Econ 101 Exam 2 Questions

After earning your BA, you have to decide whether to accept the offer of a job that will pay you $45,000 per year or spend an additional two years earning an MBA. If you decide to pursue the graduate degree, your annual expenses for tuition, books, board, and lodging will be $32,000. You have been offered a scholarship for $10,000 per year, but in order to pay the remaining $22,000 per year, you would have to cash in savings bonds that your grandparents have given you that have been earning $500 in interest per year. The annual opportunity cost of earning your MBA is: A) $67,500. B) $77,000. C) $99,000. D) $77,500.

A

An excise tax that the government collects from the producers of a good: A) shifts the supply curve upward. B) causes a loss of revenue for the government. C) has a similar effect as a tax subsidy. D) shifts the supply curve downward.

A

Assuming that all other factors of production are held constant, marginal product is the change in _____ output resulting from a one-unit change in______. A) total; a variable input B) total; a fixed input C) total; total product D) per unit; a fixed input

A

If the United States placed larger tariffs on all textiles, then: A) domestic producer surplus would increase. B) domestic consumer surplus would increase. C) domestic total surplus would increase. D) domestic producer surplus would decrease.

A

Marginal cost can be calculated as: A) TC/Q, where TC is total cost and Q is output. B) VC/Q, where VC is variable cost and Q is output. C) the slope of the total cost curve. D) TC/Q, where TC is total cost and Q is output; VC/Q, where VC is variable cost and Q is output; and as the slope of the total cost curve.

A

On a production possibility frontier, opportunity cost is: A) the decrease in the output of one good when the output of the other good is increased. B) the rate at which people are willing to exchange goods as determined by demand and supply. C) the dollar cost of the good given up to get another good. D) independent of the slope of the curve.

A

Sunk costs: A) are not considered in marginal analysis. B) help to determine the optimal quantity of an activity. C) can dramatically increase marginal costs. D) are the same as variable costs.

A

Suppose Eastland College does not have a summer program and could rent out the campus to various summer sports camps for $100,000. The potential revenue of the summer camps represents: A) an implicit cost of capital. B) an explicit cost. C) a total cost. D) a sunk cost.

A

When a cherry orchard in Oregon adds a worker, the total cost of production increases by $24,000. Adding the worker increases total cherry output by 600 pounds. Therefore, the marginal cost of the last pound of cherries produced is: A) $40. B) $19. C) $4,000. D) $24,000.

A

You own a small deli that produces sandwiches, soups, and other items for customers in your town. Which of the following is a fixed input for the production function at your deli? A) the dining room where customers eat their meals B) the loaves of bread used to make sandwiches C) the cans of tomato sauce used to make soups D) the employees hired to help make the food

A

At the point at which it is currently producing, the United States must give up the production of 500 bicycles to produce 20 additional tractors. The opportunity cost of producing 100 bicycles is ________ tractor(s). A) 1 B) 4 C) 25 D) 100

B

If Jakob, who runs a sports jersey assembly factory, knows the marginal cost of the first sports jersey is $21, the marginal cost of the second sports jersey is $40, and the marginal cost of the third jersey is $17, what is the total variable cost of producing three jerseys? A) $26 B) $78 C) $17 D) $61

B

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. In autarky the price of beef: A) is higher in the Netherlands than in Belgium. B) is lower in the Netherlands than in Belgium. C) is the same in the Netherlands as in Belgium. D) cannot be determined in either country.

B

In central Florida, the demand for real estate has been increasing rapidly for years. This reality, in combination with occasional freezes that kill orange trees, has led many orange grove owners to sell their land to real estate developers. Because of the freezes and land demand, the ________ cost of capital is ______ in central Florida's orange groves. A) explicit; decreasing B) implicit; increasing C) implicit; decreasing D) explicit; increasing

B

Janet's poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q2, where Q is the quantity of dogs groomed. Given this expression if Janet grooms 5 dogs, her total costs will be: A) $100. B) $175. C) $225. D) $75.

