Micro final

A fixed input is one: A) that only exists in nature, and there is only so much of it. B) that can be used for one thing only. C) that can never produce more or less in any period. D) whose quantity cannot be changed in the short run.

D) whose quantity cannot be changed in the short run.

One point on a standard indifference curve is 8 cookies and 2 brownies; another is 6 cookies and 4 brownies. Which of the following combinations of cookies and brownies could lie on this indifference curve? A) 6 cookies and 10 brownies B) 7 cookies and 6 brownies C) 4 cookies and 4 brownies D) 4 cookies and 8 brownies

4 cookies and 8 brownies

Which statement is FALSE? A) When the marginal product of labor is upward sloping, the marginal cost curve is upward sloping. B) The average fixed cost curve is downward sloping and approaches the horizontal axis as output increases. C) The marginal cost curve intersects the average variable cost curve at the minimum of average variable cost. D) When the marginal cost curve is above the average cost curve, the average cost curve is upward sloping.

A) When the marginal product of labor is upward sloping, the marginal cost curve is upward sloping.

The principle of _____ marginal rate of substitution states that the more chocolate Susan consumes in proportion to coffee, the _____ coffee she is willing to substitute for another piece of chocolate. A) diminishing; less B) diminishing; more C) increasing; less D) increasing; more

A) diminishing; less

Rhonda spends all of her income on clothes and CDs. Suppose this situation were graphed with clothes on the vertical axis and CDs on the horizontal axis. Rhonda consumes a bundle of the two goods whose indifference curve is flatter than the budget line. To increase total utility, given her income, Rhonda should: A) increase her consumption of clothes and decrease her consumption of CDs. B) increase her consumption of CDs and decrease her consumption of clothes. C) do nothing—she is consuming a bundle on her budget line. D) Not enough information is given to answer this question.

A) increase her consumption of clothes and decrease her consumption of CDs.

LaToya sees honey and sugar as perfect substitutes. She is always willing to substitute 1 teaspoon of honey for 2 teaspoons of sugar. If the price of honey is half that of sugar, LaToya will use: A) only honey. B) only sugar. C) a lot of honey and a little sugar. D) a lot of sugar and a little honey.

A) only honey.

The larger the output, the more output over which fixed cost is distributed. Called the _____ effect, this leads to a _____ average _____ cost as output rises. A) spreading; lower; fixed B) spreading; higher; fixed C) diminishing returns; lower; variable D) diminishing returns; higher; variable

A) spreading; lower; fixed

The relative price rule says that at the optimal consumption bundle the marginal rate of substitution between two goods must be equal to their relative price. This is equivalent to saying that: A) the marginal utility per dollar is the same for both goods. B) the marginal utility of each good consumed must be the same. C) goods should be consumed in the same ratio as their relative price. D) the marginal rate of substitution is not equal to the ratio of marginal utilities.

A) the marginal utility per dollar is the same for both goods.

Suppose the government decides to help poor families with kids by subsidizing the purchase of milk. The subsidy takes the form of a 50% discount in the price of milk. Suppose also that poor families buy only milk and Spam (an inferior good). What happens to the amount of Spam poor families buy? A) It increases. B) It decreases. C) It stays the same. D) It depends on the shape of the family's indifference curve.

B) It decreases.

If the combination of two goods occurs at a point of tangency between the budget line and an indifference curve: A) consumer equilibrium has not been achieved. B) all available income has been spent and total utility is maximized. C) total utility can be increased by consuming less of both goods. D) total utility can be decreased by consuming more of both goods.

B) all available income has been spent and total utility is maximized.

Decreases in the price of the good measured on the horizontal axis will make the horizontal intercept _____ and make the budget line _____. A) larger; steeper B) larger; flatter C) smaller; steeper D) smaller; flatter

B) larger; flatter

The average total cost of producing cell phones in a factory is $20 at the current output level of 100 units per week. If the fixed cost is $1,200 per week: A) average fixed cost is $20. B) total cost is $3,200. C) variable cost is $2,000. D) average variable cost is $8.

D) average variable cost is $8.

Indifference curves that exhibit a diminishing marginal rate of substitution are: A) concave to the origin. B) upward-sloping over part of their length. C) downward-sloping straight lines. D) convex to the origin.

D) convex to the origin.

