Download Midterm 2B (Blue Answer Sheet)

Instructor: Hirofumi Shimizu
Economics 101
Second Midterm Exam Spring 2000
Exam 2B
Mark the one best answer to each of the following 30 multiple choice questions on the
answer sheet.
Be sure to mark the answer by the corresponding question number on the answer sheet.
Do not make any stray marks on your answer sheet.
1.
A budget line
(a) describes the demand for two products.
(b) separates quantities of goods that a consumer can afford to buy at current income
and prices from those that it cannot afford.
(c) describes the quantity of a product demanded at each and every price.
(d) ranks bundles of products according to a consumer's preferences.
2.
A budget line will show a parallel shift away from the origin when there is
(a)
(b)
(c)
(d)
a decrease in consumer's income.
an increase in the price of a good measured on X-axis.
a decrease in the price of a good measured on Y-axis.
an increase in consumer's income.
3.
A budget line will become steeper when there is
(a)
(b)
(c)
(d)
an increase in consumer's income.
a decrease in the price of a good measured on X-axis.
a decrease in the price of a good measured on Y-axis.
a decrease in consumer's income.
4.
If a household's marginal utility is positive but decreases as more of a commodity is
consumed, it's total utility
(a)
(b)
(c)
(d)
may be either increasing, decreasing, or constant.
is also decreasing.
is constant.
is increasing.
5.
The law of diminishing marginal utility states that
(a) the more of a commodity one is consuming, the less the additional utility obtained by
an increase in its consumption.
(b) the more of a commodity one is consuming, the less will be total utility.
(c) the less of a commodity one is consuming, the less the additional utility obtained by
an increase in its consumption.
(d) the more of a commodity one is consuming, the more the additional utility obtained
by an increase in its consumption.
6.
An indifference curve indicates
(a) combinations of goods whose marginal utilities are always equal.
(b) all combinations of two goods that will give a person the same level of utility.
(c) all combinations of two goods that can be purchased with a given income and
current prices.
(d) the prices and quantities of two goods that can be purchased for a given
expenditure.
Y
Consumption point A
Consumption point B
X
Refer to the above budget line and indifference curve to answer questions 7 – 8.
7.
Suppose that a consumer's current consumption point is B. At point B,
(a)
(b)
(c)
(d)
MUx/MUy = Px/Py.
MUx/MUy > Px/Py.
MUx/MUy < Px/Py.
MUx/MUy = Py/Px.
8.
Suppose that a consumer's current consumption point is A. In order to increase her
utility, the consumer should
(a)
(b)
(c)
(d)
buy less X and more Y.
buy more X and less Y.
not change her purchasing behavior.
buy less X and less Y.
9.
Suppose that a consumer's budget line is $60 = $1X + $3Y. Further suppose that the
consumer's ratio of marginal utilities (MUx/MUy) is 1/4 at the point of consumption. To
maximize satisfaction, this consumer should
(a)
(b)
(c)
(d)
buy more X and less Y.
buy less X and more Y.
not change her purchasing behavior.
buy less X and less Y.
10.
Consumer surplus is
(a) the total value that a consumer receives from a purchase of a particular good.
(b) the market value of a particular good that a consumer purchases.
(c) the total value that a consumer receives from a purchase of a particular good minus
the market value of the good.
(d) the total value that a consumer receives from a purchase of a particular good minus
his/her total expenditure on that good.
11.
If a consumer is willing to pay $6 for the first unit of a good, $4 for the second, and $3 for
the third unit, and the market price is $3,
(a)
(b)
(c)
(d)
his/her consumer surplus is $4.
his/her consumer surplus is $9.
his/her consumer surplus is $3.
his/her consumer surplus is $13.
Inputs
Capital (K)
Labor (L)
4
0
4
1
4
2
4
3
4
4
Output
(Q)
0
5
15
22
27
Refer to the above table to answer questions 12 – 13.
12.
The marginal product of the third unit of the variable factor (labor) is
(a)
(b)
(c)
(d)
7.
5.
4.
3.
13.
Diminishing returns (diminishing marginal productivity of labor) occurs with which unit of
labor?
(a)
(b)
(c)
(d)
fourth
third
second
first
14.
If total product (TP) is increasing, then
(a)
(b)
(c)
(d)
average product of labor (APL) must be increasing.
marginal product of labor (MPL) must be decreasing.
marginal product of labor (MPL) must be greater than zero.
marginal product of labor (MPL) must be increasing.
15.
Average product of labor (APL) increases as long as
(a)
(b)
(c)
(d)
marginal product of labor (MPL) equals average product of labor (APL).
marginal product of labor (MPL) is less than average product of labor (APL).
marginal product of labor (MPL) is greater than average product of labor (APL).
marginal product of labor is decreasing.
