Econ 100B Practice Final + Handouts
An allocation in which one person can be made better off only by making someone else worse off is: A. inefficient. B. efficient. C. a partial equilibrium. D. a general equilibrium.
B. efficient.
In an economy which produces two goods X and Y, using two inputs L and K,efficient input use occurs when A) MRTSLKX = MRSLKY B) MRTXY = MRSXY C) MRSX/PX = MRSY/PY D) MRTSLKX = MRTSLKY
D) MRTSLKX = MRTSLKY
For a firm producing green chalk, the marginal product of labor is: MPL=24L-0.5. Suppose that the firm is a competitor in the green chalk market. The price of green chalk is $1 per unit. Suppose that the firm is a competitor in the labor market. The wage rate is $12.00 per hour. Given the information in the scenario, what is the marginal revenue product of labor? A. 0.5L^-0.5 B. 2L^-0.5 C.12L^-0.5 D. 24L^-0.5 Given the information in the scenario, how much labor will be hired to maximize profit? A. 1/16 B. 1/2 C. 1 D. 4
D. 24L^-0.5 D. 4
Coffee and donuts are complements in consumption. Suppose the economy expands so that consumer income increases, and coffee is a normal good. What impact does this change in the coffee market have on the donut market under a general equilibrium analysis? A. Donut demand shifts rightward and donut price and quantity increase. B. Donut demand shifts rightward, donut price increases, and donut quantity declines. C. Donut demand shifts leftward, donut price declines, and donut quantity increases. D. Donut demand shifts leftward and donut price and quantity decline.
D. Donut demand shifts leftward and donut price and quantity decline.
Refer to the figure on the right. The figure shows the firm's demand curve with variable capital. The shift in the marginal revenue product curve is caused by: A. an increase in capital. B. a decrease in capital. C. an increase in the wage rate. D. a decrease in the wage rate.
D. a decrease in the wage rate.
All of the payment to a factor of production will be economic rent when the factor ofproduction has: A) an infinitely inelastic supply curve. B) an infinitely elastic supply curve. C) a constant, unit elastic supply curve D) an infinitely inelastic demand curve.
A) an infinitely inelastic supply curve.
In general, does the demand for labor become more or less elastic as we increase the number of other variable inputs used in a production process? A. More elastic B. No change in elasticity C. Less elastic D. We cannot answer this question without more information about the other inputs.
A. More elastic
Suppose labor and capital are variable inputs. The wage rate is $20 per hour, the marginal product of labor is 30 units, the rental rate of capital is $100 per machine hour, and the marginal product of capital is 150 units. If the wage rate declines to $15 per hour, the firm employs more labor and the marginal product of labor declines to 20 units. Assuming the rental rate of capital remains the same, what happens to the amount of capital used by the firm? A. Decreases B. Increases C. No change D. We do not have enough information to answer this question.
B. Increases
Use the following statements to answer this question. I. Output efficiency requires that goods are produced in combinations that match people's willingness to pay for the goods. II. Output efficiency requires that goods are produced at costs that match people's willingness to pay for the goods. A. Both I and II are true. B. I is false, and II is true. C. I is true, and II is false. D. Both I and II are false.
A. Both I and II are true.
Refer to the figure on the right. The curve in the diagram is called: A. the contract curve. B. the utility possibilities frontier. C. the production possibilities frontier. D. the production contract curve.
B. the utility possibilities frontier.
Refer to the figure. Which of the dashed lines corresponds to an emissions standard? A. The horizontal line B. The vertical line C. Both lines represent standards. D. Neither line represents standards.
B. The vertical line
Which of the following is a negative externality connected to attending college? A) The fact that completion of a college degree acts as a signaling mechanism toemployers. B) The fact that other costs, such as books and materials, are incurred in addition totuition and fees. C) The fact that your college has required that all individuals living in student housingeither get or show they have already obtained vaccinations against all communicablediseases. D) The fact that the people in the next room play loud music at hours you want to sleep. E) The fact that you will get benefits from college that you don't currently anticipate.
D) The fact that the people in the next room play loud music at hours you want to sleep.
Which of the following is a condition for efficiency in the output market? A. MRT = MPL/MPK B. The marginal rate of substitution is the same for all customers. C. The marginal rate of technical substitution must be the same for all producers. D. The marginal rate of transformation must equal the marginal rate of substitution.
D. The marginal rate of transformation must equal the marginal rate of substitution.
A lighthouse is a public good: A. because it doesn't cost any more to light the way for 105 ships than it does to light the way for 104 ships, but for no other reason. B. because there is no way to prevent those who haven't contributed to the lighthouse from seeing better because of it, but for no other reason. C. because the government produces it, and for no other reason. D. for the reasons in A and B together. E. for the reasons in A, B, and C together.
