# Econ 103 Pre test 2

Document Sample

```					            Econ 103 Pre-Test 2
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

____    1. Total utility can be thought of as the
a. total satisfaction derived from a bundle of goods.
b. minimum amount of money a consumer is willing to spend on a bundle of goods.
c. additional satisfaction a consumer receives from the marginal unit of a good.
d. willingness to pay for the marginal unit of a good.
____    2. A consumer possesses five pounds of bananas and values their total utility at \$2.14. If one additional pound is
acquired and marginal utility is 11 cents, total utility will
a. rise to \$2.25.
b. fall to \$2.03.
c. stay the same.
d. fall to \$2.11.
____    3. Total utility
a. diminishes as the quantity consumed of a good increases.
b. increases as long as more goods are acquired.
c. increases as long as marginal utility increases.
d. increases as long as marginal utility is positive.
e. diminishes as consumption of some good rises.
____    4. Jason considers a crystal bowl, a silver dish, and a pewter figurine, each priced \$45 at the local gift shop. He
chooses the silver dish because, according to economic theory
a. his marginal utility per dollar is greatest.
b. his total utility is minimized.
c. his marginal utility is equal to his total utility.
d. silver costs more per ounce than pewter.

Table 4-2

Number of coconuts                           0           1            2              3        4
Robinson's marginal utility                  C         \$2.00        \$1.88          \$1.60    \$1.30

____    5. According to Table 4-2, Robinson's total utility from having two coconuts is _______.
a. \$1.87
b. \$1.66
c. \$3.88
d. This is not determinable from the information in the table.

Table 4-1B

Number of coconuts                               0         1            2             3        4
Robinson's marginal utility                      C       \$2.00        \$1.88         \$1.60    \$1.30

TOP: Utility: A Tool to Analyze Purchase Decisions

____    6. If a graph of Robinson's marginal utility were constructed from Table 4-1B, it would
a. illustrate the "law" of diminishing marginal utility.
b. be a negatively sloped curve.
c. illustrate a typical consumer's satisfaction derived from consumption of consecutive units
of a good.
d. All of the above are correct.
____   7. Consumer's surplus is a measure of how much
a. less than his income a consumer spends on goods.
b. more utility a consumer receives from his purchases than he has to pay for them.
c. a consumer's marginal utility differs from his total utility.
d. a change in price induces a consumer to substitute other goods.

Figure 4-2

____   8. In Figure 4-2, consumer surplus is measured by the area
a. ABC.
b. OBCD.
c. OACD.
d. DCE.
____   9. The Wall Street Journal reports that "hard times aid poultry companies as people eat cheaper fowl." In the
language of economists, this means
a. chicken is an inferior good.
b. chicken has a negative substitution effect.
c. chicken has a positive substitution effect.
d. people's tastes change during recessions.
e. chicken has a positive income effect.

Figure 4-4
____ 10. Assume the market consists of three consumers with the demand curves in Figure 4-4. At a price of 1, the
total market demand is
a. 40.
b. 80.
c. 140.
d. 150.
____ 16. The formula for price elasticity of demand that is used in practice
a. usually drops all minus signs.
b. usually takes on different values at different points on the demand curve.
c. may calculate the percentage change in price between P1 and P2 as "(P2 - P1) as a
percentage of (P1 + P2)/2."
d. All of the above are correct.
____ 17. If the price of gasoline rises by 20 percent and consumption of gasoline falls by 5 percent,
a. demand is elastic.
b. demand is inelastic.
c. demand is unit elastic.
d. gas station owners' revenues will fall.

Figure 5-1

____ 18. In Figure 5-1,
a. D1 is more elastic than D2 below P2 and less elastic above P2.
b. D1 is less elastic than D2 at all prices.
c. D2 is less elastic than D1 at all prices.
d. D2 is more elastic than D2 above P2 but less elastic below P2.

Figure 5-3
____ 19. In Figure 5-3(a), demand is
a. perfectly elastic.
b. perfectly inelastic.
c. unit elastic.
d. fixed at one particular quantity.
____ 20. In Figure 5-3(b), as price falls from \$15 to \$6, total expenditure
a. falls.
b. increases.
c. remains constant.
d. first falls and then increases.

____ 22. In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent. If the dollar value of her sales
remained constant, that indicates
a. old customers bought no more books.
b. no new customers bought books.
c. the quantity of books sold increased 20 percent.
d. the demand curve is vertical.
