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Units 4 and 10 Final AP Review1-30 : Unit 10 - Behind the Supply Curve : Profit , Production, Costs31-60 : Unit 4 - National Income and Price DeterminationSigmund tutors five students for the introductory psychology class. The students differ in their willingness to pay for a one-hour session. The second column of the table shows their willingness to pay. Sigmund has estimated his costs of providing tutoring hours(he has no sunk costs) and these costs appear in the last column.StudentStudents'Willingness to PayHours ofTutoringSigmund'sCostPeter$251$5Quincy15210Rosemary5315Sally20420Tomas10525Table 53-2: Tutoring____1.(Table 53-2: Tutoring) Sigmund faces:a.increasing marginal benefit.b.constant marginal benefit.c.increasing marginal cost.d.decreasing marginal cost.e.constant marginal cost.____2.Quantityof GadgetsProducedTotal CostTotal Benefit0$100$ 01$105$2002$110$2153$115$2254$120$2305$125$223Table: The Cost of Producing GadgetsYou own a small manufacturing company that produces gadgets. The table shows the quantity of gadgets that you could produce, the total cost you incur at each level of production, and the total benefit your customer receives at each level of production. According to the table, how many gadgets should you produce?a.2b.3c.1d.5e.4Quantityof LaborTotalOutput00112222330436540643744Table 54-1 : Labor and Output____3.(Table 54-1: Labor and Output) Referring to the table, the marginal product of the fifth worker is:a.8.b.4.c.3.d.40.e.36.Scenario 54-1: Marginal Product of Labor Quantity of LaborMarginal Product of Labor0191172153134115967758____4.(Scenario 54-1: Marginal Product of Labor) Using the marginal product of labor curve in the figure, the total product of labor for five workers is:a.11 bushels.b.45 bushels.c.55 bushels.d.75 bushels.e.64 bushels.Figure 54-1: Total Product____5.(Figure 54-1: Total Product) Between points A and B the marginal product of labor is:a.increasing.b.zero.c.falling.d.infinite.e.constant.____6.You are a cabinetmaker who employs several workers to produce kitchen and bathroom cabinets. Your summer intern has created a graph showing a relationship between the number of cabinetmakers you employ and the number of cabinets produced. Unfortunately, your intern has failed to identify this curve. It is likely the ________ curve:a.total costb.total productc.marginal productd.total variable coste.total utility____7.Suppose that the first four units of a variable input generate corresponding total outputs per period of 200, 350, 450, and 500, respectively. The marginal product of the second unit of input is:a.50.b.100.c.150.d.200.e.350.Quantityof OutputVariable CostVCTotal CostTC005015010027012031001504140190524062503007320370Table 55-1: Cost Data____8.(Table 55-1: Cost Data) The table shows some cost data for a firm currently operating in the short run. What is the value of the total variable cost for this firm when the firm is producing five units of output?a.$50b.$240c.$60d.$190e.It is impossible to determine without more information.____9.If Marie’s Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be:a.equal to ATC.b.decreasing.c.increasing.d.constant.e.equal to zero.____10.Marginal cost is the change in:a.total cost resulting from a one-unit change in a variable input.b.total cost resulting from a one-unit change in output.c.total cost resulting from a one-unit change in average cost.d.average cost resulting from a one-unit change in output.e.total variable cost resulting from a one-unit change in a variable intput.Quantityof Bagels(per period)TotalVariable CostsTotalFixed Costs0$0.00$0.1010.200.1020.300.1030.350.1040.450.1050.600.1060.800.1071.050.1081.350.10Table 55-3: Costs of Producing Bagels____11.(Table 55-3: Costs of Producing Bagels) The average total cost of producing two bagels is:a.