Practice for MicroEcon Test 2

A firm has successfully adopted a positive technological change when (A) it can produce more output using the same inputs (B) it produces less pollution in its production process (C) it can pay its workers less yet increase its output. (D) it sees an increase in worker productivity

A

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is (A) 2 chairs. (B) 3 chairs. (C) 4 chairs. (D) 38 chairs.

A

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then (A) the price elasticity of demand for teapots is greater than 1 in absolute value. (B) the demand for teapots is unit-elastic. (C) the price elasticity of demand for teapots is equal to zero. (D) the price elasticity of demand for teapots is less than 1 in absolute value.

A

The processes a firm uses to turn inputs into outputs of goods and services is called (A) technology (B) technological change (C) marginal analysis (D) positive economic analysis

A

Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock are true? (A) The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock. (B) The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock. (C) The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock. (D) The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic.

B

If another worker adds 9 units of output to a group of workers who had an average product of 7 units, then the average product of labor (A) will remain the same. (B) will increase. (C) will decrease. (D) and what will happen to it cannot be determined.

B

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays (A) diminishing returns. (B) economies of scale. (C) diseconomies of scale. (D) declining fixed costs.

B

Marginal cost is equal to the (A) change in total cost divided by the change in output. (B) change in average total costs divided by the change in output. (C) change in total product divided by the change in output. (D) change in average product divided by the change in output.

A

Refer to Figure above. Diminishing returns to labor set in (A) When E is at its max. (B) When F is at its max. (C) When E is at its min. (D) immediately

A

Refer to Graph in HW 6. Under autarky, the consumer surplus is (A) $195 (B) $260 (C) $300 (D) $555

A

The larger the share of a good in a consumer's budget, holding everything else constant, the (A) more price elastic is a consumer's demand. (B) more vertical is a consumer's demand curve. (C) more price inelastic is a consumer's demand. (D) more unit-elastic is a consumer's demand.

A

The short-run supply curve for a perfectly competitive firm is that part of the firm's marginal cost curve that lies above the minimum point of its average variable cost curve. True or False?

True

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases. True or False?

True

Refer to Figure above. When output level is 100, what is the total cost of production? (A) $20 (B) $1,000 (C) $1,200 (D) $2,000

D

Refer to Graph in HW 6. Suppose the government allows imports of leather footwear into the United States. What will be the quantity demanded? (A) 5 (B) 10 (C) 15 (D) 20

D

In economics, technology only refers to the development of new products. True or False?

False

In the alcohol industry, both wine and spirits are considered to be substitutes for beer. True or False?

False

The price elasticity of supply is calculated as the change in supply divided by the change in price. True or False?

False

The process of countries becoming more open to foreign trade and investment is known as outsourcing. True or False?

False

Trade only occurs if there are only winners, and no losers, as a result of the trade. True or False?

False

A situation in which a country does not trade with other countries is called (A) autarky (B) self-actualization (C) autonomy (D) independence

A

BEFORE trade, Denmark can make 900 clocks and 150 hats. Belize can make 150 clocks and 100 hats. AFTER trade, Denmark makes 1200 clocks and 0 hats. Belize makes 0 clocks and 400 hats. With trade, what is the total gain in hat production? (A) 150 (B) 300 (C) 400 (D) 650

A

Price elasticity of supply is used to gauge (A) how responsive suppliers are to price changes. (B) how responsive suppliers are to changes in future prices. (C) how responsive suppliers are to a change in demand. (D) how responsive sales are to a change in input prices.

A

The town of Bloomfield is well known for its basketball team. The price of basketball game tickets is determined by market forces. Table 6-7 above shows the demand and supply schedules for basketball games tickets. Refer to Table . What is the most distinctive feature of the supply curve? [As price increases by $1 increments, Qs is constant, Dd decreases] (A) The supply curve is perfectly inelastic. (B) The supply curve is horizontal. (C) The supply curve is upward sloping. (D) The supply curve is perfectly elastic.

