Final Exam - PiratePanel



Final Exam

Economics 2113

Principles Microeconomics

Dr. Philip Rothman

December 8, 2000

There are 50 questions on this exam. Mark all your answers on your blue bubble sheet.

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1) Perfect competition occurs in a market where there are

A) a few firms producing identical goods.

B) a few firms producing goods that differ somewhat in quality.

C) many firms producing identical goods.

D) many firms producing goods that differ somewhat.

2) In perfect competition, the product of a single firm

A) has many perfect substitutes produced by other firms.

B) has many perfect complements produced by other firms.

C) is sold under many differing brand names.

D) is sold to different customers at different prices.

3) In perfect competition, restrictions on entry into an industry

A) apply to both capital and labor. B) apply to labor but not to capital.

C) apply to capital but not to labor. D) do not exist.

4) In perfect competition, the elasticity of demand for the product of a single firm is

A) 0. B) between 0 and 1.

C) 1. D) infinite.

5) In a perfectly competitive industry, the price elasticity of demand for the market demand is ____ and the price elasticity of demand

for an individual firm's demand is ____.

A) infinite; infinite B) less than infinite; infinite

C) infinite; less than infinite D) less than infinite; less than infinite

6) Economists assume that a perfectly competitive firm's objective is to maximize its

A) quantity sold. B) profit. C) revenue. D) output price.

7) In perfect competition, a firm that maximizes its profits will sell its product

A) below the market price.

B) at the market price.

C) above the market price.

D) below the market price if its supply curve is inelastic and above the market price if its supply curve is elastic.

[pic]

8) The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm

A) is a price taker. B) faces constant returns to scale.

C) wants to maximize its profits. D) has perfect information.

[pic]

9) In the above table, if the quantity sold by the firm rises from 5 to 6, its marginal revenue is

A) $15. B) $30. C) $75. D) $90.

10) At a firm's break-even point, definitely its

A) total revenue equals its total opportunity cost.

B) marginal revenue exceeds its marginal cost.

C) marginal revenue equals its average variable cost.

D) marginal revenue equals its average fixed cost.

[pic]

11) In the above table, the price of the product is

A) $30. B) $147. C) $150. D) $180.

[pic]

12) In the above figure, by increasing its output from Q 1 to Q 2, the firm

A) reduces its marginal revenue. B) increases its marginal revenue.

C) decreases its profit. D) increases its profit.

[pic]

13) Based on the table above which shows Chip's costs, if Chip shuts down in the short run, his economic loss will be

A) $0. B) $1,000. C) $1,200. D) $4,000.

[pic]

14) The figure above shows short-run cost curves for a perfectly competitive firm. If the price of the product is $8 and the firm does

not shut down, the firm's output in the short run

A) will be 0.

B) will be between 0 and 10.

C) will be 10 or higher.

D) cannot be determined without more information.

[pic]

15) The figure represents a firm in a perfectly competitive market. The firm will shut down if price falls below

A) P1. B) P2. C) P3. D) P4.

16) The figure represents a firm in a perfectly competitive market. If the price rises from P3 to P4 then output will increase by

A) 0 units. B) 1 unit. C) 2 units. D) 3 units.

17) In a perfectly competitive industry, the industry supply curve is the sum of the

A) supply curves of all the individual firms.

B) average variable cost curves of all the individual firms.

C) average total cost curves of all the individual firms.

D) average fixed cost curves of all the individual firms.

[pic]

18) Suppose the cost curves in the above figure apply to all firms in the industry. Then, if the initial price is P1, in the long run the

market

A) demand will increase. B) demand will decrease.

C) supply will increase. D) supply will decrease.

19) Which of the following statements about a monopoly is FALSE?

A) Monopolies have no barriers to entry or exit.

B) The good produced by a monopoly has no close substitutes.

C) A monopoly is the only supplier of the good.

D) None of the above; that is, all of the above answers are true statements about a monopoly.

