Final Econ 170

11. The most likely explanation for economies of scale is a. coordination problems. b. specialization of labor. c. increasing marginal cost. d. decreasing marginal cost.

B

29. Refer to Table 13-7. ​What is the marginal product of the third worker? a. ​85 b. ​125 c. ​45 d. ​40

D

31. Refer to Figure 14-8. Which segment of the supply curve represents the firm shutting down? a. ABCD b. BCD c. CD d. AB

D

9. As long as a consumer remains on the same indifference curve, a. she is indifferent to all points that lie on any other indifference curve. b. her preferences will not affect the marginal rate of substitution. c. she is unable to decide which bundle of goods to choose. d. she is indifferent among the points on that curve.

D

1. For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

F

10. Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay a. more than $40, as the average benefit will exceed the marginal cost. b. more than $40, as the marginal benefit will exceed the marginal cost. c. more than $80, as the average benefit will exceed the marginal cost. d. more than $80, as the marginal benefit will exceed the marginal cost.

B

25. Refer to Table 14-12. What is the average revenue when 4 units are sold? a. $0 b. $68 c. $80 d. $400

C

31. Refer to Table 13-7. What is the value of F? a. $50 b. $100 c. $150 d. $200

C

4. The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior.

F

24. When the price of a normal good decreases, a. both the income and substitution effects encourage the consumer to purchase more of the good. b. both the income and substitution effects encourage the consumer to purchase less of the good. c. the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good. d. the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.

A

30. Refer to Figure 13-6. The firm experiences economies of scale at which output levels? a. Output levels less than K b. Output levels between K and L c. Output levels greater than L d. Output level greater than K

A

34. Refer to Figure 13-7. Which of the figures represents the marginal cost curve for a typical firm? a. Figure 1 b. Figure 2 c. Figure 3 d. Figure 4

A

34. Refer to Figure 14-1. If the market price rises above $6.5, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits and shut down. d. zero economic profits in the short run.

A

28. In the long run, a firm will exit a competitive industry if a. total revenue exceeds total cost. b. the price exceeds average total cost. c. average total cost exceeds the price. d. Both a and b are correct.

C

28. Jennifer is a junior in college. Her current cumulative grade point average (GPA) is 3.5 out of a 4.0 scale. Jennifer is hoping that by the time she graduates, she can raise her cumulative GPA to a 3.7. Which of the following statements is correct? a. If Jennifer earns between a 3.5 and a 3.7 GPA in her senior year, she will be able to raise her cumulative GPA to a 3.7. b. If Jennifer earns a 3.7 GPA in her senior year, she will be able to raise her cumulative GPA to a 3.7. c. Jennifer must earn above a 3.7 GPA in her senior year in order to raise her cumulative GPA to a 3.7. d. Either b or c could be correct.

C

32. A Giffen good is a good for which a. an increase in the price raises the quantity demanded. b. the income effect outweighs the substitution effect. c. an increase in the price decreases the quantity demanded. d. Both a) and b) are correct.

D

6. The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

F

18. If Rita's labor-supply curve is downward-sloping, then for Rita​ a. ​an increase in the wage creates an income effect that is greater than the substitution effect. b. ​an increase in the wage creates a substitution effect that is greater than the income effect. c. ​leisure and consumption are perfect substitutes. d. ​leisure and consumption are perfect complements.

A

20. A consumer chooses an optimal consumption point where the a. marginal rate of substitution equals the relative price ratio. b. slope of the indifference curve exceeds the slope of the budget constraint. c. ratios of all the marginal utilities are equal. d. All of the above are correct.

A

24. Jake experiences an increase in his wages. The hours of labor that he supplies to the market would decrease if a. the income effect is larger than the substitution effect. b. the substitution effect is larger than the income effect. c. neither the income effect nor the substitution effect apply to Harry's labor-leisure tradeoff. d. Jake views both labor and leisure as inferior goods.

A

9. Refer to Scenario 21-1. If the price of hot wings doubles to $20, then the a. budget constraint intersects the horizontal axis at 4 orders of hot wings. b. slope of the budget constraint rises to −9. c. slope of the budget constraint falls to −21. d. budget constraint shifts outward in a parallel fashion.

A

Economists view normative statements as a. prescriptive, making a claim about how the world ought to be. b. descriptive, making a claim about how the world is. c. statements about the normal condition of the world. d. pessimistic, putting the worst possible interpretation on things.

