Question;Principles of;Microeconomics;ECON 201;Spring 2011/2012;MIDTERM II;1. A movement along a demand;curve from one price-quantity combination to another is called;A.a change in;quantity demanded.;B. a shift in the demand curve.;C. a change in demand.;D. a change in quantity supplied.;2. If the demand for a good;decreases as income decreases, it is a(n);A. complementary good.;B.normal good.;C. inferior good.;D. substitute good.;3. If an increase in the price of;computers lead to reduced demand for monitors, then;A.computers and;monitors are complements.;B. computers are a normal good;and monitors are inferior.;C. computers and monitors are;substitutes.;D. computers are an inferior good;and monitors are normal.;4. A decrease in the demand for;bananas with no concurrent change in the supply of bananas will;result in a ________ equilibrium;price and a(n) ________ equilibrium quantity.;A. higher, lower;B.lower, lower;C. higher, unchanged;D. higher, higher;5. An increase in the demand for;GM automobiles results in;A. a lower equilibrium price for;GM automobiles.;B.an increase in;the quantity supplied of GM automobiles.;C. an increase in the supply of;GM automobiles.;D. a lower equilibrium quantity;of GM automobiles.;6. One observes that the;equilibrium price of apples falls and the equilibrium quantity increases.;Which of the following best fits;the observed data?;A. An increase in demand with;supply constant;B. A decrease in supply with;demand constant;C. An increase in demand coupled;with an increase in supply;D.Demand constant;and an increase in supply;7. Refer to the figure above.;What might cause Demand to shift from the Original Demand to the;New Demand?;A. An expectation that coffee;prices will fall in the future.;B. An increase in the price of;coffee creamer (a complementary good).;C. An decrease in the price of;tea (a substitute).;D.An increase in;incomes.;8. Refer to the figure above.;What might cause Supply to shift from the Original Supply to the;New Supply?;A. A storm in South America wipes;out the entire coffee crop.;B.New technology;reduces the amount of coffee beans necessary to make a good-tasting pot of;coffee.;C. A news report that coffee;consumption greatly increases productivity.;D. An increase in the price of;tea.;9. If a market is in equilibrium;and demand increases while supply decreases, the change in the;equilibrium price is ________ and;the change in the equilibrium quantity is _________.;A. positive, positive;B. positive, negative;C.positive;indeterminate;D. indeterminate, positive;10. If both supply and demand in;the market for bagels increase simultaneously, which of the;following outcomes is certain to;occur?;A. The equilibrium price of;bagels will rise.;B.The equilibrium;quantity of bagels will rise.;C. The equilibrium price of;bagels will fall.;D. The equilibrium quantity of;bagels will fall.;11. If the price of cheese falls by one percent and;the quantity demanded rises by 3 percent, then;the price elasticity of demand;for cheese has a value of;A. 30.;B. 0.30.;C. 0.333.;D.3.;12. If the price of a good;increases by 20% and that leads to a decrease in quantity demanded by;60%, what is the price elasticity;of demand for that good?;A. 30.;B.3.;C. 1/3.;D. 1/6.;13. When the price of hot dogs is;$1.50 each, 500 hot dogs are sold every day. After lowering the;price to $1.35 each, 510 hot dogs;are sold every day. At the original price, what is the price;elasticity of demand for hot dog?;A. 66.67;B. 5;C. 2;D.0.2;14. Suppose a 10% increase in the;price of pain relievers leads to a 5% decrease in quantity;demanded of pain relievers. The;demand for pain relievers, with respect to price, is;A. elastic.;B.inelastic.;C. unitary elastic.;D. perfectly inelastic.;15. Generally speaking, demand;for a good will be more inelastic;A.if few;substitutes exist.;B. when the good represents a;large share of the consumer's budget.;C. in the long run.;D. when many substitutes exist.;16. Suppose two demand curves;have a point in common. With respect to price at that point;demand shown by the steeper curve;will be _______ the less steep (flatter) curve.;A. more elastic than;B.less elastic;than;C. as elastic as;D. more likely to be unitary;elastic than;17. Refer to the figure above.;The price elasticity of demand at point A is;A.5/2.;B. 5/8.;C. 2/5.;D. 8/5.;18. Refer to the figure above. If;the price of a latte increases from $2.00 to $2.50;A. total revenue would increase.;B. total revenue would stay the;same.;C.total revenue;would decrease.;D. the change in