Exam #2 Multiple Choice Questions

If the market price is $5 in a perfectly competitive market, the marginal revenue from selling the fifth unit is A) $5 B) $12.50 C) $25 D) $125

A) $5

A policy if politically efficient if: A) the marginal benefit (MB) is focused on a small aware group and the marginal cost (MC) is diffused on a large - probably unaware - group B) the MB is diffused on a large - probably unaware - group and the MC Is focused on a small aware group C) the policy is declared constitutional by the US Supreme Court D) Question cannot be answered with the available information

A) the marginal benefit is focused on a small aware group and the marginal cost is diffused on a large - probably unaware - group

Vispana's Gyros House sells gyros. The cost of ingredients to make a gyro is $2.00. Vispana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. What is Vispana's total cost per day when she does not produce any gyros and does not hire any workers? A) $0 B) $2 C) $60 D$120

D) $120

Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports. which of the following counter-arguments is made by economists who oppose trade restrictions? A) Statistics show that trade restrictions actually do not save jobs B) Consumers pay a high cost for jobs saved through trade restrictions C) Trade restrictions have a limited impact because most Americans prefer domestic goods over imports D) Trade restrictions benefit consumers in the short run but not in the long run

B) Consumers pay a high cost for jobs saved through trade restrictions

Implicit costs can be defined as A) accounting profit minus explicit cost B) the non-monetary opportunity cost of using the firm's own resources C) the deferred cost of production D) total cost minus fixed costs

B) the non-monetary opportunity cost of using the firm's own resources

If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 30 units A) $300 B) $15 C) $10 D) It is impossible to determine without additional information

C) $10

The marginal utility per dollar that Harold Stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears. To maximize his utility, what should Harold do? A) He should acquire more income so that he can afford to buy more oranges and pears B) He should reduce his consumption of both oranges and pears so that he can buy a greater variety of goods C) He should buy fewer pears and more oranges D) He should buy fewer oranges and more pears

C) He should buy fewer pears and more oranges

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen? A) the firm's profits will increase B) the firm's revenue will increase C) the firm will not sell any output D) the firm will sell more output than its competitors

C) The firm will not sell any output

If marginal utility of apples is diminishing and is a positive amount, consuming one more apple will cause A) a consumer's total utility to decrease B) a consumer to get no satisfaction from consuming apples C) a consumer's total utility to increase D) a consumer to go beyond her optimal consumption

C) a consumer's total utility to increase

Owning stock in a corporation has at least one advantage that owning the same corporation's bond does not have is: A) a stock price can rise but a bond price never changes B) in bankruptcy, stockholders will get their money returned but bondholders are wiped out C) a stockholder will have the opportunity to vote on the corporation's strategy D) all of the above are advantages of owning stock

C) a stockholder will have the opportunity to vote on the corporation's strategy

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

C) autarky

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility A) rises B) is constant C) declines D) fluctuates

C) declines

Which of the following statements best describes the economic short run? A) it is a period of one year or less B) it is a period during which firms are free to vary all of their inputs C) it is a period during which at least one of the firm's inputs is fixed D) it is a period during which fixed inputs become variable inputs because of depreciation

C) it is a period during which at least one of the firm's input is fixed

Imposing trade barriers does all of the following except A) reduces economic efficiency B) lowers incomes C) lowers domestic prices D) invites retaliation from foreign governments

C) lowers domestic prices

If a producer is not able to expand its plant capacity immediately, it is A) bankrupt B) operating in the long run C) operating in the short run D) losing money

C) operating in the short run

The main purpose of most tariffs and quotas is to A) raise revenue for the government B) reduce the prices consumers pay for goods and services C) reduce the foreign competition that domestic firms face D) improve the quality of goods and services imported into the country

C) reduce the foreign competition that domestic firms face

If canned tuna is an inferior good and its price rises then: A) the quantity of tuna demanded will increase because the substitution effect and the income effect will both increase the quantity of tuna demanded B) the quantity of tuna demanded will decrease because it is an inferior good C) the quantity of tuna demanded will decrease because the substitution effect is always stronger than the income effect D) the quantity of tuna demanded will increase because the substitution effect is always stronger than the income effect E) the quantity of tuna demanded will decrease because the substitution effect is always weaker than the income effect

C) the quantity of tuna demanded will decrease because the substitution effect is always stronger than the income effect

If a perfectly competitive firm sees that the market price is less than its minimum Average Cost (AC) but more than its minimum Average Variable Cost (AVC) then it should: A) minimize its losses by ceasing production immediately B) maximize its profit by producing where its per unit profit is highest C) maximize its profit by producing where the price line crosses the firm's marginal cost (MC) curve D) minimize its losses by producing where the price line crosses the firm's MC curve

D) minimize its losses by producing where the price line crosses the firm's MC curve