A

Refer to Figure 2-6. A movement from point H to point K could be caused by a. unemployment. b. a decrease in society's preference for pillows. c. fewer resources available for production of pillows. d. All of the above are correct.

A

14. In the short run, a market consists of 100 identical firms. The market price is $8, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market? a. 200 units b. 300 units c. 400 units d. 500 units

B

15. Refer to Table 13-2. What is the marginal product of the second worker? a. 300 units b. 200 units c. 100 units d. 50 units

B

15. Which of the following statements regarding these bundles is correct? a. The goods are perfect substitutes for this consumer. b. The goods are perfect complements for this consumer. c. These bundles illustrate the property that indifference curves are bowed inward. d. These bundles violate the property that indifference curves do not cross.

B

21. Refer to Figure 21-24. At his optimum, Steve is buying a. 0.6 pounds of apples. b. 2.0 pounds of apples. c. 4.5 pounds of apples. d. 5.5 pounds of apples.

B

21. Refer to Figure 21-9. If the price of good X is $15, what is the price of good Y? a. $1,500 b. $50 c. $5 d. $0.50

B

23. Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. The substitution effect can be illustrated as the movement from a. D to E. b. D to C. c. C to E. d. E to D.

B

26. The difference between accounting profit and economic profit is a. explicit costs. b. implicit costs. c. total revenue. d. marginal product.

B

27. Traci consumes two goods, lemonade and pretzels. Lemonade costs $2 per glass, and she consumes it to the point where the marginal utility she receives from her last glass of lemonade is 4. Pretzels cost $3 per bag. The relationship between the marginal utility Traci gets from eating a bag of pretzels and the number of bags she eats per month is as follows: Bags of pretzels 1 2 3 4 5 6 Marginal utility 30 20 12 6 2 0 If Traci is maximizing her utility, how many bags of pretzels does she buy each month? a.3 b.4 c.5 d.6

B

30. In a competitive market the current price is $5. The typical firm in the market has ATC = $5.50 and AVC = $4.50. a. In the short run firms will shut down, and in the long run firms will leave the market. b. In the short run firms will continue to operate, but in the long run firms will leave the market. c. New firms will likely enter this market to capture any remaining economic profits. d. The firm will earn zero profits in both the short run and long run.

B

32. Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that a. fixed costs decrease as output increases from Q3 to Q4. b. it can earn a positive profit by increasing production to Q4. c. profit is still maximized at a production level of Q3. d. average revenue exceeds marginal revenue at a production level of Q4.

B

35. Refer to Table 13-9. The average variable cost of producing 240 units is a. $0.13. b. $0.19. c. $0.32. d. $0.80.

B

8. Refer to Figure 21-8. You have $300 to spend on good X and good Y. If good X costs $30 and good Y costs $50, your budget constraint is a.AB. b.BC. c.CD. d.DE.

B

9. Refer to Figure 21-20. Assume that the consumer has an income of $80. If the price of chocolate chips is $4 and the price of marshmallows is $4, the optimizing consumer would choose to purchase a. 9 marshmallows and 6 chocolate chips. b. 10 marshmallows and 10 chocolate chips. c. 5 marshmallows and 5 chocolate chips. d. 3 marshmallows and 9 chocolate chips.

B

A decrease in income will cause a consumer's budget constraint to a. shift outward, parallel to its initial position. b. shift inward, parallel to its initial position. c. pivot along the horizontal axis. d. pivot along the vertical axis.

B

Ariana withdrew $400,000 out of her personal savings account and used it to start her new Internet cafe. The savings account pays 3 percent interest per year. During the first year of her business, Ariana sold 2,000 cups of coffee for $2.50 per cup and 4,000 hours of Internet time, also at $2.50 per hour. During the first year, the business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Ariana's time. 14. Refer to Scenario 13-12. Ariana's economic profit for the year was a. $-394,000. b. $-6,000. c. $3,000. d. $6,000.

B

16. The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $10 for 10,000 widgets. At that level of output, the firm's average total costs equal a. $10 b. $15 c. $20 d. $25

C

17. The income effect of an increase in the interest rate will result in an increase in​ consumption when a. young and an increase in savings when young. b. ​old and an increase in savings when young. c. young and a decrease in savings when young.​ d. ​old and an increase in savings when old.

C

23. If the interest rate rises, an individual could choose to a. increase consumption when young. b. increase consumption when old. c. decrease consumption when young. d. Any of the above could be correct.