20) Which of the following is LEAST likely to be a monopoly?

A) The holder of a public franchise

B) A pharmaceutical company with a patent on a drug.

C) A store in a large shopping mall

D) The sole owner of an occupational license

21) Public franchises create monopolies by restricting

A) demand. B) prices. C) entry. D) profit.

22) A patent grants

A) a guarantee of quality to consumers.

B) the right to practice a profession.

C) an exclusive right to an inventor of a product.

D) control over a unique source or supply of raw materials.

23) A defining characteristic of a natural monopoly is that

A) its demand curve slopes downward.

B) it has no close substitutes.

C) its average total cost curve slopes downward as it intersects the demand curve.

D) it exists because of legal barriers to entry.

24) For a monopoly, the industry demand curve is the firm's

A) supply curve. B) marginal revenue curve.

C) demand curve. D) profit function.

25) Monopolists

A) maximize revenue, not profits.

B) have no short-run fixed costs.

C) face downward sloping demand curves.

D) are price takers.

26) Human capital is

A) all capital owned by individuals, but not by corporations or governments.

B) all capital owned by individuals or corporations, but not by governments.

C) machinery that meets or exceeds federal safety standards for use by humans.

D) the accumulated skill and knowledge of workers.

27) Sam's production possibility frontier has good A on the horizontal axis and good B on the vertical axis. If Sam is producing at a

point inside his frontier, then he

A) can increase production of both goods with no increase in resources.

B) is fully using all his resources.

C) values good A more than good B.

D) values good B more than good A.

28) If additional units of a good could be produced at a constant opportunity cost, the production possibility frontier would be

A) bowed outward. B) bowed inward.

C) positively sloped. D) a straight line.

[pic]

29) In the above figure, if 2 million computers are produced per year then the

A) marginal cost of a computer exceeds the marginal benefit of a computer, so more computers should be produced.

B) marginal cost of a computer exceeds the marginal benefit of a computer, so fewer computers should be produced.

C) marginal benefit of a computer exceeds the marginal cost of a computer, so more computers should be produced.

D) marginal benefit of a computer exceeds the marginal cost of a computer, so fewer computers should be produced.

30) A relative price is

A) the slope of the demand curve.

B) the difference between one price and another.

C) the slope of the supply curve.

D) the ratio of one price to another.

31) The law of demand implies that, other things remaining the same,

A) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will increase.

B) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease.

C) as income increases, the quantity of cheeseburgers demanded will increase.

D) as the demand for cheeseburgers increases, the price of a cheeseburger will fall.

32) Inferior goods are those for which demand increases as

A) the price of a substitute falls. B) the price of a substitute rises.

C) income decreases. D) income increases.

33) A fall in the price of a good causes producers to reduce the quantity of the good they are willing to produce. This fact illustrates

A) the law of supply. B) the law of demand.

C) a change in supply. D) the nature of an inferior good.

34) The price elasticity of demand equals

A) the change in the price divided by the change in quantity demanded.

B) the change in the quantity demanded divided by the change in price.

C) the percentage change in the price divided by the percentage change in the quantity demanded.

D) the percentage change in the quantity demanded divided by the percentage change in the price.

[pic]

35) If demand is price elastic,

A) a 1 percent decrease in the price causes an increase in the quantity demanded that exceeds 1 percent.

B) a 1 percent increase in the price causes an increase in the quantity demanded that exceeds 1 percent.

C) a 1 percent decrease in the price causes a decrease in the quantity demanded that is less than 1 percent.

D) the price is very sensitive to any shift of the supply curve.

36) On a linear demand curve that intersects both axes,

A) the elasticity exceeds 1.00 at all prices.

B) the elasticity is less than 1.00 at all prices.

C) the elasticity equals 1.00 at all prices.

D) the elasticity decreases as the price falls and quantity increases.

