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PRINCIPLES OF MICROECONOMICS Quiz 2 MCQS

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Question;1. The theory of;consumer choice assumes that consumers attempt to maximize;a. the difference between total utility and marginal utility.;b. average utility.;c. total utility.;d. marginal utility.;2. Utility refers to the;a. usefulness of a good or service.;b. satisfaction that results from the consumption of a good.;c. relative scarcity of a good.;d. rate of decline in the demand curve.;3. The law of diminishing marginal utility says that;a. the marginal utility gained by consuming equal successive units of a good;will decline as the amount consumed increases.;b. the more of a particular good one consumes, the greater us the utility;received from the consumption of that good.;c. the marginal utility gained by consuming equal successive units of a good;will increase as the amount consumed increases.;d. the more of a particular product one sells, the less utility one receives;from selling.;e. none of the above;4. Which of the following is true?;a. It is possible for total utility to rise as marginal utility falls.;b. Marginal utility is the same as total utility.;c. It is possible for marginal utility to rise as total utility falls.;d. a and c;e. a, b, and c;5. In order for an individual to maximize total utility while consuming only;two goods, A and B, that individual must fulfill the condition;a. TUA= TUB.;b. TUA/PA= TUB/PB.;c. MUA= MUB.;d. MUA/PA= MUB/PB.;e. MUB/PB= MUB/PA.;6. We would expect the total utility of water to be high but its marginal;utility to be low. Why?;a. Because water is a fluid and we don?t need fluids to live as much as we need;food.;b. Because we need water to live and there is so much of it.;c. Because we need water to live and there is very little of it.;d. Because water?s price is low.;e. none of the above;7. To demonstrate the law of demand, suppose the price of good A rises. To;restore consumer equilibrium, ________ of good A is purchased in order to;the marginal utility of the last unit of it purchased.;a. more, lower;b. more, raise;c. less, lower;d. less, raise;8. The ?income effect? indicates that;a. when the price of a good falls, a consumer will be able to buy more of it;with a given money income.;b. consumers should substitute among various goods until the marginal utility;of the last unit of each good purchased is the same.;c. when the price of a good falls, the lower price will induce the consumer to;buy more of that good now that it is relatively cheaper.;d. b and c;e. none of the above;9. Price elasticity of demand is a measure of the responsiveness of quantity;demanded to changes in;a. interest rates.;b. price.;c. supply.;d. demand.;10. If the percentage change in quantity demanded is greater than the;percentage change in price, demand is;a. inelastic.;b. unit elastic.;c. elastic.;d. perfectly elastic.;e. perfectly inelastic.;11. Which of the following is a determinant of price elasticity of demand?;a. the number of substitutes;b. the percentage of one?s budget spent on the good;c. the amount of time that has passed since a price change;d. b and c;e. all of the above;12. Upon deregulation, firms in a formerly regulated industry feared;that cut throat competition would reduce prices and their revenue.;Competition did force prices down but to the firms' surprise their;revenues increased. The demand curve for the product these firms;produced must be;a. perfectly elastic.;b. elastic.;c. inelastic.;d. perfectly inelastic.;13. When the cross elasticity of demand between two goods is ________, the;goods are ________.;a. negative, substitutes;b. negative, complements;c. positive, normal goods;d. positive, inferior goods;14. If Cassandra bought 24 blouses last year when her income was $40,000 and;she buys 16 blouses this year her when income is $35,000, then for her blouses;are;a. an inferior good.;b. a normal good.;c. a substitute good.;d. a complementary good.;e. There is not enough information to answer this question.;15. Economists Alchian and Demsetz suggest that firms are formed when;a. the sum of what individuals can produce alone is greater than what they can;produce as a team.;b. someone wants to earn profits.;c. someone comes up with the idea that customers will buy a new product.;d. the sum of what individuals can produce as a team is greater than the sum of;what they can produce alone.;16. Most economists say that the firm?s goal or objective is to maximize;a. sales.;b. employment.;c. profits.;d. worker satisfaction.;e. none of the above;17. The sole proprietor of