B

Marginal cost ________ over the range of increasing marginal returns and ________ over the range of diminishing marginal returns. A) increases; decreases B) decreases; increases C) is constant; decreases D) increases; is constant

B

Saudi Arabia has a tremendous comparative advantage in petroleum. Which of the following is a source of this comparative advantage? A) mild temperatures B) large reserves of crude oil C) no opportunity cost associated with oil production D) high tariffs on oil from other nations

B

Suppose the government imposes a $10 per month tax on cell phone service. If the demand curve for cell phone service is perfectly inelastic and the supply curve is upward sloping, the price that consumers each month pay for cell phone service will increase by: A) $5. B) less than $10. C) $10. D) $0.

B

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

When all of a firm's inputs are doubled and this results in the firm's level of production more than doubling, a firm is operating: A) on the upward-sloping portion of its LRATC curve. B) on the downward-sloping portion of its LRATC curve. C) at the minimum of its LRATC curve. D) on the upward-sloping portion of its MC curve.

B

A firm finds that its long-run average total costs increase as it produces more output. This firm is experiencing: A) economies of scale. B) constant returns to scale. C) diseconomies of scale. D) a spreading effect.

C

Bangladesh exports shirts, the making of which is labor-intensive, to the United States. The likely source of Bangladesh's comparative advantage in shirts is: A) a hotter climate, which makes it possible to produce shirts outdoors, eliminating the need for factory buildings and hence reducing costs. B) superior production technology. C) that in comparison with the United States, Bangladesh is a labor-abundant country. D) the higher labor productivity in Bangladesh.

C

If labor is abundant in South Africa but capital is scarce, when South Africa opens to trade: A) the prices of labor and capital will rise. B) the prices of labor and capital will fall. C) the price of labor will rise and the price of capital will fall. D) the price of labor will fall and the price of capital will rise.

C

Suppose that the first four workers generate corresponding total outputs of baby diapers of 200, 350, 450, and 500, respectively. The marginal product of the second worker is: A) 50. B) 100. C) 150. D) 200

C

Suppose the government imposes a $10 excise tax on the sale of sweaters by charging suppliers $10 for each sweater sold. Using economic analysis, we would predict that: A) the price of sweaters will increase by $10. B) consumers of sweaters will bear the entire burden of the tax. C) the price of sweaters will increase but by less than $10. D) the price of sweaters will decrease by $10.

C

The dormitories of Eastland College are part of its: A) land. B) labor. C) capital. D) explicit costs.

C

The idea of diminishing returns to an input in production suggests that if a local college adds more custodians, the marginal product of labor for the custodial staff will ________. A) increase at an increasing rate B) increase at a decreasing rate C) decrease D) not change

C

To maximize her grade in economics, Stacey should study until: A) her marginal cost of studying begins to increase. B) her marginal benefit of studying begins to decrease. C) her marginal benefit of studying equals her marginal cost of studying. D) her marginal cost of studying reaches zero.

C

France and England both produce wine and clothing under conditions of constant opportunity costs. France will have a comparative advantage in wine production if: A) it can produce more wine than England. B) its labor productivity in wine production is greater than England's. C) the absolute cost of producing wine is lower in France than in England. D) the opportunity cost of wine production is lower in France than in England

D

If Japan levies tariffs on U.S. goods entering Japan, this will tend to: A) benefit both Japanese and U.S. producers. B) damage U.S. producers and benefit Japanese producers. C) benefit U.S. producers and damage Japanese producers. D) damage both Japanese and U.S. producers.

D

In economic analysis, the optimal quantity of an activity is the quantity at which: A) marginal benefit exceeds marginal cost by the greatest amount. B) total benefit exceeds total cost by the greatest amount. C) marginal benefit equals marginal cost. D) total benefit exceeds total cost by the greatest amount and marginal benefit equals marginal cost

D

Lauren has 11 people working in her tangerine grove. The marginal product of the eleventh worker equals 13 bushels of tangerines. If she hires a twelfth worker, the marginal product of that worker will equal: A) 14 bushels. B) 15 bushels. C) 12 bushels. D) The answer cannot be determined with the information available.

D

Wendy sells ice-making machines. She can sell six per week at a price of $2,000. If she charges $2,100, she will sell only five per week. The marginal benefit of selling the sixth ice-making machine is: A) $2,000. B) $2,100. C) $12,000. D) $1,500.

D