Download ECO 2003.003 Exam 2 Spr 14

ECO 2003.003 Exam 2 Spr 14
Multiple Choice
Identify the choice that best completes the statement or answers the question.
1. A legal minimum on the price at which a good can
7. Ivana produces cookies. Her production cost is $6
be sold is called a price
per dozen. She sells the cookies for $8 per dozen.
a. subsidy.
Her producer surplus per dozen cookies is
b. floor.
a. $2.
c. support.
b. $6.
d. ceiling.
c. $8.
d. $14.
2. The minimum wage
a. is an example of a price ceiling.
Figure 7-20
b. has its greatest impact on middle-aged and
immigrant workers.
Price
c. does not apply to unpaid internships.
K
48
Supply
d. does not affect the quantity of labor demanded;
A
44
it only affects the quantity of labor supplied.
40
3. Welfare economics is the study of
a. taxes and subsidies.
b. how technology is best put to use in the
production of goods and services.
c. government welfare programs for needy people.
d. how the allocation of resources affects
economic well-being.
36
32
F
G
28
24
H
B
Demand
20
16
12
4. The maximum price that a buyer will pay for a good
is called the
a. cost.
b. willingness to pay.
c. equity.
d. efficiency.
5. Consumer surplus is the
a. amount of a good consumers get without paying
anything.
b. amount a consumer pays minus the amount the
consumer is willing to pay.
c. amount a consumer is willing to pay minus the
amount the consumer actually pays.
d. value of a good to a consumer.
6. A seller’s opportunity cost measures the
a. value of everything she must give up to produce
a good.
b. amount she is paid for a good minus her cost of
providing it.
c. consumer surplus.
d. out of pocket expenses to produce a good but not
the value of her time.
8
C
4
1
2
3
4
5
6
7
8
9
10
11 Quantity
8. Refer to Figure 7-20. At equilibrium, consumer
surplus is measured by the area
a. ACG.
b. AFG.
c. KBG.
d. CFG.
9. Refer to Figure 7-20. At equilibrium, producer
surplus is measured by the area
a. ACG.
b. AFG.
c. KBG.
d. CFG.
10. Refer to Figure 7-20. At equilibrium, total surplus
is
a. $36.
b. $72.
c. $108.
d. $144.
11. The decisions of buyers and sellers that affect people
who are not participants in the market create
a. market power.
b. externalities.
c. profiteering.
d. market equilibrium.
12. The benefit that government receives from a tax is
measured by
a. the change in the equilibrium quantity of the
good.
b. the change in the equilibrium price of the good.
c. tax revenue.
d. total surplus.
15. Refer to Figure 8-3. The equilibrium price before
the tax is imposed is
a. P1.
b. P2.
c. P3.
d. P4.
Figure 8-6
The vertical distance between points A and B
represents a tax in the market.
Price
22
20
18
16
Supply
A
14
13. When a tax is levied on buyers, the
a. supply curves shifts upward by the amount of
the tax.
b. tax creates a wedge between the price buyers
effectively pay and the price sellers receive.
c. tax has no effect on the well-being of sellers.
d. All of the above are correct.
14. The loss in total surplus resulting from a tax is called
a. a deficit.
b. economic loss.
c. deadweight loss.
d. inefficiency.
Figure 8-3
The vertical distance between points A and C
represents a tax in the market.
P4
Price
Supply
A
P3
D
B
P2
P1
C
Demand
Q1
Q2
Quantity
12
10
8
6
B
4
Demand
2
100 200 300 400 500 600 700 800 900 1000
Quantity
16. Refer to Figure 8-6. The amount of the tax on each
unit of the good is
a. $6.
b. $8.
c. $10.
d. $12.
Figure 8-11
Price
Supply
P
A
3
C
P2
P1
B
Demand
Q1
Q2
17. Refer to Figure 8-11. The deadweight loss of the
tax is represented by the
a. length of the line segment connecting points A
and B.
b. length of the line segment connecting points A
and C.
c. length of the line segment connecting points B
and C.
d. area of the triangle bounded by the points A, B,
and C.
18. Refer to Figure 8-11. The price labeled as P3 on
the vertical axis represents the price
a. received by sellers before the tax is imposed.
b. received by sellers after the tax is imposed.
c. paid by buyers before the tax is imposed.
d. paid by buyers after the tax is imposed.
19. What is the fundamental basis for trade among
nations?
Figure 9-6
Quantity
a. shortages or surpluses in nations that do not
trade
b. misguided economic policies
c. absolute advantage
d. comparative advantage
20. A tax on an imported good is called a
a. quota.
b. tariff.
c. supply tax.
d. trade tax.
21. The price of a good that prevails in a world market is
called the
a. absolute price.
b. relative price.
c. comparative price.
d. world price.
22. Refer to Figure 9-6. The size of the tariff on
carnations is
a. $8 per dozen.
b. $6 per dozen.
c. $4 per dozen.
d. $2 per dozen.
23. Refer to Figure 9-6. The amount of revenue
collected by the government from the tariff is
a. $200.
b. $400.
c. $500.
d. $600.
24. Refer to Figure 9-6. When a tariff is imposed in the
market, domestic producers
a. gain by $100.
b. gain by $200.
c. gain by $300.
d. lose by $100.
25. Refer to Figure 9-6. The amount of deadweight loss
caused by the tariff equals
a. $100.
b. $200.
c. $400.
d. $500.
26. Which of the following is not a commonly-advanced
argument for trade restrictions?
a. the jobs argument
b. the national-security argument
c. the infant-industry argument
d. the efficiency argument
27. Economists normally assume that the goal of a firm
is to
a. maximize its total revenue.
b. maximize its profit.
c. minimize its explicit costs.
d. minimize its total cost.
