Supplemental Instruction for Econ 2106 | Just another ...
ECON 2106 TEST REVIEW #3
11/11/10
(By the way, this is not a guarantee of everything that could be on the test.)
|1. |A farm can produce 1,000 bushels of wheat per year with two workers and 1,300 bushels of wheat per year with four workers. The |
| |marginal product of the fourth worker is: |
|A) |100 bushels. |
|B) |300 bushels. |
|C) |1,300 bushels. |
|D) |150 bushels. |
|2. |Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run |
| |equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal |
| |and average total cost of producing candy canes by $0.05; there are no other changes in production costs. Based on the |
| |information given, we can conclude that in the long run we will observe: |
|A) |firms leaving the industry. |
|B) |firms entering the industry. |
|C) |some firms entering and some firms leaving. |
|D) |neither entry nor exit from the industry. |
Use the following to answer question 3:
[pic]
|3. |(Table: Production of Cabinets) The table shows how many cabinets your firm can make with a variable quantity of labor hired. |
| |After which worker does the firm begin to experience diminishing returns to labor? |
|A) |first |
|B) |second |
|C) |third |
|D) |fourth |
Use the following to answer questions 4-5:
Figure: Firms in Monopolistic Competition
[pic]
|4. |(Figure: Firms in Monopolistic Competition) Long-run equilibrium is illustrated at the profit-maximizing price ________ in panel|
| |________. |
|A) |F; A |
|B) |G; A |
|C) |H; B |
|D) |I; C |
|5. |(Figure: Firms in Monopolistic Competition) In panel C, the profit-maximizing quantity of output is generated by the |
| |intersection at point: |
|A) |U. |
|B) |V. |
|C) |W. |
|D) |X. |
Use the following to answer question 6:
[pic]
|6. |(Table: Two Rival Gas Stations) There are only two gas stations in a small town, Swifty Gas and Speedy Gas. Each firm can set |
| |either a high price or a low price, and customers view these two firms as nearly perfect substitutes. The table shows the payoff|
| |matrix of daily profits that each firm would receive from their pricing decision, given the pricing decision of their rival. |
| |Profits in each cell of the payoff matrix are given as (Swifty, Speedy). Which of the following choices describes a dominant |
| |strategy? |
|A) |Swifty will always set a low price, no matter Speedy's choice. |
|B) |Swifty will always set a high price, no matter Speedy's choice. |
|C) |Swifty will set a low price when Speedy sets a high price, but Swifty will set a high price when Speedy sets a low price. |
|D) |Swifty will set a high price when Speedy sets a high price, but Swifty will set a low price when Speedy sets a low price. |
Use the following to answer question 7:
Figure: A Gadget Monopoly
[pic]
|7. |(Figure: A Gadget Monopoly) The graph shows a monopoly firm that sells gadgets. If the firm is regulated such that the firm |
| |earns zero economic profit, the firm will sell ________ units at a price of ________ per unit. |
|A) |Q1; P1 |
|B) |Q2; P1 |
|C) |Q4; P3 |
|D) |Q3; P2 |
Use the following to answer question 8:
[pic]
|8. |(Table: Costs of Producing Bagels) Average total cost reaches its minimum value for the ________ bagel. |
|A) |first |
|B) |third |
|C) |fourth |
|D) |fifth |
|9. |Suppose Prof. Dumbledorr's magic hat monopoly is broken up and the magic hat industry becomes perfectly competitive. We would |
| |expect the ________ to increase from the breakup and ________ to decrease from the breakup. |
|A) |producer surplus; consumer surplus and total surplus |
|B) |consumer surplus; producer surplus and total surplus |
|C) |consumer surplus and total surplus; producer surplus |
|D) |producer surplus and total surplus; consumer surplus |
|10. |The largest HHI possible is in the case of ________ and the index is ________ . |
|A) |monopoly; 10 |
|B) |monopoly; 10,000 |
|C) |monopoly; 100,000 |
|D) |oligopoly; 100,000 |
|11. |In general, oligopolists find it easier to engage in collusive behavior when the industry is characterized by ________ behavior.|
|A) |Cournot |
|B) |Bertrand |
|C) |noncooperative |
|D) |interdependent |
|12. |If the toothpaste market is monopolistically competitive, product differentiation will take place in which of the following |
| |forms? |
|A) |different varieties of toothpaste—including whitening agents |
|B) |differentiation in the locations where certain toothpastes are available |
|C) |quality differences among the various brands |
|D) |all of these forms |
Use the following to answer question 13:
[pic]
|13. |(Table: Soybean Cost) The costs of production of a perfectly competitive soybean farmer are given in the table. If the market |
| |price of a bushel of soybeans is $15, how many bushels will the farmer produce to maximize short-run profit? |
|A) |4 |
|B) |5 |
|C) |3 |
|D) |7 |
Use the following to answer question 14:
Figure: A Firm's Cost Curves
[pic]
|14. |(Figure: A Firm's Cost Curves) The curve labeled V represents the firm's ________ curve. |
|A) |total cost |
|B) |average total cost |
|C) |marginal cost |
|D) |average variable cost |
|15. |Suppose the price elasticity of demand for coffee at the CoffeeBarn equals 1.71 for women and 0.55 for men. A successful price |
| |discrimination strategy would lead to: |
|A) |lower prices for men and women. |
|B) |lower prices for men and higher prices for women. |
|C) |lower prices for men and higher prices for women, as long as the CoffeeBarn could prevent men from reselling drinks to |
| |women. |
|D) |higher prices for men and lower prices for women, as long as the CoffeeBarn could prevent women from reselling drinks to |
| |men. |
|16. |Toby operates a small deli downtown. The deli industry is monopolistically competitive. Toby tells you that his and every other |
| |deli in town is producing the quantity that minimizes their average total cost. Assuming the delis are maximizing profits, you |
| |know that the: |
|A) |number of delis will soon decrease. |
|B) |number of delis will soon increase. |
|C) |delis' prices equal their average total costs. |
|D) |delis have excess capacity. |
Use the following to answer question 17:
Figure: Profit Maximizing
[pic]
|17. |(Figure: Profit Maximizing) The figure shows cost curves for a firm operating in a perfectly competitive market. Which of the |
| |following statements is true? |
|A) |AFC is represented in this figure by the vertical distance between Curve M and Curve N at any level of output. |
|B) |AFC is represented in this figure by the vertical distance between Curve N and Curve O at any level of output. |
|C) |This figure illustrates the long run because all costs are variable. |
|D) |Quantity q2 is to the left of the shut-down point. |
Helpful tools:
- Dr Frost’s and Andy’s office hours listed in the syllabus! They make the test! I don’t!
- iTunes U episodes
- Practice tests, past quizzes and book (Chapters 12-16)
- SI worksheets and study guides!
o econ2106si
- Stuff in “review materials” folder
- Dr. Frost’s past exams in “Exams” folder
- Past clicker questions from class. Look in “CPS” folder to find out where to look.
- Utilize the discussion board on ULearn
- SI session with me Tuesday 11/16 for last minute questions in LN 518
o (No session after class on Tuesday)
Next: Chapter 17: Externalities!
Thursday 11/18
Answer Key
|1. |D |
|2. |A |
|3. |B |
|4. |C |
|5. |D |
|6. |A |
|7. |C |
|8. |C |
|9. |C |
|10. |B |
|11. |A |
|12. |D |
|13. |B |
|14. |C |
|15. |D |
|16. |B |
|17. |B |
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