Download Final Exam Answer Key

Economics 101 – Section 4 Final Exam
1. How would an increase in the price of labor, an input in production, change supply? D
a. Movement up
b. Movement down
c. Shift to the right
d. Shift to the left
e. a & b
2. What market condition would exist if the price happens to be below the equilibrium price? B
a. Excess supply
b. Excess demand
c. Equilibrium
d. All
e. None
3. What will happen to equilibrium price and quantity if income of consumers rise causing demand to increase? B
a. P up and Q down
b. P up and Q up
c. P down and Q up
d. P down and Q down e. P and Q same
4.
The law of diminishing marginal returns states that as more of any one input is added, holding the other inputs constant, its
marginal product will eventually decline. B
a. False
b. True
c. All
d. None
5. Type of business ownership that has unlimited liability. B
a. Corporation
b. Sole proprietorship
c. Multinational
d. Domestic
6. Condition at the region where the long-run average total cost decreases as output increases. B
a. Fixed cost
b. Economies of scale
c. Diseconomies
d. Constant
7.
e. All
e. Average
The point where average variable cost is at the minimum is the point where B
a. Minimum MC
b. Minimum ATC
c. AVC=MC
d. ATC=MC
e. ATC=AVC
8. The output level at which the firm’s LRATC curve is lowest. B
a. Total product
b. Minimum efficient scale
c. Marginal product
d. Constant product
e. Average
9. The shutdown price is. B
a. Price < ATC
b. Price < AVC
c. Price < AFC
d. Price < MC
10. The price which gives zero profit is. A
a. Price = ATC
b. Price = AVC
c. Price = AFC
d. Price = MC
e. None
d. P↓
e. None
11. What suggests that quantity demanded has increased? D
a. At same P, Q↑
b. At same Q, P↑
c. At same Q, P↓
12. Curve showing all combinations of goods and services that can be produced using all resources at given technology? C
a. Demand
b. Budget
c. PPF
d. Indifference
e. None
13. Method determining what to produce, how to produce, and who will get them? A
a. Resource Allocation
b. Economics
c. Resources
d. Market Economy
e. None
14. Economy determined by decisions of individual agents? A
a. Market Economy
b. Allocation
c. Traditional
d. Command Economy
e. None
15. If a consumer prefers A to B and B to C, then A is preferred to C? D
a. More is better
b. Utility
c. Diminishing
d. Rational preference
e. None
16. Assumption that puts a consumer always at the budget constraint? A
a. More is better
b. Utility
c. Diminishing
d. Rational preference
e. None
17. Maximum satisfaction of a consumer is achieved when B
a. MUx=MUy
b. MUx/Px=MUy/Py
c. Px=Py
d. X=Y
e. None
18. At a point of productive inefficiency in the PPF, opportunity cost to increase one product holding the other fixed is C
a. Greater than 0
b. Less than 0
c. Equal to 0
d. Greater than 1
e. None
19. Products that are substitutes in demand have a cross-price elasticity that is A
a. Greater than 0
b. Less than 0
c. Equal to 0
d. Greater than 1
e. None
20. If a product is inelastic, an increase in price will ________ total revenue. A
a. Increase
b. Decrease
c. Not change
d. Double
e. None
21. The supply function of a firm under perfect competition. C
a. AVC
b. ATC
c. MC
d. AFC
22. Zero economic profit means that a firm is not earning anything. B
a. True
b. False
c. a and b
d. None
e. None
23. Given an initial equilibrium price of Po, an increase in demand in a constant cost industry will result to a new price which is C
a. Higher than Po
b. Lower than Po
c. Equal to Po
d. Any price
e. None
24. Given an initial equilibrium price of Po, an increase in demand in an increasing cost industry will result to a new price which is
A
a. Higher than Po
b. Lower than Po
c. Equal to Po
d. Any price
e. None
25. A monopoly will always produce at an output level where marginal revenue is positive. A
a. True
b. False