A

Which of the following is a fixed cost? (A) payment to hire a security worker to guard the gate to the factory around the clock (B) wages to hire assembly line workers (C) payments to an electric utility (D) costs of raw materials

A

A characteristic of the long run is (A) there are fixed inputs. (B) all inputs can be varied. (C) plant capacity cannot be increased or decreased. (D) there are both fixed and variable inputs.

B

A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a (A) Tariff (B) Quota (C) Quantity Floor (D) Barricade

B

Cross-price elasticity of demand is calculated as the (A) percentage change in quantity demanded divided by percentage change in price of a good. (B) percentage change in quantity demanded of one good divided by percentage change in price of a different good. (C) percentage change in quantity sold divided by percentage change in buyers' incomes. (D) percentage change in quantity supplied divided by percentage change in price of a good.

B

Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03. This means that (A) beer and wine are substitutes and wine is an inferior good (B) beer and wine are complements and wine is a luxury good. (C) beer and wine are substitutes and wine is a luxury good. (D) beer and wine are complements and wine is an inferior good.

B

Linesha, a college student working part-time receives a wage increase. An avid movie buff, she increased her purchases of Blu-ray discs and reduced her purchases of DVDs. Based on this information: (A) DVDs and Blu-ray discs are substitutes. (B) Blu-ray discs are normal goods and DVDs are inferior goods. (C) DVDs and Blu-ray discs are normal goods. (D) the cross-price elasticity between DVDs and Blu-ray discs is negative.

B

Once a country has lost its comparative advantage in producing a good, its income will be ________ and its economy will be ________ if it switches from producing the good to importing it. (A) higher; less efficient (B) higher; more efficient (C) lower; less efficient (D) lower; more efficient

B

Sarita can make 15 pies and 25 cakes. Gabriel can make 12 pies and 16 cakes. (A) Sarita has a greater opportunity cost than Gabriel for baking cakes. (B) Sarita's opportunity cost for baking cakes is less than Gabriel's. (C) Gabriel has a greater opportunity cost than Sarita for baking pies. (D) Gabriel's opportunity cost for baking cakes and baking pies are both greater than Sarita's.

B

Suppose the value of the price elasticity of demand is -3. What does this mean? (A) A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. (B) A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. (C) A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. (D) A $1 increase in price causes quantity demanded to fall by 3 units.

B

The law of diminishing marginal returns states (A) that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. (B) that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. (C) that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added. (D) average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increases.

B

The selling of a product for a price below its cost of production is called (A) fair competition. (B) dumping. (C) unfair competition. (D) operating at a loss.

B

When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays (A) increasing returns to scale. (B) constant returns to scale. (C) decreasing returns to scale. (D) constant average fixed costs.

B

Which of the following goods would have the most inelastic demand? (A) Ski vacations (B) Bread (C) Luxury cars (D) Big Screen TVs

B

_______ refers to reductions in a firm's costs that result from an increase in the size of an industry. (A) Internal economies (B) External economies (C) Autarkial dominance (D) Streamlining

B

A Federal Reserve publication proclaimed that "Trade is a win-win situation for all countries that participate." This statement is (A) false since it ignores the workers who lose their jobs as result of international trade. (B) false since not all countries participate in international trade. (C) true because it refers to countries; individuals may be losers as a result of international trade. (D) true because all consumers and workers benefit from international trade.

C

According to an article in the Wall Street Journal, unlike airlines, even elite hotels don't have sophisticated systems that can react quickly to changes in demand. Even if they could, many hoteliers say people don't respond that much to lower rates. "We've tested this, cutting our rates by $50 [per night], and we didn't see an appreciable response in occupancy," says Jim Schultenover, a vice president for Ritz-Carlton. Based on the information above, the demand for hotel rooms is: (A) Elastic (B) Unit-Elastic (C) Inelastic (D) Perfectly Inelastic

C

At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised her price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is: (A) Perfectly Elastic (B) Elastic (C) Perfectly Inelastic (D) Unit-Elastic