$0.05.b.$0.10.c.$0.20.d.$0.40.e.$0.25.Figure 55-2: Short-Run Costs____12.(Figure 55-2: Short-Run Costs) B is the ________ cost curve.a.average totalb.average variablec.marginald.totale.average fixed____13.When marginal cost is below average variable cost, average variable cost must be:a.at its minimum.b.at its maximum.c.falling.d.rising.e.equal to zero.____14.Average variable cost is:a.the firm's variable cost per unit multiplied by the quantity.b.total variable cost divided by quantity.c.the difference between average total cost and total cost.d.the difference between total cost and total fixed cost.e.equal to marginal cost when average variable cost is maximized.The table provides information about the production function for Lindsay's Farm, which uses labor and land to produce its produce. The price of labor is $50 per worker per week and the price of land is $20 per acre.Quantityof Land(acres)Quantityof Labor(workers)Quantityof Produce(bushels)100010150102100103140104170105190Table 55-4: Lindsay's Farm____15.(Table 55-4: Lindsay's Farm) Lindsay's variable costs of production:a.stay constant.b.are equal to 10.c.equal zero when she produces zero bushels of produce.d.fall as soon as she starts producing.e.equal $100 when 3 workers are employed.____16.Diminishing returns is a reason why:a.the marginal cost curve is downward-sloping.b.fixed costs remain constant.c.the marginal cost curve is upward-sloping.d.the average fixed cost curve is downward-sloping.e.demand curves can slope upward.____17.Denaro pays $8,000 per month in rent to operate a health club in Memphis. He also pays $17,000 per month in wages, $3,000 per month in food and supplies, and $1,000 per month in insurance. All of his costs of production can change except his insurance and rent. Denaro's sunk costs equal:a.$20,000 per month.b.$11,000 per month.c.$29,000 per month.d.$5,000 per month.e.$9,000 per month.____18.A university that benefits from lower costs per unit as it grows is an example of:a.economies of scale.b.diseconomies of scale.c.increasing opportunity costs.d.scale reduction.e.sunk costs.Figure 56-1: Long-Run Average Cost____19.(Figure 56-1: Long-Run Average Cost) Output per period in the region B to C indicates that a firm is experiencing:a.constant returns to scale.b.diseconomies of scale.c.economies of scale.d.falling marginal cost.e.increasing returns to scale.____20.A firm that is experiencing diminishing returns in management's ability to use and disseminate information as it increases production in the long run is an example of:a.economies of scale.b.diseconomies of scale.c.being too small for the relevant market.d.not having enough managers.e.a perfectly competitive firm.Figure 56-2: Cost Curves____21.(Figure 56-2: Cost Curves) If a firm currently was producing at point C on the ATC2 in the figure but anticipates increasing output to 225,000 units in the long run, the firm will build a ________ plant and experience ________.a.smaller; economies of scaleb.smaller; diseconomies of scalec.larger; economies of scaled.larger; constant returns to scalee.larger; diseconomies of scale____22.A firm finds that as it produces more, its long-run average total costs increase. This firm is experiencing:a.economies of scale.b.constant returns to scale.c.diseconomies of scale.d.a dominant spreading effect.e.increasing returns to scale.____23.Economies and diseconomies of scale are best associated with the:a.marginal product curve in the short run.b.short-run average total cost curve.c.marginal cost curve in both the long and short run.d.average fixed cost curve in the short run.e.long-run average total cost curve.