Micro Final

A production function may exhibit: A) constant returns to scale and diminishing marginal productivities to all inputs. B) constant returns to scale and diminishing marginal productivities to all but one input, but at least one input must have a constant marginal productivity. C) constant returns to scale and diminishing marginal productivity to at most one input. D) constant returns to scale and diminishing marginal productivities for no inputs.

A

As an individual moves northwest along an indifference curve substituting more and more Y for X, his or her MRS of X for Y: A) increases B) decreases C) stays the same D_ changes in a way that cannot be determined

A

If a consumer purchases only two goods (X and Y ) and the demand for X is elastic, then a rise in the price of X A) will cause total spending on good Y to rise. B) will cause total spending on good Y to fall. C) will cause total spending on good Y to remain unchanged. D) will have an indeterminate effect on total spending on good Y.

A

If a good is normal and its price decreases, A) the income effect will be positive and the substitution effect will be positive. B) the income effect will be negative and the substitution effect will be negative. C) the income effect will be positive and the substitution effect will be negative. D) the income effect will be negative and the substitution effect will be positive.

A

If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g., coffee and cream for a coffee drinker who never varies the amount of cream used in each cup), then... A) there is no substitution effect from a change in the price of coffee B) there is no income effect from a change in the price of coffee. C) Giffen's Paradox must occur if both coffee and cream are inferior goods. D) an increase in income will not affect cream purchases

A

Quotas that limit the quantity of imports of a foreign good provide an incentive for foreign suppliers to: I. Provide higher quality goods. II. Seek more open markets elsewhere. III. Lower prices to be more competitive. IV. Stop all trade with the country imposing the quotas. Which of the above statements are true? A) I and II. B) I and III. C) II and IV. D) I, III, and IV. E) ​III only.

A

Suppose demand for a good is QD = 100 - P and supply is QS = -20 + P. Suppose that a nationwide quota (of 20) is enforced so that more can be used in a war effort. What is the consumer surplus? A) 200 B) 400 C) 600 D) 800

A

Suppose that the price elasticity of demand for a product is −1 and that the price elasticity of supply is +1. Assume also that the income elasticity of demand is +2. Then an increase in income of 10% will raise equilibrium price by Select one: A) 10%. B) 5%. C) 20% D) an annual amount that cannot be determined.

A

The marginal rate of technical substitution of labor for capital measures A) the amount by which capital input can be reduced while holding quantity produced constant when one more unit of labor is used. B) the amount by which labor input can be reduced while holding quantity produced constant when one more unit of capital is used. C) the ratio of total labor to total capital. D) the ratio of total capital to total labor.

A

The price elasticity of demand for a linear demand curve follows the pattern (moving from high prices to low prices): A) elastic, unit elastic, inelastic. B) unit elastic, inelastic, elastic. C) inelastic, unit elastic, elastic. D) elastic, inelastic, unit elastic.

A

​Suppose a farmer is a price taker for soybean sales with cost functions given by ​​ TC = .1q2 + 2q + 100 MC = .2q + 2 A) q = 5P - 10 B) q = .2P +2 C) q = 10P - 2 D) q = 2P - 5

A

If a firm wished to maximize total revenues it should produce where A) marginal cost is zero. B) marginal revenue is zero C) marginal revenue is equal to marginal cost. D) marginal revenue is equal to price.

B

If a good is normal and its price increases, A) the income effect will be positive and the substitution effect will be positive. B) the income effect will be negative and the substitution effect will be negative. C) the income effect will be positive and the substitution effect will be negative. D) the income effect will be negative and the substitution effect will be positive.

B

If an individual's housing purchases are always a constant fraction of income, then the income elasticity of demand for housing is A) greater than one. B) equal to one C) less than one. D) Cannot be determined from the available information.

B

If demand is elastic, a decrease in quantity will cause the total spending to A) rise. B) fall. C) remain unchanged. D) change in a way that cannot be determined.

B

If good X is a normal good and its price rises, then quantity demanded A) may or may not fall. B) will always fall. C) will always rise. D) will remain unchanged.

B

If goods X and Y are complements, then the cross price elasticity of demand between them will be A) positive. B) negative. C) zero. D) infinity.

B

If the demand faced by a firm is elastic, selling one less unit of output will A) increase revenue. B) decrease revenue. C) keep revenues constant. D) decrease price.

