Eco Test #3

The long run is best defined as:

a period of time sufficiently long that all factors of production are variable.

The short run is best defined as:

a period of time sufficiently short that at least one factor of production is fixed.

To produce 150 units of output, a firm must use 3 employees per day. To produce 300 units of output, the firm must use 8 employees per day. Apparently, the firm is:

experiencing diminishing returns.

When the price of a good rises, marginal utility per dollar spent on that good ______, leading consumers to purchase ______ of that good.

falls; less

The term marginal utility denotes the amount by which ______ changes when consumption changes by ______ unit(s).

total utility; 1

Individual supply curves generally slope ______ because ______.

upward; of increasing opportunity costs.

At her current level of consumption, Jess gets half as much marginal utility from an additional bagel as from an additional muffin. If the price of muffin is $2 each, then Jess is maximizing her utility if the price of a bagel is:

$1.00

Which of the following is a defining characteristic of all perfectly competitive markets?

All firms sell the same standardized product.

Which of the following is NOT true of a perfectly competitive firm?

It seeks to maximize revenue.

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell?

The opportunity cost of picking up cans is higher for wealthy people than for poor people.

According to the law of diminishing marginal utility:

as you consume less of something, your marginal utility from consuming that good will increase.

One implication of the shape of the demand curve facing a perfectly competitive firm is that:

if the firm increases its price above the market price, it will earn zero revenue.

A variable factor of production:

is variable in both the short run and the long run

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ______ utility from eating the fourth pie than from eating the second pie.

less

The primary objective of most private firms is to:

maximize profit.

The rational spending rule is derived from the consumer's desire to:

maximize utility.

For two goods, coffee and scones, suppose that MU(coffee)/P(coffee) = 4 and MU(scones)/P(scones) = 3. To maximize your total utility from these two goods, you should purchase:

more coffee and fewer scones.

Suppose that Cathy spends all of her income on 20 units of good X and 25 units of good Y. Cathy's marginal utility from the 20th unit of good X is 9 utils, and her marginal utility from the 25th unit of good Y is 19 utils. If the price of good X is $0.50 per unit and the price of good Y is $1.00 per unit, then to comply with the rational spending rule, Cathy should:

purchase less than 20 units of good X and more than 25 units of good Y.

The dollar price of a good relative to the average dollar price of all other goods is the good's:

real price.

The goal of utility maximization is to allocate your ______ in order to maximize your ______.

resources; satisfaction

Marginal cost is calculated as:

the change in total cost divided by the change in output.

Last year, Casey grew fresh vegetables, which she sold at her local farmers market, but this year, Casey did not plant any vegetables and went to work at a bank instead. If Casey's decision to change careers did not affect the price of vegetables at the farmers market, then this suggests that:

the market for vegetables is perfectly competitive.