The term diminishing returns refers to a: A) falling interest rate that can be expected as one's investment in a single asset increases. B) reduction in profits caused by increasing output beyond the optimal point. C) decrease in total output due to the firm hiring uneducated workers. D) decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

D) decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

Ms. Sweettooth always consumes iced tea and sugar in fixed proportions: 8 ounces of iced tea to 3 teaspoons of sugar. This implies that for Ms. Sweettooth: A) iced tea and sugar are perfect substitutes. B) the indifference curves for iced tea and sugar are parallel. C) 8 ounces of iced tea and 3 teaspoons of sugar yield exactly the same utility as 16 ounces of iced tea and 6 teaspoons of sugar. D) iced tea and sugar are perfect complements.

D) iced tea and sugar are perfect complements.

The change in total output resulting from a one-unit increase in the quantity of an input used, holding the quantities of all other inputs constant, is: A) average cost. B) average product. C) marginal cost. D) marginal product.

D) marginal product.

Suppose the marginal cost curve in the short run first decreases and then increases. If marginal cost is decreasing, _____ must be _____ and _____ must be _____. A) marginal product; increasing; average fixed cost; zero B) average variable cost; decreasing; average fixed cost; increasing C) average total cost; increasing; marginal cost; decreasing D) marginal product; increasing; average variable cost; decreasing

D) marginal product; increasing; average variable cost; decreasing

When Caroline's dress factory hires two workers, the total product is 50 dresses. When she hires three workers, total product is 60, and when she hires four workers, total product is 65. The slope of the marginal product curve between two and four workers hired is: A) positive. B) zero. C) infinite. D) negative.

D) negative.

Mario sees popcorn and pretzels as perfect substitutes. He is always willing to substitute 3 cups of popcorn for 1 cup of pretzels. His indifference curves for popcorn and pretzels are _____, and at the optimal consumption bundle his marginal rate of substitution of popcorn for pretzels is _____. A) right angles; 3 B) right angles; 0.33 C) straight lines; 3 D) straight lines; 0.33

D) straight lines; 0.33

25) Karen consumes gasoline and other goods. A new excise tax on gasoline raises the price. However, the government pays Karen an income subsidy that is just enough for her to stay on her original (pretax) indifference curve. Her new optimal consumption bundle will have: A) the same amount of both goods as before. B) less gas and more of other goods. C) less of other goods and more gas. D) This question can't be answered, since some essential information (such as Karen's income and the pretax and taxed prices of gas) is missing.

B) less gas and more of other goods.

The marginal rate of substitution shows how a consumer can substitute between two goods to: A) maintain the same income. B) maintain the same level of total utility. C) maintain the same marginal utility. D) increase total utility.

B) maintain the same level of total utility.

Joseph chooses a combination of apples and oranges along his budget line. The marginal rate of substitution of apples for oranges is 2, the price of an apple is $0.50, and the price of an orange is $1.50. Joseph: A) is maximizing total utility. B) should consume more apples and fewer oranges to maximize total utility. C) should consume fewer apples and more oranges to maximize total utility. D) may or may not be maximizing total utility.

B) should consume more apples and fewer oranges to maximize total utility.

The total product curve: A) shows the relation between output and the quantity of a variable input for varying levels of the fixed input. B) will become flatter as output increases if there are diminishing returns to the variable input. C) will be downward sloping if there are diminishing returns to the variable input. D) will become horizontal when the marginal product of the variable input is constant.

B) will become flatter as output increases if there are diminishing returns to the variable input.

Buford Bus Manufacturing installs a new assembly line. As a result, the output per worker increases. The marginal cost of output at Buford: A) will increase (the MC curve will shift up). B) will decrease (the MC curve will shift down). C) will be unchanged. D) is at its maximum.

B) will decrease (the MC curve will shift down).

Manny consumes only bananas and DVDs, and he is on his highest possible indifference curve. Two bundles on this indifference curve are bundle A (5 bananas and 2 DVDs), and bundle B (3 bananas and 3 DVDs). Between points A and B, what is Manny's marginal rate of substitution of bananas for DVDs? A) 1 B) 2 C) 0.5 D) 1.33

C) 0.5

16) If the price of a ticket to a Minnesota Wild hockey game is $60 and the price of a snow shovel is $40, the price of the hockey ticket relative to that of shovels is _____. A) 40 B) 23. C) 1.5 D) 6

C) 1.5

Which cost concept is CORRECTLY defined? A) MC = TC/FC B) ATC = VC + FC C) ATC = AVC + AFC D) TC = AVC + AFC

C) ATC = AVC + AFC

The slope of a(n) _____ curve shows the rate at which two goods can be exchanged _____. A) indifference; without changing the total budget B) utility; without changing the total budget C) indifference; without changing total utility D) marginal utility; to increase the consumer's marginal utility

C) indifference; without changing total utility

The _____ is the increase in output that is produced when a firm hires an additional worker. A) average product B) total product C) marginal product D) marginal cost

C) marginal product