____24.For the Colorado beef industry to be classified as perfectly competitive ranchers in Colorado must have ________ on prices and beef is a ________ product.a.no noticeable effect; standardizedb.a huge effect; standardizedc.a huge effect; differentiatedd.no noticeable effect; differentiatede.no noticeable effect; price inelastic____25.Which of the following is not a barrier to entry?a.control of an input essential for ernment-created barriers such as patentsc.a ban on certain kinds of advertisingd.the existence of significant economies of scalee.the elimination of trade barriers such as tariffs.____26.A(n) ________ is a single firm with ________, whereas ________ implies an industry with ________ firm(s) that has(have) ________.a.oligopoly; no barriers to entry; monopoly; many; easy entry and exitb.monopoly; barriers to entry; monopolistic competition; many; easy entry and exitc.monopoly; barriers to entry; oligopoly; few; no barriers to entryd.monopolistic competitor; barriers to entry; monopoly; one; barriers to entrye.monopoly; barriers to entry; monopolistic competition; a small number of; easy entry and exit____27.The market for dentists in most communities can be considered ________ because there are a large number of similar, but not identical, substitutes in the market.a.monopolistically competitiveb.a monopolyc.perfectly competitived.an oligopolye.a regulated natural monopoly____28.Assume a firm employs two inputs, A and B. The optimal hiring of inputs occurs when which of the following is true?a.TPA/PA=TPB/PBb.MPA/PA=MPB/PBc.TCA=TCBd.MPA=MPBe.(MPA) (PA)= (MPB) (PB)____29.Suppose a firm is producing the profit-maximizing level of output and the MP of capital and labor are 10 and 20, respectively. If the wage is $10 and the rental rate for capital is $25, which of the following is true? To minimize costs the firm shoulda.Use more capital.b.Hire more labor and use less capital.c.Hire less labor and use more capital.d.Hire less labor.e.Continue using the current levels of capital and labor.____30.Tanya is an independent truck driver who delivers cargo all around the country. For Tanya, she and her truck are:plementary inputs in the production process.b.more productive when used separately, rather than when they are used together.c.substitute inputs in the production process.d.both examples of physical capital.e.both examples are human capital.____31.If the multiplier is 4, and investment spending falls by $100 billion, the change in equilibrium income will be:a.-$40 billion.b.$400 billion.c.$25 billion.d.–$25 billion.e.–$400 billion.Disposable Personal IncomeConsumption$100$140200220300300400380500460Table 16- 1: Income and Consumption____32.Use Table 16- 1. When disposable personal income is $400, the level of personal saving is:a.–$40.b.–$20.c.$0.d.$20.e.$40.____33.If the MPC is greater than zero but less than one, then we can be sure that when disposable income rises by $1 consumption will:a.not be affected.b.will rise by more than $1.c.will rise by less than $1.d.will rise by exactly $1.e.will fall by less than $1.____34.An upward shift in the aggregate consumption function can be caused by:a.expectations of higher future incomes.b.expectations of less income in the future.c.a stock market crash.d.a reduction in the wealth of households.e.economic forecasts of an impending recession.____35._____ inventories typically indicate _______ changes to unplanned inventory investment and a _________ economy.a.Rising; positive; slowingb.Rising; negative; slowingc.Rising; positive; expandingd.Falling; negative; slowinge.Falling; positive; expanding____36.Which of the following will cause a decrease in unplanned inventory investment?a.An increase in interest rates.b.A rapid increase in the unemployment rate.c.A decrease in the growth rate of real GDP.d.A sudden decrease in consumer wealth.e.An unexpected increase in consumer spending.