28. A certain firm produces and sells potato chips. Last
year it sold 3 million bags of chips at a price of $3
per bag. For last year, the firm's
a. accounting profit was $9 million.
b. economic profit was $9 million.
c. total revenue was $9 million.
d. explicit costs was $9 million.
29. Assume a certain firm regards the number of
workers it employs as variable but regards the size of
its factory as fixed. This assumption is often realistic
a. in the short run but not in the long run.
b. in the long run but not in the short run.
c. both in the short run and in the long run.
d. neither in the short run nor in the long run.
30. For a firm, the production function represents the
relationship between
a. implicit costs and explicit costs.
b. quantity of inputs and total cost.
c. quantity of inputs and quantity of output.
d. quantity of output and total cost.
31. Suppose a firm currently produces 225 units of
output per day with 15 workers. The firm is able to
produce 235 units of output with a 16th worker.
What is the marginal product of the 16th worker?
a. 10 units of output
b. 15 units of output
c. 16 units of output
d. 25 units of output
32. Total cost can be divided into two types of costs:
a. fixed costs and variable costs.
Table 13-7
The Flying Elvis Copter Rides
Quantity Total
Fixed
Variable Marginal
Cost
Cost
Cost
Cost
0
$50
$50
$0
1
$150
A
B
2
G
H
I
3
M
N
O
34. Refer to Table 13-7. What is the value of B?
a. $25
b. $50
c. $100
d. $200
35. Refer to Table 13-7. What is the value of A?
a. $25
b. $50
c. $100
d. $200
36. Refer to Table 13-7. What is the value of F?
a. $50
b. $100
c. $150
d. $200
37. Refer to Table 13-7. What is the value of P?
a. $50
b. $140
c. $360
d. $410
38. Refer to Table 13-7. What is the value of R?
a. $16.67
b. $50
c. $136.67
d. $360
Scenario 13-16
-C
$120
P
b. fixed costs and marginal costs.
c. variable costs and marginal costs.
d. average costs and marginal costs.
33. Average total cost (ATC) is calculated as follows:
a. ATC = (change in total cost)/(change in quantity
of output).
b. ATC = (change in total cost)/(change in quantity
of input).
c. ATC = (total cost)/(quantity of output).
d. ATC = (total cost)/(quantity of input).
Average
Average
Average
Fixed
Variable
Total
Cost
Cost
Cost
---D
E
F
J
K
L
Q
$120
R
A certain firm produces and sells staplers. Last year,
it produced 7,000 staplers and sold each stapler for
$6. In producing the 7,000 staplers, it incurred
variable costs of $28,000 and a total cost of $45,000.
39. Refer to Scenario 13-16. The firm's fixed cost was
a. $7,000.
b. $17,000.
c. $28,000.
d. $42,000.
40. If marginal cost is greater than average total cost,
then
a. profits are increasing.
b. economies of scale are becoming greater.
c. average total cost remains constant.
d. average total cost is increasing.
41. The firm's efficient scale is the quantity of output
that minimizes
a. average total cost.
b. average fixed cost.
c. average variable cost.
d. marginal cost.
42. A key characteristic of a competitive market is that
a. government antitrust laws regulate competition.
b. producers sell nearly identical products.
c. firms minimize total costs.
d. firms have price setting power.
43. Whenever a perfectly competitive firm chooses to
b. does not change.
change its level of output, its marginal revenue
c. increases.
a. increases if MR < ATC and decreases if MR >
d. decreases.
ATC.
Table 14-7
Suppose that a firm in a competitive market faces the following revenues and costs:
Marginal
Marginal
Quantity
Cost
Revenue
12
$5
$9
13
$6
$9
14
$7
$9
15
$8
$9
16
$9
$9
17
$10
$9
44. Refer to Table 14-7. If the firm is currently
46. Refer to Figure 14-2. If the market price is P1, in
producing 14 units, what would you advise the
the short run the firm will earn
owners?
a. positive economic profits.
a. decrease quantity to 13 units
b. negative economic profits but will try to remain
b. increase quantity to 17 units
open.
c. continue to operate at 14 units
c. negative economic profits and will shut down.
d. increase quantity to 16 units
d. zero economic profits.
45. In calculating accounting profit, accountants
typically don't include
a. long-run costs.
b. sunk costs.
c. explicit costs of production.
d. opportunity costs that do not involve an outflow
of money.
Figure 14-2
Suppose a firm operating in a competitive market
has the following cost curves:
10
Price
MC
9
ATC
8
AVC
7
P1
6
5
P2
P3
4
3
P4
2
1
1
2
3
4
5
6
7
8
Quantity
47. Refer to Figure 14-2. If the market price is P4, in
the short run the firm will earn
a. positive economic profits.
b. negative economic profits but will try to remain
open.
c. negative economic profits and will shut down.
d. zero economic profits.
Figure 14-3
Suppose a firm operating in a competitive market
has the following cost curves:
19
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
Price
MC
ATC
1
2
3
4
5
6
7
8
Quantity
48. Refer to Figure 14-3. If the market price is $10,
what is the firm’s short-run economic profit?
a. $9
b. $15
c. $30
d. $50
49. Refer to Figure 14-3. If the market price is $10,
what is the firm’s total cost?
a. $15
b. $30
c. $35
d. $50
50. Refer to Figure 14-3. If the market price is $10,
what is the firm’s total revenue?
a. $15
b. $30
c. $35
d. $50