased; 3.33

Krista's dry-cleaning business incurs $900 per month in fixed costs. Last month her total output was 3,000 pounds of clothes. This month her total output fell to 2,700 pounds. This means her average fixed cost _____ by a little more than _____ cents.

is the addition to total benefit due to undertaking one more unit of an activity

Marginal Benefit:

explicit cost

Money that must be paid for the use of factors of production such as labor and capital is an:

large reserves of crude oil

Saudi Arabia has a tremendous comparative advantage in petroleum. Which factor is a source of this comparative advantage?

$7.00

Suppose Cyd knows the average total cost of producing 9 scones is $5, while the average total cost of producing 10 scones is $5.20. What is the marginal cost of the tenth scone?

marginal product; decreasing

Suppose the marginal cost curve in the short run first decreases and then increases. If marginal cost is increasing, _____ must be _____.

4

The United States must give up the production of 500 bicycles to produce 20 additional tractors. The opportunity cost of producing 100 bicycles is _____ tractor(s).

marginal cost

The amount by which an additional unit of an activity increases total cost is:

the opportunity cost of capital used by a business

The implicit cost of capital is:d

diminishing returns; higher; variable

The larger the output, the more variable input required to produce additional units. Called the _____ effect, this leads to a _____ average _____ cost as output rises.

negative

The law of diminishing marginal utility indicates that the slope of the marginal utility curve is generally

diseconomies of scale

The long-run average cost curve will be upward-sloping when the firm has:

total

The sum of fixed and variable costs is _____ cost.

less

Whenever marginal benefit is less than marginal cost, the decision maker should do _____ of the activity

paint, because you need enough to paint atleast one entire room

Which good is MOST likely to display increasing marginal utility over some range?

the Heckscher-Ohlin model

Which model states that nations that are abundant in a factor will have a comparative advantage in a good whose production is intensive in that factor?

rutabagas and broccoli is the same

Wolfgang really likes both rutabagas and broccoli. The price of each good is $0.60 per pound and Wolfgang is maximizing utility. At the point of maximal utility, the marginal utility of:

negative

Xavier notices that the marginal utility of working with a tutor seems to fall with each hour the tutor helps him study. If Xavier keeps the tutor until his grade actually begins to fall, his marginal utility for the last hour of tutoring will be:

the dining room

you own a deli. Which input of production is MOST likely fixed at your deli?