Microeconomics Final

A consumer has $100 per day to spend on product A, which has a unit price of $7, and product B, which has a unit price of $15. What is the slope of the budget line if good A is on the horizontal axis and good B is on the vertical axis? A)-7/15 B) -7/100 C)-15/7 D) 7/15 E) None of the above

A

A monopolist has equated marginal profit to zero. The firm has: A) maximized profit B) maximized revenue C) minimized revenue D) minimized profit E) none of the above

A

Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will: A) Become flatter B) Become steeper C) Shift outward D) Become steeper or flatter depending on the relationship between prices and income E) None of the above

A

Lady Gaga is sorting out her dating choices. If she prefers Yariv to Scotty, and Scotty to Pavlov, and if she is indifferent between Yariv and Milton, she must: A) prefer Milton to Pavlov B) prefer Scotty to Milton C) be indifferent between Scotty and Milton D) be indifferent between Yariv and Pavlov E) be indifferent between Pavlov and Milton

A

The magnitude of the slope of an indifference curve is: A) called the marginal rate of substitution B) equal to the ratio of the total utility of the goods C) always equal to the ratio of the prices of the goods D) All of the above E) A and C only

A

Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms? A) when there are few firms in the market and the demand curve faced by each firm is highly inelastic. B) when there are many firm sin the market and the demand curve faced by each firm is highly inelastic. C) when there are few firms in the market and the demand curve faced by each firm is highly elastic. D) when there are many firm sin the market and the demand curve faced by each firm is highly elastic. E) when there are few firms characterized by a low markup as indicated by the Lerner Index.

A

Which of the following is not an expression for the cost minimizing combination of inputs? A) MRTS = MPL/MPK B) MPL/w=MPK/r C) MRTS=w/r D) MPL/MPK=w/r E) (MPL)w^-1 = (MPK)r^-1

A

Which of the following statements about marginal cost is incorrect? A) a U shaped marginal cost curve implies the existence of diminishing returns over all ranges of output B) when marginal cost equals average cost, average cost is at a minimum C) In the short run, the shape of the marginal cost curve is due to the law of diminishing marginal returns D) when marginal cost is falling, marginal product is rising E) marginal cost can be constant, increasing, decreasing or zero

A

Assume that a profit maximizing monopolist is producing a quantity where MR > MC. We can conclude that the: A) firm is maximizing profit B) firm's output is smaller than the profit maximizing output C) firm's output is larger than the profit maximizing quantity D) firm's output does not maximize profit, but we cannot conclude whether the output is too large or too small E) none of the above

B

For negative externalities, the marginal social cost is _____ the marginal private cost and producers will ______ this product in a free market. A) greater than; underproduce B) greater than; overproduce C) less than; underproduce D) less than; overproduce E) equal to; underproduce

B

If Px=Py, then when the consumer maximizes utility, A) X must equal Y B) MUx must equal MUy C) MUx may equal MUy but it is not necessarily so D) X and Y must be substitutes E) None of the above

B

In an unregulated competitive market, consumer surplus exists because: A) sellers are willing to take a lower price than equilibrium price B) consumers are willing to pay more than equilibrium price C) sellers will only sell at prices above equilibrium price (or actual price). D) a, b and c E) only b and c

B

Marginal utility of a good is best described by the following statement: A) the slope of the indifference curve B) the additional satisfaction from consuming one more unit C) the slope of the budget line D)the marginal rate of substitution E) None of the above

B

The substitution effect is: A) the change in the amount of the good consumed holding the level of income constant B) the change in the amount of the good consumed as the price of the good changes, holding income constant C) the change in the amount of the good consumed as the price of the good changes, holding utility constant D) the change in the amount of the good consumed holding relative prices constant and changing the level of income E) none of the above

B

A demand curve of the form Q=a-bP, where a and b are positive numbers: A) is an upward sloping straight line B) is a non-linear, downward sloping line C) is a downward sloping straight line D) both b and c E) a, b and c are all true F) None of the above

C

A firm employs 100 workers at a wage rate of $10 per hour, and 50 units of capital at a rate of $21 per hour. The marginal product of labor is 3, and the marginal product of capital is 5. The firm: A) is producing its current output level at the minimum cost B) could reduce the cost of producing its current output level by employing more capital and less labor C) could reduce the cost of producing its current output level by employing more labor and less capital D) could increase its output level at no extra cost by employing more capital and less labor E) both b and d are true

C

A variable cost function of the form VC = 23 +20Q implies a marginal cost curve that is: A) Linear B) downward sloping C) U shaped D) Quadratic E) A horizontal line