____37.When the aggregate price level increases, the purchasing power of many assets falls, causing a decrease in consumer spending. This is known as the _____ effect and is a reason why the _____ curve slopes _____.a.interest rate; aggregate demand; downwardb.wealth; aggregate demand; downwardc.interest rate; investment demand; downwardd.wealth; short-run aggregate supply; upwarde.substitution; aggregate demand; downward____38.According to the wealth effect, when the price level decreases, the purchasing power of assets:a.decreases and consumer spending decreases.b.increases and consumer spending decreases.c.decreases and consumer spending increases.d.remains constant and consumer spending is unchanged.e.increases and consumer spending increases.____39.The interest rate effect is the tendency for changes in the price level to affect:a.the quantity of investment demanded and thus affect interest rates.b.export demand and thus affect aggregate demand.c.interest rates and thus affect the quantity of investment and consumption demanded.d.real incomes and lead to shifts in potential output.e.interest rates and thus affect the productivity of existing capital equipment.____40.Aggregate demand will decrease if:a.the aggregate price level falls. exports rises.c.productivity declines.d.the money supply increases.e.the government raises the tax rate.Figure 17-2: Shift of the Aggregate Demand Curve____41.Use the “Shift of the Aggregate Demand Curve” Figure 17-2. A movement from point A on AD1 to point C on AD2 could have resulted from a(n):a.lower price level.b.higher price level.c.increase in the total quantity of consumer goods and services demanded at every price level.d.significant decrease in the income level of consumers.e.increase in the income tax rates.____42.An increase in wealth or an increase in government spending will result in a:a.shift to the left of the short-run aggregate supply curve.b.shift right of the aggregate demand curve.c.shift right of the short-run aggregate supply curve.d.movement along the aggregate demand curve.e.shift right of the long-run aggregate supply curve.____43.Which of the following would likely cause the short-run aggregate supply curve to shift to the left?a.A decrease in consumer spending.b.A decrease in the price of imported oil.c.An increase in the price of imported oil.d.An increase in consumer spending.e.An increase in personal income taxes.____44.A general decrease in wages will result in the:a.aggregate demand shifting to the right.b.aggregate demand shifting to the left.c.short-run aggregate supply shifting to the right.d.short-run aggregate supply shifting to the left.e.long-run aggregate supply shifting to the right.____45.In the long-run if all prices, including the nominal wage, rate doubled, then aggregate output supplied would:a.double.b.increase, but by less than double.c.fall.d.remain unchanged.e.increase by more than double.____46.In the short run, the equilibrium price level and the equilibrium level of total output are determined by the intersection of:a.LRAS and SRAS.b.LRAS and aggregate demand.c.SRAS and aggregate demand.d.potential output and LRAS.e.potential output and aggregate demand.____47.A negative short-run supply shock:a.decreases aggregate output with no impact on the aggregate price level.b.increases aggregate output and decreases the aggregate price level.c.decreases both aggregate output and the aggregate price level.d.increases both aggregate output and the aggregate price level.e.decreases aggregate output and increases the aggregate price level.____48.If commodity prices rise unexpectedly, it will cause:a.a positive supply shock.b.a positive demand shock.c.both a negative supply shock and a positive demand shock.d.a negative demand shock.e.a negative supply shock.