total revenue;if any, would depend on the supply curve.;19. Chris had been charging a;dollar a pound for potatoes. When Chris lowered the price to;$0.90, total revenue fell. When;Chris raised the price to $1.10, total revenue also fell. Why?;A. $1.00 is the equilibrium price;for potatoes.;B. At $0.90, there is excess;demand for potatoes.;C. $1.10 is more than Chris's;customers' reservation prices.;D.Price elasticity;of demand is unitary at $1.00.;20. Sven likes to water ski, but;can only water ski during the one week that he is on vacation.;Therefore, he plans to ski every;day, for eight hours a day. The first day, Sven skied for eight;hours and enjoyed every hour. The;second day, Sven slept in and then skied for seven hours;which was fun but not as much fun;as the first day. The third day, Sven skied for six hours, but;was starting to get a bit bored;by the end. The fourth day, Sven skied for four hours and then;took a nap. On the fifth day of;Sven's vacation, Sven went blueberry picking all day.;Sven's vacation convinced him;that;A.even for;activities he really enjoys, diminishing marginal utility eventually sets in.;B. blueberry picking yields;higher total utility than does water skiing.;C. even for activities he really;enjoys, total utility declines each time he engages in it.;D. economic theory applies only;to things you buy, not recreation;21. Pat's total utility after;eating 99 Reese's Peanut Butter Cups was greater than his total utility;after eating his hundredth. Therefore;Pat's marginal utility for the 100thpeanut butter cup was;A. positive, but less than one.;B. positive, but less than Pat's;marginal utility for the 99thpeanut butter cup.;C. zero;D.negative;22. Laura's total utility from;consuming 8, 9, and 10 bonbons is 35, 42, and 45, respectively. Her;marginal utility from the 9thbonbon is;A. 42;B. 77;C.7;D. 87;23. Refer to the figure above.;The marginal utility of the sixth pizza is;A. 95;B. 100;C.5;D. 15;24. Refer to the figure above.;Total utility increases with each additional pizza consumed up to;the _____ and then declines, but;marginal utility _______ with each additional pizza consumed;each week.;A. 7thpizza, increases;B. 6thpizza, increases;C. 5thpizza, stays the;same;D.6thpizza, decreases;25. Cory gets 18, 23, and 25;units worth of total utility from consuming 10, 11, and 12 raw;oysters, respectively, and the;price per oyster is 25 cents. Thus, one can infer that Cory;A. is not utility maximizing.;B.is experiencing;diminishing marginal utility.;C. should NOT consume any more;oysters.;D. has consumed too many oysters.;26. Evan gets twice as much;marginal utility from an additional bottle of water than from an;additional bottle of soda. If the;price of soda is $1.00 per bottle, then Evan is maximizing utility;if the price of a bottle of water;is;A. $1.00;B. $1.50;C.$2.00;D. $.50;27. At his current consumption;level Cameron gets 3 times more marginal utility from an;additional game of pinball than;from an additional game of ping pong. If the price of a ping pong;game is $0.50, than he is;maximizing utility if the price of a pinball game is;A. $1.00;B.$1.50;C. $2.00;D. $3.00;28. Angel's marginal utility for;playing pool is 10 after playing 5 games. Angel's marginal utility;for bowling is 6 after 3 games.;If both pool and bowling cost $1 a game, to maximize his utility;Angel should;A. bowl more and play pool less;B. just go home;C. bowl only;D.bowl less and;play pool more;29. Jamie's marginal utility for;consuming muffins and doughnuts in utils are as follows. Jamie;spends $4 for breakfast every;morning, the price per muffin is $1.00 and the price per doughnut;is $0.50.;What is Jamie's optimal;combination of muffins and doughnuts?;A. 1 muffin, 6 doughnuts;B.2 muffins, 4;doughnuts;C. 3 muffins, 2 doughnuts;D. 4 muffins, zero doughnuts;30. For the two good case, the;rational spending rule requires that;A. total expenditures on the two;goods be equal.;B. total utility from the two;good be equal.;C. average utility from the two;goods be equal.;D.the ratio of;marginal utility to price be equal for the two goods.;31. You are trying to decide how;to spend your last lunch dollar. You should use that dollar to;buy more of;A. the item that costs the least.;B. the item that you have already;consumed the most of.;C.the item that;will give you the greatest marginal utility per dollar spent.;D. the item from which you have;gained the greatest total utility already.;32. If the marginal utility per;dollar is not the same for each good, the consumer could _____ her;utility by spending ______ on;goods for which the marginal utility per dollar is lower.;A. decrease, less;B. increase, more;C. maximize, more;D.increase, less;33. Refer to the figure above. At;the equilibrium price, consumer surplus is;A.