D. for the reasons in A and B together.
The Edgeworth box illustrates possibilities for Karen and James to increase their satisfaction by trading goods. If point A gives the initial allocation of food and clothing, a movement into the shaded area: A. leaves Karen better off, but James worse off. B. leaves James better off, but Karen worse off. C. leaves James and Karen worse off. D. leaves James and Karen better off.
D. leaves James and Karen better off.
Which of these is NOT an exercise in general equilibrium analysis? A) A discussion of factors within the wheat market that influence wheat prices B) An analysis of the effects of changes in oil prices upon the natural gas market C) An evaluation of relationships between the markets for tires and automobiles D) none of the above
A) A discussion of factors within the wheat market that influence wheat prices
The industry demand curve for labor is the: A. horizontal sum of individual firm labor demand curves. B. vertical sum of individual firm demand curves. C. representative firm's demand curve multiplied by the number of firms. D. none of the above
A. horizontal sum of individual firm labor demand curves.
Common property resources tend to be: A. overused. B. underused. C. not used at all. D. efficiently used.
A. overused.
If the firms in an industry could take advantage of a reduced wage, how would one best describe the firms' demand for labor? The MRPL: A. schedule would remain unchanged, and the firms would hire more labor at the lower wage. B. schedule would shift to the left and the firms would move down the new schedule. C. schedule would shift to the right and the firms would move down the new schedule. D. none of the above
A. schedule would remain unchanged, and the firms would hire more labor at the lower wage.
An efficient allocation of goods in an exchange economy means that A) goods were produced by the most efficient technology available. B) no one can be made better off without making somebody else worse off. C) those made worse off are not hurt as badly as the benefits resulting from those madebetter off. That is, there is a net positive gain. D) in a particular production process one gets the maximum output for a given input
B) no one can be made better off without making somebody else worse off.
Which of the following is a public good? A. Telephone service B. Broadcast TV C. A daily newspaper D. The Red Cross E. all of the above
B. Broadcast TV
Refer to the same figure. The efficient level of output is: A. Q1. B. Q2. C. Q3. D. A mix of Q1 and Q3.
B. Q2.
Refer to the figure, which of the following statements is correct? A. The marginal external cost (MEC) is the sum of marginal social cost (MSC) and marginal cost (MC). B. The marginal external cost (MEC) is the difference between marginal social cost (MSC) and marginal cost (MC). C. When MEC is subtracted from MC, we obtain MSC. D. When adding MSC and MC, we obtain MEC.
B. The marginal external cost (MEC) is the difference between marginal social cost (MSC) and marginal cost (MC).
Refer to the figure, which of the following areas represents the total abatement cost? A. The rectangle B. The triangle C. Both the rectangle and the triangle D. Neither the rectangle nor the triangle
B. The triangle
When comparing point A, which lies within a utilities possibilities frontier, with point B, which lies on the same utilities possibilities frontier, A. A may be more efficient than B. B. A is necessarily more equitable than B. C. B may be more equitable than A. D. B is necessarily more equitable than A.
C. B may be more equitable than A.
Which of the following is NOT a public good? A. Public fireworks display B. National defense C. Books in a public library D. Clean air
C. Books in a public library
The marginal product of labor for Acme, Inc. is 15. The average product of labor is 25, and the price of labor is $10. Assuming that Acme, Inc. is a competitor in its output and input markets, the marginal revenue product of labor: A. is $10. B. is $150. C. is $250. D. is $375. E. cannot be determined with the information provided.
E. cannot be determined with the information provided.
An economy produces outputs X and Y using inputs L and K. Which of the following is NOT required for economic efficiency? A. MRTSLK = MRSXY for all producers and consumers. B. MRTXY = MRSXY for all producers and consumers. C. MRSXY is equal for all consumers. D. MRTSLK is equal for all producers. E. None of the above. All of these are required for economic efficiency.
A. MRTSLK = MRSXY for all producers and consumers.
Refer to the same figure. The competitive level of output in the industry is: A. Q1. B. Q2. C. Q3. D. any level as long as price is P0.
A. Q1.
If an individual's labor supply curve is backward bending, then: A. the income effect associated with a higher wage is greater than the substitution effect. B. the substitution effect associated with a higher wage is greater than the income effect. C. the substitution effect associated with a higher wage encourages more leisure. D. A and C E. B and C
A. the income effect associated with a higher wage is greater than the substitution effect.
General equilibrium analysis is different from partial equilibrium analysis in thatgeneral equilibrium analysis A) explicitly takes feedback effects into account and partial equilibrium analysis doesnot. B) does not take into consideration specific problems, but partial equilibrium analysisdoes. C) takes into consideration specific problems, but partial equilibrium analysis does not. D) allows one to arrive at a specific conclusion, but partial equilibrium analysis doesnot
A) explicitly takes feedback effects into account and partial equilibrium analysis doesnot.