C

Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis). If the wage rate is $20 per hour and the rental cost of capital is $25 per hour, the slope of the isocost curve will be: A) 500 B) 25/500 C) -4/5 D) -25/20 E) None of the above are true

C

Indifference curves cannot intersect because: A) more is better than less B) of diminishing marginal utility C) of the transitivity property of indifference theory D) of both a and c above E) of none of the above

C

The price of lemonade is $0.50; the price of popcorn is $1.00 (where popcorn is on the x axis, and lemonade is on the vertical). If Fred has maximized his utility, by purchasing lemonade and popcorn, his marginal rate of substitution will be: A) 2 B) 1 C) 1/2 D) All lemonade and no popcorn E) indeterminate unless more information on Fred's Marginal utilities is provided

C

The total cost (TC) of producing computer software discs (Q) is given as TC = 200 + 5Q^2. What is the marginal cost? A) 200 B) 5Q C) 10Q D) 5 + (200/Q) E) 5

C

Which of the following is a correct representation of the budget constraint with only food and clothing where M=income, Pf is the price of food and Pc is the price of clothing, C= quantity of clothing and F=quantity of food: A) M=Pf x C + Pc x F B) F= M/Pc - Pf/Pc x C C) C= M/Pc - Pf/Pc x F D) F= MxPc + Pf/Pc x C E) None of the above

C

An individual consumes only two goods, X and Y. Which of the following expression represents the utility maximizing basket? A) MRSxy is at a maximum B) Px/Py = money income C) MRSxy = money income D) MRSxy = Px/Py E) All of the above

D

Assuming the usual two good context, X1 and X2, if optimization reveals that X1* is negative, which of the following must be true: A) the consumer must be irrational B) the consumer will consume all X1 and zero X2 C) Shows an inferior good D) the consumer will consume all X2 and zero X1 E) None of the above

D

At the optimum combination of two inputs, A) the slopes of the isoquant and isocost curves are equal B) cost are minimized for the production of a given output C) the marginal rate of technical substitution equals the ratio of the input prices D) all of the above E) a and c only

D

Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as: A) P=MR B) P=AVC C) AR=MR D) P=MC E) P=AC

D

By "scarcity" economists mean that A) there is never enough money available B) people are wasteful with resources C) there is very little of many useful things D)there are not enough resources available to produce and consume all that we desire E) good help is hard to find

D

The fact that the firm is perfectly competitive is evident from: A) increasing marginal cost B) increasing total cost C) zero economic profits D) constant marginal revenue E) absence of marginal values at q=0

D

When the TR and TC curves have the same slope: A) they are closest to each other B) they intersect each other C) profit is negative D) they are furthest from each other E) they must intersect with TR cutting TC from above

D

Which of the following inputs are variable in the long run? A) Labor B) Capital and Equipment C) Plant Size D) All of the above E) Only a and b

D

Which of the following is a negative externality connected to attending college? A) the fact that the completions of a college degree acts as a signaling mechanism to employers B) the fact that other costs, such as books and materials, are incurred in addition to tuition and fees C) the fact that your college has required that all student housing occupants acquire vaccinations D) the fact that people in the n ext room play blaringly loud Justin Bieber music at hours you want to sleep E) the fact that you will get benefits from college that you don't currently anticipate

D

A straight line isoquant: A) is impossible B) would indicate that the firm could switch from one output to another costlessly C) would indicate that the firm could not switch from one output to another D) would indicate that labor nd capital cannot be substituted for one another in production E) would indicate that capital and labor are perfect substitutes in production

E

Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the: A) price taking assumption B) homogenous product assumption C) free entry assumption D) A and B are correct E) A and C are correct

E

The more elastic the demand facing a firm: A)the higher the value of the Lerner index B) the lower the value of the Lerner index C) the less monopoly power it has D) the higher its profit E) could be B and C

E

The statements below relate to the way the marginal product and marginal cost curves are related to each other: A) marginal product is the inverse of marginal cost B) after hitting the law of diminishing marginal returns, marginal product increases consistently C) has a calculus equivalent shown by duality in production and cost D) a, b and c E) only a and c

E

With its current levels of input use, a firm's MRTS is 3 (when capital is on the vertical axis and labor is on the horizontal axis). This implies: A) the firm could produce 3 more units of output if it increased its use of capital by one unit (holding labor constant). B) the firm could produce 3 more units of output if it increased its use of labor by one unit (holding capital constant). C) if the firm reduced its capital stock by one unit, it would have to hire 3 more workers to maintain its current level of output. D) if it used one more unit of both capital and labor, the firm could produce 3 more units of output E) the marginal product of labor is 3 times the marginal product of capital

E