37) Producers' total revenue will decrease if

A) income increases and the good is normal.

B) the price rises and demand is elastic.

C) the price rises and demand is inelastic.

D) income falls and the good is inferior.

38) The willingness to pay curve is the same as

A) the demand curve, but not the marginal benefit curve.

B) the demand curve and the marginal benefit curve.

C) the marginal benefit curve, but not the demand curve.

D) neither the marginal benefit curve nor the demand curve.

[pic]

39) The above figure shows Dana's marginal benefit curve for ice cream. If the price of ice cream is $2 per gallon, then Dana's

consumer surplus from the 4th gallon

A) is greater than her consumer surplus from the 8th gallon.

B) is the same as her consumer surplus from the 8th gallon.

C) is less than her consumer surplus from the 8th gallon.

D) could be greater than, equal to, or less than the consumer surplus from the 8th gallon.

[pic]

40) In the above figure, if the market price is $100 per ton, then the firm's producer surplus on the second ton of wheat is

A) $25. B) $50. C) $75. D) $100.

41) Underproduction implies that for the last unit produced

A) marginal benefit exceeds marginal cost.

B) marginal benefit equals marginal cost.

C) marginal cost exceeds marginal benefit.

D) the deadweight loss is zero.

42) A price ceiling set below the equilibrium price

A) reduces both search activity and the use of black markets.

B) increases both search activity and the use of black markets.

C) reduces search activity and increases the use of black markets.

D) increases search activity and reduces the use of black markets.

43) Firms use incentives to pursue their most fundamental goal, which is to maximize

A) profits. B) sales revenue.

C) worker satisfaction. D) worker pay.

44) The costs of a firm that are paid directly in money are called its

A) explicit costs. B) implicit costs.

C) money opportunity costs. D) alternative costs.

45) The average return for supplying entrepreneurial ability is the firm's

A) accounting profit. B) normal profit.

C) explicit profit. D) actual profit.

46) A firm uses labor and capital. To tell if the firm is technologically efficient, you

A) do not need to know the cost of labor or the cost of capital.

B) need to know the cost of capital but not the cost of labor.

C) need to know the cost of labor and the cost of capital.

D) need to know the cost of labor but not the cost of capital.

47) In the long run, a firm can vary

A) its capital input but not its labor input.

B) its labor input but not its capital input.

C) both its labor and its capital inputs.

D) neither its labor nor its capital input.

[pic]

48) In the above table, the marginal product of the third worker is

A) 1. B) 2. C) 3. D) 4.

[pic]

49) At point d in the above figure, the average product of labor equals

A) 15. B) 4.

C) 3.75. D) approximately 1.

50) The steeper the slope of the total product curve, the

A) larger is the marginal product of labor.

B) smaller is the marginal product of labor.

C) higher is the level of the total cost curve.

D) more efficient is the technology employed.

Answer Key: Final Exam, Economics 2113, Fall 2000

1) Answer: C

2) Answer: A

3) Answer: D

4) Answer: D

5) Answer: B

6) Answer: B

7) Answer: B

8) Answer: A

9) Answer: A

10) Answer: A

11) Answer: A

12) Answer: D

13) Answer: B

14) Answer: B

15) Answer: B

16) Answer: B

17) Answer: A

18) Answer: D

19) Answer: A

20) Answer: C

21) Answer: C

22) Answer: C

23) Answer: C

24) Answer: C

25) Answer: C

26) Answer: D

27) Answer: A

28) Answer: D

29) Answer: C

30) Answer: D

31) Answer: B

32) Answer: C

33) Answer: A

34) Answer: D

35) Answer: A

36) Answer: D

37) Answer: B

38) Answer: B

39) Answer: A

40) Answer: A

41) Answer: A

42) Answer: B

43) Answer: A

44) Answer: A

45) Answer: B

46) Answer: A

47) Answer: C

48) Answer: D

49) Answer: C

50) Answer: A

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