Coffee and donuts are complements in consumption. Suppose bad weather in the coffee producing regions of the world, which shifts the coffee supply curve leftward. How do the general equilibrium price and quantity outcomes compare to the partial equilibrium outcomes for this situation? A. General equilibrium price and quantity are higher. B. General equilibrium price is higher and quantity is lower. C. General equilibrium price is lower and quantity is higher. D. General equilibrium price and quantity are lower
A. General equilibrium price and quantity are higher.
The Acme Company is a perfect competitor in its input markets and its output market. Its average product of labor is 30, the marginal product of labor is 20, the price of labor is $20, and the price of the output is $5. For Acme Company, the marginal revenue product of labor: A. $100. B. $150. C. $400. D. $600.
A. $100
Use the following statements to answer this question: I. Under profit maximization, the quantity of labor used in production is optimal if MR =w/MPL. II. The expression MR = w/MPL implies that the revenue earned from the last unit of output produced equals the marginal cost of the last unit of output. A. I and II are true. B. I is true and II is false. C. II is true and I is false. D. I and II are false
A. I and II are true.
What can account for the negative slope of the marginal revenue product curve? A. diminishing marginal utility B. diminishing marginal returns C. monopoly power D. all workers eventually begin slacking. E. none of the above
B. diminishing marginal returns
When emissions are measured on horizontal axis, the marginal cost of abating emissions is: A. downward-sloping because emissions become more and more easy to eliminate once the firm makes the initial commitment to do so. B. downward-sloping because a high level of emissions is cheap to attain, and a low level of emissions is expensive to attain. C. upward-sloping because emissions become more and more easy to eliminate once the firm makes the initial commitment to do so. D. upward-sloping because a high level of emissions is cheap to attain, and a low level of emissions is expensive to attain. E. horizontal because the technology to remove emissions is assumed constant.
B. downward-sloping because a high level of emissions is cheap to attain, and a low level of emissions is expensive to attain.
Suppose the labor market and all output markets are perfectly competitive. When the labor market is in equilibrium, the wage rate will: A. be less than the marginal revenue product of labor. B. equal the marginal revenue product of labor. C. be greater than the marginal revenue product of labor. D. none of the above is necessarily correct.
B. equal the marginal revenue product of labor.
A firm should hire more labor when the marginal revenue product of labor: A. equals the wage rate. B. exceeds the wage rate. C. is less than the wage rate. D. any of these can be true. E. none of these are true.
B. exceeds the wage rate.
The Acme Company is a perfect competitor in its input markets and its output market. Its marginal product of labor is at its maximum and equals 30. The marginal revenue product of labor is $300. The price of its output: A. is $0.10. B. is $10. C. is $9,000. D. cannot be determined without more information.
B. is $10.
Assume that as the wage rate rises a worker's substitution effect for leisure is larger than the income effect. We can conclude that in this region, the worker's: A. labor supply curve will be backward bending. B. labor supply curve will have the usual upward slope. C. labor supply curve will be completely inelastic. D. supply curve will be horizontal.
B. labor supply curve will have the usual upward slope.
A consumer's original utility maximizing combination of income and leisure is shown in the diagram above as point A. After a wage decrease, the consumer's utility maximizing combination changes to point C. The substitution effect of the wage decrease on the amount of hours of leisure is: A) L1 to L0. B) L0 to L1. C) L1 to L2. D) L2 to L0. E) none of the above The income effect of the wage decrease on the amount of hours of leisure is:
C) L1 to L2. B-->C, L2-->L0
Dry cleaning of clothing produces air pollutants. Therefore, in the market for drycleaning services, the equilibrium price A) and output are too low to be optimal B) and output are too high to be optimal. C) is too low to be optimal, and equilibrium quantity is too high D) is too high to be optimal, and equilibrium quantity is too low. E) is optimal, but there is an excess supply.
C) is too low to be optimal, and equilibrium quantity is too high
What is TRUE about every point along a production possibilities frontier? A. Both people are maximizing utility. B. It is impossible to increase production of either good. C. All allocations are efficient. D. It includes some unattainable points.
C. All allocations are efficient.
Refer to the figure on right above. Which allocation is efficient? A. A and B B. B and C C. C and D D. D only
C. C and D
Labor is typically assumed to be the only variable input in very short-run production systems, and the number of variable inputs increases as we lengthen our planning horizon from short run to long run. What happens to the labor demand curve as we move from short run to long run? A. Demand curve becomes less elastic. B. Demand curve elasticity does not change. C. Demand curve becomes more elastic. D. Demand curve becomes upward sloping.
C. Demand curve becomes more elastic.
A move from one point on a contract curve to another point on the contract curve will make: A. both individuals better off. B. both individuals worse off. C. one individual better off and the other individual worse off. D. the goods more expensive
C. one individual better off and the other individual worse off.