B

If the demand faced by a firm is inelastic, selling one more unit of output will A) increase revenue. B) decrease revenue. C) keep revenues constant. D) decrease price.

B

One example of Ricardian rent is A) rent paid to landlords under price controls. B) the difference between the wage of a star baseball player and what he could earn outside of baseball. C) the amount paid to a seller above the equilibrium price of tourist class tickets in order to receive higher quality seats in first class. D) the price rise of wool from a disease among sheep.

B

Suppose the "poor" and "rich" have identical demand functions for good X but only differ in income (I): . At a given price of X, the price elasticity of their individual demand curves is such that​ A) the rich person's demand is more elastic than the poor person's. B) the poor person's demand is more elastic than the rich person's. C) the poor person's demand is as elastic as the rich person's. Incorrect

B

Which of the following functional forms for utility suggests the greatest substitution effect when starting at the point where Px=Py A) U=min(X,Y) B) U=X + Y C) U=X^1/2Y^1/2 D) U=X^1/4Y^3/4​

B

For an increasing cost industry, the long-run supply curve has a(n) elasticity of supply A) infinite. B) negative. C) positive. D) zero.

C

If a good is Giffen and its price increases, A) the income effect will be positive and the substitution effect will be positive. B) the income effect will be negative and the substitution effect will be negative. C) the income effect will be positive and the substitution effect will be negative D) the income effect will be negative and the substitution effect will be positive. Incorrect

C

If a good is inferior and its price increases, A) the income effect will be positive and the substitution effect will be positive. B) the income effect will be negative and the substitution effect will be negative. C) the income effect will be positive and the substitution effect will be negative. D) the income effect will be negative and the substitution effect will be positive.

C

If an individual's indifference curve map does not obey the assumption of a diminishing MRS, then A) the individual will not maximize utility B) the individual will buy none of good X C) tangencies of indifference curves to the budget constraint may not be points of utility maximization D) the budget constraint cannot be tangent to an appropriate indifference curve.

C

If there are only two goods and these are consumed in fixed proportions, the price elasticities of demand for these two goods will sum to A) 0.0 B) -0.5 C) -1.0 D) a number between 0 and -1.

C

In the long run, the greater burden of a specific tax will usually be absorbed by A) consumers. B) the party⎯consumers or producers⎯with the more elastic demand/supply curve. C) the party with the least elastic demand/supply curve. D) shareholders and employees of the firm in the form of reduced dividends and wages.

C

One way to minimize the deadweight loss resulting from a specific tax is to Select one: A) tax only wealthy firms and individuals. B) spread the tax over many goods and services. C) tax goods for which either supply or demand is inelastic. D) tax luxury items such as yachts and sports cars.

C

The expansion path for a constant-returns-to-scale production function A) is a straight line through the origin with a slope greater than 1 if w > v. B) is a straight line through the origin with a slope greater than 1 if w < v. C) is a straight line through the origin, though its slope cannot be determined by w and v alone. D) has a positive slope but is not necessarily a straight line.

C

The markup pricing technique involves determining the selling price of a good by adding a profit markup to minimum average cost. This would result in maximum profits only if A) average cost were constant. B) the markup were zero. C) the markup varied with the elasticity of demand. D) demand were inelastic.

C

"If an individual is to maximize the utility received from consumption, he or she should spend all available income..." This statement assumes: A) That saving is impossible B) That the individual is not satiated in all goods C) That no goods are inferior D) Both a and b

D

A change in the distribution of income which leaves total income constant will not shift the market demand curve for a product if A) everyone has an income elasticity of demand of zero for the product. B) everyone has the same income elasticity of demand for the product. C) individuals have differing income elasticities for the product, but the average income elasticity for income gainers is equal to the average income elasticity for income losers. D) any of the above conditions occur.

D

A firm that sought to "maximize market share" would choose to produce an output level for which marginal revenue was equal to A) marginal cost B) average cost. C) price D) zero

D

If a good is inferior and its price decreases, A) the income effect will be positive and the substitution effect will be positive B)the income effect will be negative and the substitution effect will be negative C) the income effect will be positive and the substitution effect will be negative. D) the income effect will be negative and the substitution effect will be positive.

D

If income doubles and the quantity demanded of good X more than doubles, then good X can be described as A) substitute good. B) complement good. C) necessity. D) luxury.

D