c. a and b
d. None
26. Force(s) that can cut monopoly profits to zero C
a. Government regulation b. Rent-seeking
c. a and b
d. None
27. A firm in a monopolistic competition will always have excess capacity compared to a firm in perfect competition. A
a. True
b. False
c. a and b
d. None
28. There is more benefit to advertise in a perfect competition than in monopolistic competition. B
a. True
b. False
c. a and b
d. None
29. Entry and exit characteristic of a monopoly. B
a. Free-easy
b. Restricted
c. All
d. None
30. Entry and exit characteristic of a perfect competition. A
a. Free-easy
b. Restricted
c. All
d. None
31. Entry and exit characteristic of a monopolistic competition. A
a. Free-easy
b. Restricted
c. All
d. None
32. Number of firms characteristic of a perfect competition. A
a. Many small
b. One
c. Few large
d. None
33. Number of firms characteristic of a monopoly. B
a. Many small
b. One
c. Few large
d. None
34. Number of firms characteristic of a monopolistic competition. A
a. Many small
b. One
c. Few large
d. None
35. Product characteristic of a monopolistic competition. B
a. Homogenous
b. Differentiated
c. None
36. Product characteristic of a monopoly. A
a. Homogenous
b. Differentiated
c. None
37. Product characteristic of a perfect competition. A
a. Homogenous
b. Differentiated
c. None
38. Abnormal profit performance standard of a monopolistic competition in the long run. B
a. Greater than zero
b. Equal to zero
c. Less than zero d. None
39. Abnormal profit performance standard of a monopoly in the long run. A
a. Greater than zero
b. Equal to zero
c. Less than zero d. None
40. Abnormal profit performance standard of a perfect competition in the long run. B
a. Greater than zero
b. Equal to zero
c. Less than zero d. None
41. Actual cost versus minimum cost performance standard of a monopoly in the long run. A
a. Cost > min cost
b. Cost = min cost
c. Cost < min cost
d. None
42. Actual cost versus minimum cost performance standard of a monopolistic competition in the long run. A
a. Cost > min cost
b. Cost = min cost
c. Cost < min cost
d. None
43. Actual cost versus minimum cost performance standard of a perfect competition in the long run. B
a. Cost > min cost
b. Cost = min cost
c. Cost < min cost
d. None
44. Under an oligopoly game which strategy gives higher payoff regardless of what the other player chooses to play. C
a. Nash Equilibrium
b. Collusion Solution
c. Dominant Strategy
d. All
e. None
45. Under an oligopoly game which solution is more stable. A
a. Nash Equilibrium
b. Collusion Solution
c. Dominant Strategy
d. All
e. None
46. Under an oligopoly game which solution usually gives a higher payoff to both players. B
a. Nash Equilibrium
b. Collusion Solution
c. Dominant Strategy
d. All
e. None
47. What makes a monopoly long run solution “bad” when compared to perfect competition. D
a. Higher price
b. Lower quantity
c. Cost not minimum
d. All
e. None
48. What are the sources of monopoly. D
a. Economies of scale
b. Network externalities
d. a, b, and c
e. None
49. Change in total revenue per unit increase in the resource (e.g., labor). B
a. MR
b. MRP
c. MC
d. MFC
e. none
50. Change in total cost per unit increase in the resource (e.g., labor). D
a. MR
b. MRP
c. MC
d. MFC
e. none
51. What factor(s) affect the demand curve of labor. D
a. Productivity
b. Output price
d. a and b
e. none
52. Rule in choosing the profit maximizing quantity of labor to employ. B
a. MR=MC
b. MRP=MFC
c. MR=MRP
d. MC=MFC
e. none
53. If MRP > MFC the firm will improve profits if it A
a. Hires more labor
b. Hires less labor
d. a and b
e. none
c. Legal barriers
c. Input price
c. No change
54. If the demand for cars increase, what is expected to happen to the labor employed (L) in the car industry and their wages (w) A
a. L up and w up
b. L up and w same
c. L down and w up