Output
(Q)
0
1
3
4
Labor
(L)
0
1
2
3
Capital
(K)
4
4
4
4
Price of labor (w): $5 per unit
Price of capital (r): $10 per unit
Refer to the above table to answer questions 16 – 17.
16.
When the level of output is 3, the total variable cost (TVC) is
(a)
(b)
(c)
(d)
$5.
$10.
$30.
$40.
17.
The marginal cost (MC) of the fourth unit of output is
(a)
(b)
(c)
(d)
$4/3.
$1.
$5.
$15.
18.
When average variable cost (AVC) is at its minimum,
(a)
(b)
(c)
(d)
total fixed cost (TFC) is at its minimum.
average total cost (ATC) is at its minimum.
marginal product of labor (MPL) is at its maximum.
average product of labor (APL) is at its maximum.
19.
When average total cost (ATC) is falling, marginal cost (MC) must be
(a)
(b)
(c)
(d)
below average total cost (ATC) and falling.
above average total cost (ATC).
above average total cost (ATC) and increasing.
below average total cost (ATC).
20.
As the firm's output increases, in the short run,
(a) marginal cost (MC) curve intersects average variable cost (AVC) curve and average
total cost (ATC) curve at their minimum points.
(b) average fixed cost (AFC) increases continuously.
(c) the difference between average variable cost (AVC) and average total cost (ATC)
increases.
(d) marginal cost (MC) reaches its maximum, then decreases.
21.
A firm's long-run average cost (LRAC) curve depicts
(a)
(b)
(c)
(d)
the lowest attainable unit costs when all inputs (factors) are variable.
what costs will be attainable with technological improvement.
the lowest attainable average cost when all input prices vary.
a firm's profit-maximizing output choices.
22.
If the long-run average cost (LRAC) curve is downward sloping, the firm is experiencing
(a)
(b)
(c)
(d)
negative returns to scale.
increasing returns to scale.
constant returns to scale.
decreasing returns to scale.
23.
An isocost line
(a)
(b)
(c)
(d)
describes the demand for two inputs by a firm.
describes the quantity of an input demanded by a firm at each and every price.
shows alternative combinations of inputs that a firm could buy for a given total cost.
ranks bundles of inputs according to a producer's preferences.
24.
An isoquant curve indicates
(a) all combinations of two inputs for producing a given level of output.
(b) all combinations of two inputs that can be purchased by a firm for a given
expenditure.
(c) the prices and quantities of two inputs that can be purchased by a firm for a given
expenditure.
(d) combinations of inputs whose marginal products are always equal.
25.
For Firm A, the marginal product of labor (MPL) is 1 and that of capital (MPK) is 5. The
price of labor is $1 and that of capital is $4. To minimize total costs, Firm A should
(a)
(b)
(c)
(d)
not alter the factor (input) mix.
use more labor and less capital.
use less labor and more capital.
use more capital but keep labor constant.
26.
The assumptions of perfect competition include all of the following EXCEPT:
(a) Firms can easily enter into or exit from the market in the long run.
(b) There are small numbers of consumers and firms, and each buys or sells a large
fraction of the total quantity in the market.
(c) Buyers (consumers) know the nature of the product being sold and the prices
charged by each firm.
(d) All the firms in the market sell an identical (homogeneous) product.
27.
A profit-maximizing firm should produce in the short run if
(a)
(b)
(c)
(d)
price is greater than average variable cost (AVC).
price is less than average variable cost (AVC).
price is equal to marginal cost (MC).
total revenue (TR) is less than total variable cost (TVC).
28.
If it produces at all, a profit-maximizing firm should produce the output at which
(a)
(b)
(c)
(d)
average total cost (ATC) is minimized.
total revenue (TR) exceeds total cost (TC).
total revenue (TR) is maximized.
the incremental change in revenue equals the incremental change in costs.
29.
In the long run, a profit-maximizing firm should enter (or stay in) the market if
(a)
(b)
(c)
(d)
price is lower than long-run average cost (LRAC).
price exceed long-run average cost (LRAC).
total revenue (TR) is lower than long-run average cost (LRAC).
total revenue (TR) exceed long-run average cost (LRAC).
30.
In long-run equilibrium in a perfectly competitive market,
(a)
(b)
(c)
(d)
price will be lower than marginal cost (MC) of each firm in the industry.
price will exceed long-run average cost (LRAC) of each firm in the industry.
price will equal long-run average cost (LRAC) of each firm in the industry.
price will exceed marginal cost (MC) of each firm in the industry.