C

BEFORE trade, Denmark can make 900 clocks and 150 hats. Belize can make 150 clocks and 100 hats. AFTER trade, Denmark makes 1200 clocks and 0 hats. Belize makes 0 clocks and 400 hats. Prior to trade, what was the opportunity cost to produce 1 hat in Belize? (A) 1/6 of a clock (B) 2/3 of a clock (C) 1.5 clocks (D) 6 clocks

C

Identify the two goods which are substitutes. X- a shift to the left Y- a shift to the right Z- a movement down the demand curve (A) X and Y (B) Y and Z (C) X and Z (D) None

C

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output? (A) $65 (B) $50 (C) $15 (D) It is impossible to determine without additional information.

C

In the long run which of the following is true? (A) Total cost = fixed cost + variable cost. (B) The size of a firm's physical plant can be changed but the firm cannot adopt new technology. (C) There are no fixed costs. (D) The firm can vary its explicit costs but not its implicit costs.

C

Refer to Figure above. The marginal product of the 3rd worker is 68--------------- 66------------ 57-------- 42----- 15-- 1 2 3 4 5 (A) 57 (B) 19 (C) 15 (D) 11

C

Suppose the price of gasoline is $3.50 per gallon, the quantity of gasoline demanded is 150 billion gallons per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon, which increases the price of gasoline by $0.75 per gallon. How much revenue does the federal government receive from the tax? (A) $95.44 billion (B) $111.20 billion (C) $148.27 billion (D) $161.61 billion

C

The demand curve on which elasticity changes at every point is given in (A) A vertical line (B) A horizontal line (C) A diagonal line (D) A concave line

C

Under autarky, consumer surplus is represented by the area (A) above the supply curve and below the equilibrium price. (B) above the supply curve and below the demand curve. (C) below the demand curve and above the equilibrium price. (D) above the demand curve and below the supply curve.

C

Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's variable cost per day when she produces 50 gyros using two workers? (A) $100 (B) $124.40 (C) $220 (D) $240

C

Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because (A) they do not want to offend their employers who want them. (B) politicians lobby to convince workers the restrictions will make them better off. (C) they believe the restrictions will protect their jobs. (D) they don't understand that the restrictions will threaten their jobs.

C

Average fixed costs of production (A) remain constant. (B) will rise at a fixed rate as more is produced. (C) graph as a U-shaped curve. (D) fall as long as output is increased.

D

Bryce can make 150 candles and 450 soaps. Tina can make 200 candles and 450 soaps. (A) Bryce has an absolute advantage in making candles and soap. (B) Tina has an absolute advantage in making candles and soap. (C) Neither Bryce nor Tina has an absolute advantage in making candles. (D) Neither Bryce nor Tina has an absolute advantage in making soap.

D

Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback? (A) Governments always make the level of protection for infant industries too high. (B) Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets. (C) Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (D) Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up."

D

Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant? (A) Demand is likely to be perfectly inelastic (B) Demand is likely to be perfectly elastic. (C) Demand is likely to be relatively elastic. (D) Demand is likely to be relatively inelastic.

D

The supply curve on which price elasticity changes at every point is shown in (A) A vertical line (B) A horizontal line (C) Diagonal line with slope of 1 (D) Diagonal line with slope that isn't 1

D

Which of the following is an implicit cost of production? (A) interest paid on a loan to a bank (B) wages paid to labor plus the cost of carrying benefits for workers (C) the utility bill paid to water, electricity, and natural gas companies (D) rent that could have been earned on a building owned and used by the firm

D

________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors. (A) Absolute advantage (B) Specialization (C) Autarky (D) Comparative advantage

D

A tariff is a tax imposed by a government on its own exports. True or False?

False

If a country has a comparative advantage in producing a product, it may not have an absolute advantage in producing that product. True or False?

True

If a firm is experiencing diseconomies of scale, its long-run average cost curve is increasing. True or False?

True

In a decreasing-cost industry, the entry of new firms lowers average cost at each level of output. True or False?

True