____ 23. The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller.
The airlines base the policy on the assumption that
a. consumers are not aware of airline prices.
b. consumer demand is unrelated to prices.
c. consumer demand becomes more elastic as departure time approaches.
d. consumer demand becomes less elastic as departure time approaches.
____ 24. The price of coffee rose 50 percent and coffee sales fell 25 percent. Doughnut sales also fell 25 percent. From
this information we can conclude that
a. demand for coffee is inelastic.
b. coffee and doughnuts are complements.
c. the cross elasticity of demand is minus 0.5 percent.
d. All of the above are correct.
____ 25. Marginal physical product can tell a producer
a. at what point to stop adding inputs to the production process.
b. how much profit will be made at each level of production.
c. how much the last input added to the total amount of revenue.
d. how much the last input added to the total amount of production.

Table 6-1

Workers         Toys
1               5
2              12
3              22
4              30
5              35

____ 26. In Table 6-1, the average physical product after five workers are hired is
a. 5.
b. 6.
c. 7.
d. 8.

John Amaker owns orange groves and hires pickers for a two-week period as shown in Table 6-3.

Table 6-3

Pickers       Oranges Picked
1              1,000
2              2,000
3              3,000
4              3,900
5              4,700
6              5,400
7              6,000
8              6,200
9              6,000

____ 27. In Table 6-3, diminishing returns set in with picker
a. 3.
b. 4.
c. 5.
d. 6.
e. 9.

Figure 6-1
____ 28. Of the graphs in Figure 6-1, which best represents marginal physical product?
a. 1
b. 2
c. 3
d. 4
____ 29. In August 1988, the Los Angeles Kings hired Wayne Gretzky for \$15 million in cash. The hockey team's
decision must have been based on the expectation that
a. Gretzky's opportunity cost will exceed \$15 million.
b. Gretzky's marginal revenue product will equal or exceed \$15 million.
c. the team's total revenue will equal \$15 million.
d. Gretzky's marginal revenue product will rise in the long run.
____ 30. The rule for the optimal use of any input says that
a. when MRP is less than price, it pays to expand resource use.
b. when MRP is greater than price, it pays to expand resource use.
c. when MRP equals price, resource use should be cut back.
d. resources should be used only if MRP exceeds price.
____ 31. At a given level of wheat output, one more unit of labor would produce 10 extra bushels, and one more unit of
seed would produce 30 extra bushels. A unit of labor costs \$6, and a unit of seed costs \$12. The farmer should
a. produce less wheat.
c. buy more seed and less labor.
d. buy less seed and more labor.
____ 32. If the MPP of labor is 60 and the price of labor per period is \$20, the MPP of machinery is 75 and the price of
the machinery per period is \$25, in order to achieve optimal input proportions the firm should use
a. more labor and less machinery.
b. more machinery and less labor.
c. more labor with the same amount of machinery.
d. the current combination.
____ 33. Total fixed cost
a. increases as output increases.
b. declines as output increases.
c. is always zero.
d. remains constant even if the firm shuts down.

Figure 6-5

____ 34. Which of the curves in Figure 6-5 could be a firm's average fixed cost curve?
a. (a)
b. (b)
c. (c)
d. (d)

Figure 6-10

____ 35. In Figure 6-10, the curve labeled C is
a. average fixed cost.
b. average total cost.
c. average variable cost.
d. marginal cost.

Figure 6-12

____ 36. Which of the graphs in Figure 6-12 shows a marginal physical product curve that exhibits first increasing, and
then diminishing, marginal returns to sunlight?
a. (a)
b. (b)
c. (c)
d. (d)
____ 37. The long-run average cost curve
a. is a composite of short-run AC curves.
b. shows the lowest possible short-run AC corresponding to each output level.
c. depends on the firm's planning horizon.
d. All of the above are correct.
____ 38. When economies of scale are present,
a.   costs per unit decline as output expands.
b.   the government feels responsible for breaking up the firm.
c.   firms always make handsome profits.
d.   costs fall as the size of the product is increased.
____
Econ 103 Pre-Test 2

MULTIPLE CHOICE

1.   A
2.   A
3.   D
4.   A
5.   C
6.   D
7.   B
8.   A
9.   A
10.   C
16.   D
17.   B
18.   C
19.   A
20.   B
21.   A
22.   C
23.   D
24.   D
25.   D
26.   C
27.   B
28.   B
29.   B
30.   B
31.   C
32.   D
33.   D
34.   A
35.   B
36.   C
37.   D
38.   A

```
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
 views: 100 posted: 11/3/2012 language: English pages: 9
How are you planning on using Docstoc?