____49.When an economy experiences stagflation, it is usually caused by a:a.negative demand shock.b.positive supply shock.c.negative supply shock.d.positive demand shock.e.negative supply shock and a positive demand shock.____50.In the long run (as the economy self-corrects), an increase in aggregate demand will cause the price level to _______ and potential output to _______ .a.increase; increaseb.decrease; decreasec.increase; increased.decrease; remain stablee.increase; remain stable____51.A recessionary gap will be eliminated because there is _______ pressure on wages, causing the _______ .a.downward; short-run aggregate supply curve to shift rightward.b.downward; short-run aggregate supply curve to shift leftward.c.downward; aggregate demand curve to shift rightward.d.upward; aggregate demand curve to shift to leftward.e.upward; short-run aggregate supply curve to shift rightward.____52.If an economy is in short-run equilibrium such that the level of output is greater than the potential output, then this means that:a.in the long run, nominal wages will rise.b.the economy is in long-run equilibrium.c.in the long run, the short run AS curve will shift to the right.d.unemployment in the economy is much higher than the natural rate of unemployment.e.in the long run, the unemployment rate will decrease as the short run AS curve shifts to the right.____53.Keynesians argue that a lack of spending is:a.not possible in an economy.b.possible and can lead to prolonged recessions.c.not helped by monetary or fiscal policy efforts.d.only evident during expansions.e.a key indicator of an economic boom.____54.An inflationary gap occurs when:a.we need to increase prices.b.real output is too low.c.potential output exceeds actual output.d.actual output exceeds potential output.e.nominal interest rates exceed the inflation rate.Figure 20-5: Fiscal Policy I____55.Use the “Fiscal Policy I” Figure 20-5. Suppose that this economy is in equilibrium at E1. If there is an increase in government purchases, then:a.AD2 will shift to the left, causing an increase in the price level and a decrease in real GDP.b.AD2 will shift to the left, causing a decrease in the price level and a decrease in the real GDP.c.AD1 will shift to the right, causing an increase in the price level and an increase in real GDP.d.AD1 will shift to the right, causing a decrease in the price level and an increase in real GDP.e.AD1 will shift to the right, causing a increase in the price level and a decrease in real GDP.____56.Use the “Fiscal Policy I” Figure 20-5. Suppose that this economy is in equilibrium at E1. If there is a decrease in taxes, then:a.AD2 will shift to the left, causing an increase in the price level and a decrease in real GDP.b.AD2 will shift to the left, causing a decrease in the price level and a decrease in the real GDP.c.AD1 will shift to the right, causing an increase in the price level and an increase in real GDP.d.AD1 will shift to the right, causing a decrease in the price level and an increase in real GDP.e.AD1 will shift to the right, causing an increase in the price level and a decrease in real GDP.Figure 20-8: Fiscal Policy Options____57.Use the “Fiscal Policy Options” Figure 20-8. If the aggregate demand curve is AD':a.a contractionary fiscal policy may be warranted.b.an expansionary fiscal policy may be warranted.c.the economy is in long-run equilibrium.d.the economy is experiencing an inflationary gap.e.the unemployment rate is lower than the natural rate of unemployment.____58.One of the shortcomings of fiscal policy is that:a.it has significant time lags which make it more effective.b.it takes effect immediately, thus it is the best policy to use at crunch time.c.it affects aggregate demand indirectly through the interest rate.d.it has time lags and sometimes it may end up destabilizing the economy as a result of these lags.e.changes to fiscal policy have very predictable and precise impacts on GDP and employment.