d. L & w down
e. zero
55. If a computer is complimentary to labor what happens to L & w if computer prices decline. A
a. L up and w up
b. L up and w same
c. L down and w up
d. L & w down
e. zero
56. An increase in the use of a substitute input to labor will impact L and w with D
a. L up and w up
b. L up and w same
c. L down and w up
d. L & w down
e. zero
57. What is the impact to L and w if foreign workers are allowed easy entry and exit to the U.S. B
a. L up and w up
b. L up and w down
c. L down and w up
d. L & w down
e. zero
58. What is was the impact of the entry of women in the workforce B
a. L up and w up
b. L up and w down
c. L down and w up
e. zero
d. L & w down
59. The lowest wage rate at which an individual would supply labor to a particular labor market. A
a. Reservation wage
b. Minimum wage
c. Maximum wage
d. Equilibrium wage
e. zero
60. Impact on the supply of factory workers if the wage of office receptionists increases. D
a. Move up along same
b. Move down along same
c. Shift to the right
d. Shift to the left
e. None
61. Impact of higher tuition on the supply of engineers. D
a. Move up along same
b. Move down along same
e. None
c. Shift to the right
d. Shift to the left
62. When minimum wage is imposed, the resulting condition in the affected labor markets is a A
a. Surplus labor
b. Deficit
c. Equilibrium
d. None
63. The value of an asset is the sum of the present value of all the future benefits it generates. B
a. False
b. True
c. a and b
d. none
64. What happens to the value of an asset if the future benefits are delayed B
a. Increase
b. Decrease
c. Unchanged
d. none
65. What happens to the value of an asset if the discount rate (interest) decreases A
a. Increase
b. Decrease
c. Unchanged
d. none
66. Which financial instrument has more risk associated with its benefits A
a. Stocks
b. Bonds
67. The firm that issued the financial instrument generates cash every time they are bought or sold A
a. False
b. True
c. a and b
d. none
68. What is the impact of an increase in current profits on the value of a share of stock. A
a. Increase
b. Decrease
c. No impact
d. none
69. What is the impact of a rise in interest rate on the value of a share of stock. B
a. Increase
b. Decrease
c. No impact
d. none
70. What is the impact of an increase in the riskiness of future profits on the value of a share of stock. B
a. Increase
b. Decrease
c. No impact
d. none
71. An asset that promises to pay $1 over the next five years is worth ____, given a discount rate that is not zero. C
a. Equal to 5
b. Greater than 5
c. Less than five
d. All
e. None
72. A financial asset that promises to pay fixed payments at given periods. B
a. Stocks
b. Bonds
c. Deposits
d. All
e. None
73. The amount of money a bond promises to pay when it matures. B
a. Premium
b. Face value
c. Capital gains
d. Coupon payments
e. None
74. A series of periodic payments that a bond promises before maturity. D
a. Premium
b. Face value
c. Capital gains
d. Coupon payments
e. None
75. Part of a firm’s earnings that is paid to its shareholders. A
a. Dividends
b. Face value
c. Capital gains
d. Coupon payments
e. None
76. The yield (YLD) in a stock report is dividends divided by the. A
a. Stock price
b. Face value
c. Capital gains
d. Coupon payments
e. None
77. Which is (are) a function(s) of a financial market E
a. Facilitate production
b. Discipline management
d. Reallocate spending
e. All
78. Which market do corporations sell their initial public offering (IPO). A
a. Primary market
b. Secondary Market
c. Local market
d. Foreign market
e. All
79. A PE of 5 in a stock report means that B
a. Earnings is 5x > price b. Price is 5x > earnings
d. None
c. Reduce risk
c. Price=Earnings
80. At a given time, the total supply of stocks from a firm is A
a. Fixed
b. Upward sloping
c. Downward sloping
d. Horizontal
e. None