a proprietorship has;a. unlimited liability, which means the owner is responsible for settling all;debts of the firm but not if it means selling his personal property to do so.;b. limited liability, which means the owner is responsible for settling all;debts of the firm, even if this means selling his personal property to do so.;c. limited liability, which means the owner cannot be sued for the his failure;to pay his company's debts.;d. unlimited liability, which means the owner is responsible for settling all;debts of the firm even if this means selling his personal property to do so.;18. Which of the following is a disadvantage of a corporation relative to a;proprietorship or a partnership?;a. perpetual life;b. difficulty in raising money;c. unlimited liability of the owners;d. double taxation of profits;e. none of the above;19. ?Managerial coordination? refers to the;a. behavior of a worker who is putting forth less than the agreed-to effort.;b. process where individuals perform certain tasks based on changes in market;forces.;c. process where persons share in the profits of a business firm.;d. process where managers direct employees to perform certain tasks.;20. Which of the following statements is true?;a. Explicit costs always equal implicit costs.;b. Zero economic profit is a smaller dollar figure than normal profit.;c. Zero economic profit is a larger dollar figure than normal profit.;d. Saying that a firm earned zero economic profit is the same as saying it;earned normal profit.;e. none of the above;21. A fixed input is an input whose quantity;a. can be changed as output changes in the short run.;b. cannot be changed as output changes in the short run.;c. cannot be changed as output changes in the long run.;d. a and c;e. b and c;22. ?As additional units of a variable input are added to a fixed input;eventually the marginal physical product of the variable input will decline.?;This is a statement of the;a. law of supply.;b. average-marginal rule.;c. law of comparative advantage.;d. law of diminishing marginal returns.;23. A rising marginal cost curve is a reflection of;a. a rising marginal physical product curve.;b. a falling marginal physical product curve.;c. a falling average fixed cost curve.;d. a rising average variable cost curve.;24. The average-marginal rule states that;a. if the marginal magnitude is less than the average magnitude, the average;magnitude falls.;b. if the marginal magnitude is greater than the average magnitude, the average;magnitude falls.;c. if the marginal magnitude is rising, the average magnitude is necessarily;above it.;d. if the marginal magnitude is falling, the average magnitude is necessarily;below it.;e. c and d;25. Refer to Exhibit T-4. Curve A is ________ curve.;a. a marginal cost;b. an average variable cost;c. an average total cost;d. an average fixed cost;26. A ?price taker? is a firm that;a. does not have the ability to control the price of the product it sells.;b. does have the ability, albeit limited, to control the price of the product;it sells.;c. can raise the price of the product it sells and still sell some units of its;product.;d. sells a differentiated product.;e. none of the above;27. A perfectly competitive firm will increase its production as long as;a. total revenue is less than total cost.;b. the total revenue curve is rising.;c. marginal revenue is greater than marginal cost.;d. the marginal revenue curve is rising.;28. The perfectly competitive firm will;a. produce in the short run if price is below average variable cost.;b. produce in the long run if price is below average variable cost.;c. produce in the short run if price is below average total cost but above;average variable cost.;d. produce in the long run if price is below average total cost but above;average variable cost.;29. The perfectly competitive firm?s short-run supply curve is;a. the upward-sloping portion of its average total cost curve.;b. the horizontal portion of its marginal revenue curve.;c. the portion of its average variable cost curve that lies above the average;fixed cost curve.;d. the upward-sloping portion of its marginal cost curve.;e. the portion of its marginal cost curve that lies above its average variable;cost curve.;30. Why must profits be zero in long-run competitive equilibrium?;a. If profits are not zero, firms will enter or exit the industry.;b. If profits are not zero, firms will produce higher-quality goods.;c. If profits are not zero, marginal revenue will rise.;d. If profits are not zero, marginal cost will rise.

 

Paper#56946 | Written in 18-Jul-2015

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