____59.Discretionary fiscal policy may fail to stabilize the economy or even make the economy less stable due to:a.its ineffectiveness.ernment waste.c.lags in deciding and implementing a policy change.d.the business cycle.e.the absence of the multiplier.____60.If the marginal propensity to consume is .75, and the federal government increases spending by $100 billion, the income expenditure model would predict that real GDP will increase by:a.$100 billion.b.$750 billion.c.$400 billion.d.$300 billion.e.$150 billion.Units 4 and 10 Final AP ReviewAnswer SectionMULTIPLE CHOICE1.ANS:EPTS:1DIF:MREF:Module 53/17MSC:Critical Thinking2.ANS:EPTS:1DIF:MREF:Module 53/17MSC:Analytical Thinking3.ANS:BPTS:1DIF:MREF:Module 54/18MSC:Critical Thinking4.ANS:DPTS:1DIF:MREF:Module 54/18MSC:Critical Thinking5.ANS:CPTS:1DIF:MREF:Module 54/18MSC:Critical Thinking6.ANS:BPTS:1DIF:MREF:Module 54/18MSC:Concept-Based7.ANS:CPTS:1DIF:MREF:Module 54/18MSC:Analytical Thinking8.ANS:DPTS:1DIF:MREF:Module 55/19MSC:Analytical Thinking9.ANS:CPTS:1DIF:MREF:Module 55/19MSC:Concept-Based10.ANS:BPTS:1DIF:MREF:Module 55/19MSC:Definitional11.ANS:CPTS:1DIF:MREF:Module 55/19MSC:Analytical Thinking12.ANS:APTS:1DIF:MREF:Module 55/19MSC:Concept-Based13.ANS:CPTS:1DIF:MREF:Module 55/19MSC:Concept-Based14.ANS:BPTS:1DIF:MREF:Module 55/19MSC:Definitional15.ANS:CPTS:1DIF:MREF:Module 55/19MSC:Analytical Thinking16.ANS:CPTS:1DIF:MREF:Module 55/19MSC:Critical Thinking17.ANS:DPTS:1DIF:MREF:Module 56/20MSC:Critical Thinking18.ANS:APTS:1DIF:MREF:Module 56/20MSC:Concept-Based19.ANS:BPTS:1DIF:MREF:Module 56/20MSC:Concept-Based20.ANS:BPTS:1DIF:MREF:Module 56/20MSC:Critical Thinking21.ANS:EPTS:1DIF:MREF:Module 56/20MSC:Concept-Based22.ANS:CPTS:1DIF:MREF:Module 56/20MSC:Critical Thinking23.ANS:EPTS:1DIF:MREF:Module 56/20MSC:Critical Thinking24.ANS:APTS:1DIF:MREF:Module 57/21MSC:Concept-Based25.ANS:CPTS:1DIF:MREF:Module 57/21MSC:Fact-Based26.ANS:BPTS:1DIF:MREF:Module 57/21MSC:Definitional27.ANS:APTS:1DIF:MREF:Module 57/21MSC:Definitional28.ANS:BPTS:1DIF:MREF:Module 72/36MSC:Concept-Based29.ANS:BPTS:1DIF:MREF:Module 72/36MSC:Analytical Thinking30.ANS:APTS:1DIF:MREF:Module 72/36MSC:Critical Thinking31.ANS:EPTS:1DIF:MREF:Module 16MSC:Critical Thinking32.ANS:DPTS:1DIF:MREF:Module 16MSC:Critical Thinking33.ANS:CPTS:1DIF:MREF:Module 16MSC:Critical Thinking34.ANS:APTS:1DIF:MREF:Module 16MSC:Critical Thinking35.ANS:APTS:1DIF:MREF:Module 16MSC:Critical Thinking36.ANS:EPTS:1DIF:MREF:Module 16MSC:Critical Thinking37.ANS:BPTS:1DIF:MREF:Module 17MSC:Concept-Based38.ANS:EPTS:1DIF:MREF:Module 17MSC:Concept-Based39.ANS:CPTS:1DIF:MREF:Module 17MSC:Concept-Based40.ANS:EPTS:1DIF:MREF:Module 17MSC:Critical Thinking41.ANS:CPTS:1DIF:MREF:Module 17MSC:Concept-Based42.ANS:BPTS:1DIF:MREF:Module 17MSC:Concept-Based43.ANS:CPTS:1DIF:MREF:Module 18MSC:Critical Thinking44.ANS:CPTS:1DIF:MREF:Module 18MSC:Concept-Based45.ANS:DPTS:1DIF:MREF:Module 18MSC:Critical Thinking46.ANS:CPTS:1DIF:MREF:Module 19MSC:Concept-Based47.ANS:EPTS:1DIF:MREF:Module 19MSC:Concept-Based48.ANS:EPTS:1DIF:MREF:Module 19MSC:Critical Thinking49.ANS:CPTS:1DIF:MREF:Module 19MSC:Concept-Based50.ANS:EPTS:1DIF:MREF:Module 19MSC:Critical Thinking51.ANS:APTS:1DIF:MREF:Module 19MSC:Concept-Based52.ANS:APTS:1DIF:MREF:Module 19MSC:Critical Thinking53.ANS:BPTS:1DIF:MREF:Module 20MSC:Fact-Based54.ANS:DPTS:1DIF:MREF:Module 20MSC:Concept-Based55.ANS:CPTS:1DIF:MREF:Module 20MSC:Critical Thinking56.ANS:CPTS:1DIF:MREF:Module 20MSC:Critical Thinking57.ANS:BPTS:1DIF:MREF:Module 20MSC:Critical Thinking58.ANS:DPTS:1DIF:MREF:Module 20MSC:Fact-Based59.ANS:CPTS:1DIF:MREF:Module 20MSC:Concept-Based60.ANS:CPTS:1DIF:MREF:Module 21MSC:Critical Thinking ................
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