Midterm 2 HW questions (final exam)

Question 1

11. Which of the following statements is correct?
    a. Marginal utility decreases as a person consumes more of a commodity.
    b. Total utility is always increasing as a person consumes more of a commodity.
    c. Marginal utility cannot be negative.
    d. none of the above

Answer 1

A: a. Marginal utility decreases as a person consumes more of a commodity.

Question 2

21. When long-run average total costs decrease as output increases, there are
    a. economies of scale.
    b. diseconomies of scale.
    c. constant returns to scale.
    d. constant marginal costs.

Answer 2

A:

a. economies of scale.

Question 3

22. The “four-firm concentration ratio”

a. measures the incidence of a sales tax.
b. measures the percentage of sales accounted for by the top 4 firms in an industry.
c. is an implicit cost in partnership arrangements.
d. none of the above.

Answer 3

b. measures the percentage of sales accounted for by the top 4 firms in an industry.

Question 4

23. Agricultural acreage controls

a. are intended to shift the demand curve for agricultural products to the right.
b. are to increase exports of agricultural products.
c. are intended to shift the supply curve for agricultural products to the right.
d. are intended to increase the price per unit of agricultural products.

Answer 4

d. are intended to increase the price per unit of agricultural products.

Question 5

24. When an effective price ceiling has been imposed on a commodity, we could expect to see

a. the price for a commodity to be above the equilibrium price.
b. the price for a commodity to be below the equilibrium price
c. an excess demand for the commodity.
d. an excess supply for the commodity.
e. both (b) and (c)

Answer 5

A: e. both (b) and (c)

b. the price for a commodity to be below the equilibrium price
c. an excess demand for the commodity.

Question 6

28. Which of the following can cause a parallel rightward shift of the budget line?

a. income decreases
b. relative price changes
c. the prices of both goods in the diagram decrease in the same proportion
d. none of above

Answer 6

c. the prices of both goods in the diagram decrease in the same

Question 7

29. The accountant for Happy Bakery says that it earned profits of $35,000 last year. The owner of Happy Bakery took $10,000 out of her savings account to use in the business, but had no other implicit costs. Her savings account paid a 10% annual rate of interest. An economist would says that Happy Bakery

a. made a profit of less than $35,000
b. made a profit of more than $35,000
c. made a profit equal to $35,000
d. none of the above.

Answer 7

a. made a profit of less than $35,000

Question 8

30. Suppose when a firm produces 10 units of product, the total fixed cost is $3,000 and the average fixed cost is $300. Then if the firm produces 100 units of product, the total fixed cost should be__________ and the average fixed cost should be__________.

a. $30,000; $1,000
b. $3,000; $3,000
c. $300; $1,000
d. $3,000; $30

Answer 8

d. $3,000; $30

Question 9

31. Which of the following statements is true for a perfectly competitive market?

a. Each firm chooses its production quantity and the price it will charge.
b. Short-run supply curve for each firm is the same as its marginal cost curve above average fixed cost.
c. The sum of consumer surplus and producer surplus is maximized in equilibrium in this type of market.
d. In long-run equilibrium, firms will not produce at the minimum point of the short-run average total cost curve.

Answer 9

c. The sum of consumer surplus and producer surplus is maximized in equilibrium in this type of market.

Question 10

35. If perfectly competitive firms are presently earning positive profits, then

a. some of the firms will leave the market and market price will go up.
b. some new firms will enter the market and market price will go down.
c. There will be no more entry and exit of firms in the market.
d. The market supply curve will shift to the left as this market approaches the long-run equilibrium.

Answer 10

some new firms will enter the market and market price will go down.

Question 11

44. Suppose for a consumer the marginal utility from banana consumption is 15 and the price of a banana is $3; and the marginal utility from apple consumption is 15 and the price of an apple is $5 Given this information,

a. the consumer should buy less bananas and more apples to maximize total utility.
b. the consumer should buy more bananas and less apples to maximize total utility
c. the consumer need not to do anything currently to maximize total utility.
d. none of above

Answer 11

A:b. the consumer should buy more bananas and less apples to maximize total utility