ECON102 Exam 3

Refer to the figure below. At the equilibrium price, total consumer surplus is Select one: a. $7.50 per day. b. $10 per day. c. $15 per day. d. $40 per day.

a. $7.50 per day.

Suppose Chris's marginal utility from the first taco he eats is 15, and his marginal utility from the second taco he eats is 12. One can infer that: Select one: a. Chris's total utility from eating two tacos is 27. b. Chris should eat one taco. c. Chris's average utility from eating two tacos is 27. d. Chris should eat two tacos.

a. Chris's total utility from eating two tacos is 27.

As price increases, firms find that it is: Select one: a. beneficial to produce more units of output. b. more difficult to sell their product. c. beneficial to produce fewer units of output. d. easier to sell their product.

a. beneficial to produce more units of output.

An increase in the price a firm receives for its output will lead the firm to: Select one: a. expand output. b. leave output unchanged and earn greater profits. c. leave output unchanged and earn smaller losses. d. reduce output.

a. expand output.

The difference between the price a seller actually receives for a good and the seller's reservation price is: Select one: a. producer surplus. b. profit. c. variable cost. d. consumer surplus.

a. producer surplus.

Suppose that when a perfectly competitive firm produces 1,000 units of output, its total variable cost is $1,900. If the marginal cost of producing the 1,000th unit is $1.70, and if the market price of each unit of output is $1.70, then the firm should: Select one: a. shut down. b. raise its price. c. increase output. d. continue to produce 1000 units.

a. shut down.

For a given seller, the figure below shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. If the market price of this good is $6, how many units would this seller produce? Select one: a. 50 b. 150 c. 250 d. 300

d. 300

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below. What is the lowest price per window that would induce John to spend at least one hour per day cleaning windows? Select one: a. $7 b. $1 c. $3 d. $2

b. $1

Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the table below. Chris's fixed cost is ______ per day. Select one: a. $0 b. $10 c. $39 d. $49

b. $10

Refer to the figure below. In this market, equilibrium price is ______ and equilibrium quantity is ______. Select one: a. $10; 25 b. $25; 10 c. $50; 20 d. $20; 50

b. $25; 10

Refer to the figure below. If Mallory and Rick are the only two consumers in this market and the price of soda is $0.75 per can, then what will be the market demand for soda each week? Select one: a. 70 b. 50 c. 30 d. 20

b. 50

If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to: Select one: a. a decrease in the quantity supplied by the firm, but no change in the firm's supply. b. a decrease in the firm's supply. c. an increase in the quantity supplied by the firm, but no change in the firm's supply. d. an increase in the firm's supply.

b. a decrease in the firm's supply.

Shelter for homeless people is an example of Select one: a. a want. b. a need c. something they can live without. d. something hard to find.

b. a need

Suppose a cup of tea costs $0.60 and a scone costs $1.20. If Edith spends all of her income on these two goods, and at her current level of consumption, she receives a marginal utility of 6 utils from the last cup of tea she buys and a marginal utility of 24 utils from the last scone she buys, then Edith should: Select one: a. buy more tea and fewer scones. b. buy less tea and more scones. c. not change her consumption of tea and scones. d. buy more tea and more scones.

b. buy less tea and more scones.

Refer to the figure below. Total utility ______ as additional apples are consumed, but marginal utility ______ with each additional apple consumed. Select one: a. first decreases then increases; decreases b. first increases then decreases; decreases c. first decreases then increases; increases d. first increases then decreases; increases

b. first increases then decreases; decreases

The additional utility gained from consuming an additional unit of a good is called: Select one: a. total utility b. marginal utility c. costly utility d. an util

b. marginal utility

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: Select one: a. purchase more than 20 units of good X and less than 25 units of Y. b. purchase less than 20 units of good X and more than 25 units of good Y. c. purchase more than 20 units of good X and more than 25 units of good Y. d. continue to purchase 20 units of good X and 25 units of good Y.

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

Suppose you want to maximize your total utility. If your marginal utility per dollar spent is higher for one good than for all others, then you should: Select one: a. reallocate your spending away from that good. b. reallocate your spending towards that good. c. spend more on all goods. d. spend less on all goods.

b. reallocate your spending towards that good.

Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm: Select one: a. should shut down. b. should not shut down if its total variable cost is less than $750. c. is not maximizing its profit. d. should produce more than 500 units a day.

b. should not shut down if its total variable cost is less than $750.

Refer to the figure below. The equilibrium price in this market is ______ and the equilibrium quantity is ______. Select one: a. $25; 25 b. $25; 30 c. $30; 25 d. $30; 30

c. $30; 25

Which of the following will cause an increase market supply? Select one: a. A decrease in the number of firms in the market. b. An increase in demand for the good. c. A technological innovation that lowers the marginal cost of producing the good. d. An increase in the price of the good.

c. A technological innovation that lowers the marginal cost of producing the good.

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below. Should John spend a third hour cleaning windows? Select one: a. Yes, because he would earn $28. b. Yes, because the additional amount he would earn is $14, which is greater than his opportunity cost of $7. c. No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7. d. Yes, because the additional amount he would earn is $6, which is better than earning nothing.

c. No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7.

Average variable cost is defined as: Select one: a. Total cost divided by total output b. Total cost divided by number of workers c. Variable cost divided by total output d. Variable cost divided by price

c. Variable cost divided by total output

Refer to the figure below. Suppose a consumer protection group convinces the government to impose price controls in this market. If the government requires cheese to be sold for less than the equilibrium price, then, relative to before the price controls, total consumer surplus in the market: Select one: a. would increase because consumers would be able to purchase the same quantity of cheese at a lower price. b. would increase because consumers would be able to purchase more cheese at a lower price. c. could either increase or decrease. d. would decrease because of the reduction in equilibrium price.

c. could either increase or decrease.

You are trying to decide how to spend your last lunch dollar. You should use that dollar to buy more of the item: Select one: a. that costs the least. b. that gives you the highest average utility per dollar. c. that gives you the highest marginal utility per dollar. d. from which you already have gained the greatest total utility.

c. that gives you the highest marginal utility per dollar.

The figure below shows the demand curve for a product that can be sold only in whole-number amounts. At a price of $15 per unit, what would be the total consumer surplus in this market each day? Select one: a. $0 b. $6 c. $15 d. $75

d. $75

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. If Dusty's income rises to $45, Dusty can now buy a maximum of ______ loaves of bread or a maximum of ______ jars of peanut butter. Select one: a. 5; 25 b. 10; 40 c. 15; 30 d. 30; 15

d. 30; 15

Refer to the figure below. The total utility of consuming 4 pizzas a week is: Select one: a. 15 b. 22.5 c. 75 d. 90

d. 90

Suppose the market for shoes consists of three consumers. The table below shows the quantity demanded at various prices for each consumer: The data suggest that Leigh: Select one: a. has a higher income than either Pat or Chris do. b. does not experience diminishing marginal utility. c. prefers shoes to other items that are for sale. d. has a greater demand for shoes than either Pat or Chris do.

d. has a greater demand for shoes than either Pat or Chris do.

Individual supply curves generally slope ______ because ______. Select one: a. downward; sellers become more efficient with practice b. upward; profits increase with quantity c. downward; inputs are cheaper when purchased in high volume d. upward; of increasing opportunity costs

d. upward; of increasing opportunity costs