D

19. Giffen goods are a. normal goods for which the income effect dominates the substitution effect. b. normal goods for which the substitution effect dominates the income effect. c. inferior goods for which the income effect dominates the substitution effect. d. inferior goods for which the substitution effect dominates the income effect.

C

22. Jerry consumes two goods, hamburgers and ice cream sandwiches. He has maximized his utility given his income. Ice cream sandwiches costs $2, and he consumes them to the point where the marginal utility he receives is 6. Hamburgers cost $4, and the relationship between the marginal utility that Jerry gets from eating hamburgers and the number he eats per month is as follows: a. 1 b. 2 c. 3 d. 4

C

25. What is the most important factor that explains differences in living standards across countries? a. the quantity of money b. the level of unemployment c. productivity d. equality

C

26. Refer to Figure 14-2. If the market price is $10, what is the firm's total cost? a. $15 b. $30 c. $35 d. $50

C

29. Refer to Figure 14-1. If the market price is $2.5, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits and shut down. d. zero economic profits in the short run.

C

33. Refer to Figure 14-1. The firm's short-run supply curve is its marginal cost curve above a. $1. b. $3. c. $4.50. d. $6.30.

C

35. For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the a. production of the 100th unit of output increases the firm's profit by $3. b. production of the 100th unit of output increases the firm's average total cost by $7. c. firm's profit-maximizing level of output is less than 100 units. d. production of the101st unit of output must increase the firm's profit by more than $3.

C

Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. 10. Refer to Scenario 14-2. At Q = 1,000, the firm's profits equal a. -$5,000. b. $2,500. c. $5,000. d. $10,000.

C

If marginal cost is rising, a. average variable cost must be falling. b. average fixed cost must be rising. c. marginal product must be falling. d. marginal product must be rising.

C

When a perfectly competitive firm decides to shut down, it is most likely that a. marginal cost is above average variable cost. b. marginal cost is above average total cost. c. price is below the firm's average variable cost. d. fixed costs exceed variable costs.

C

11. Refer to Table 14-11. The marginal revenue from producing the 5th unit equals(i) $6.(ii) the price.(iii) the marginal cost. a. (i) only b. (i) and (ii) only c. (iii) only d. (i), (ii), and (iii)

D

12. In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker a. decreased by 1.7 percent between 1998 and 2008. b. remained unchanged between 1998 and 2008. c. increased by 4.75 percent between 1998 and 2008. d. increased by 6.25 percent between 1998 and 2008.

D

13. If a firm produces nothing, which of the following costs will be zero? a. total cost b. fixed cost c. opportunity cost d. variable cost

D

20. Refer to Figure 21-25. Suppose the price of good X is $8, the price of good Y is $10, and the consumer's income is $360. Then the consumer's optimal choice is represented by a point on which curve? a. I1 b. I2 c. I3 d. I4

D

Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business. 22. Refer to Scenario 13-7. Julia's economic profits are a. $160,000. b. $150,000. c. $135,000. d. $125,000.

D

The information below applies to a competitive firm that sells its output for $40 per unit.• When the firm produces and sells 150 units of output, its average total cost is $24.50.• When the firm produces and sells 151 units of output, its average total cost is $24.55. 27. Refer to Scenario 14-4. When the firm increases its output from 150 units to 151 units, its profit a. decreases by $5.75. b. decreases by $7.20. c. increases by $4.15. d. increases by $7.95.

D

5. In the circular-flow diagram, factors of production are the goods and services produced by firms.

F

7. A worker with a backward-bending labor supply curve responds to an increase in wages by working more hours.

F

8. If a line passes through the points (20,5) and (10,10), then the slope of the line is 1/2.

F

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

F

Variable costs equal fixed costs when nothing is produced.

F

2. If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

T

3. The direction of the substitution effect is not influenced by whether the good is normal or inferior.

T

All scientific models, including economic models, simplify reality in order to improve our understanding of it.

T

By comparing the marginal revenue and marginal cost from each unit produced, a firm in a competitive market can determine the profit-maximizing level of production.

T

Changes in one variable on a graph might be caused by the other variable on the graph or by a third omitted variable.

T

The opportunity cost of working out for one hour is the value of the next-best activity that you could have done in that hour.​

T

When a firm experiences economies of scale, long-run average total cost falls as the quantity of output increases.

T