$7.50/day;B. $10/day;C. $15/day;D. $40/day;34. Refer to the figure above.;Suppose the dairy lobby convinces the government to impose price;controls in this market. If the;government requires all cheese to be sold for a price of at least $8;consumer surplus would;and the market would;A. increase, reach a new;equilibrium at $8.00;B. decrease, reach a new;equilibrium at $8.00;C. increase, have excess demand;for cheese.;D.decrease, have;excess supply of cheese.;35. A rational seller will sell;another unit if;A. the profit earned from the;sale of the next unit is greater than the profit earned on the sale of;the last unit.;B.the cost of;making the next unit is less than the revenue gained by selling the next unit.;C. the quantity demanded of the;seller's output is greater than zero.;D. the price that could be;charged is greater than the equilibrium price.;36. Why are you more likely to;see a poor person picking up aluminum cans to return for a;deposit than a wealthy person?;A. Wealthy people care less about;the environment.;B.Wealthy people;have higher opportunity costs for their time.;C. Wealthy people are more;concerned about their public image.;D. Wealthy people are more likely;to be aware of diseases that are transmitted through litter.;37. John is trying to decide how;to divide his time between his job as a stocker in the local;grocery store, which pays $7/hr;for as many hours as he chooses to work, and cleaning windows;for the businesses in downtown.;He makes $2 for every window he cleans. John is indifferent;between the two tasks, and the;number of windows he can clean depends on how many hours he;cleans a day, as shown in the;table below;What is John's reservation price;per window for the 4th;and;5thhours of;cleaning windows?;A. $7 and $7.5 respectively;B. $2 and $3.5 respectively;C.$3.5 and $7;respectively;D. $11 and $14 respectively;38. A firm's total profit equals;A. Marginal Benefit minus;Marginal Cost.;B.(Price minus;Average Total Cost) times the quantity sold.;C. Price times Quantity Sold;D. Price minus Average Total;Cost.;39. Which of the following is NOT;true of a perfectly competitive firm?;A. It faces a perfectly elastic;demand curve.;B. It is unable to influence the;market price of the good it sells.;C.It seeks to maximize;revenue.;D. Relative to the size of the;market, the firm is small.;40. A price taker confronts a;demand curve that is;A. vertical at the market price.;B. upward sloping.;C. downward sloping.;D.horizontal at;the market price.;41. Which of the following is;most likely to be a fixed factor of production at a university?;A. The number of personal;computers.;B.The number of;lecture halls.;C. The number of professors and;lecturers.;D. The amount of chalk.;42. One reason that variable;factors of production tend to show diminishing returns in the short;run is that;A. too much capital equipment is;idle.;B.there are too;many workers using a fixed amount of productive resources.;C. the firm has become too large;to effectively manage workers.;D. the cost of hiring additional;workers increases as firms seek to hire more.;43. In general, if the price of a;variable factor of production increases;A. total costs fall.;B. the profit maximizing level of;output rises.;C. output prices fall.;D.marginal costs;rise.;44. In general, if the price of a;fixed factor of production increases;A. output prices fall.;B.marginal costs;are unchanged.;C. marginal costs increase.;D. the profit maximizing level of;output falls.;45. Refer to the figure above.;When the pizza shop employs 2 workers per day, it will experience;a marginal cost of ______ per;pizza.;A. $15;B. $25;C. $6;D.$3;46. Refer to the figure above.;When the market price of a doughnut is 10 cents, this firm will;A. shut down;B.produce 50;doughnuts;C. remain in operation only in;the short run and shut down in the long run;D. earn negative profits (losses);47. Fred runs a fishing lodge;and has a very successful business during the summer. In the fall;the number of guests at the lodge;starts to decline, and by November very few people stay at;Fred's Lodge. Fred should;A. keep the lodge open all year;because his summer profits offset any losses he has in the winter.;B. Keep the lodge open only;during those months in which revenues exceed total costs.;C. Keep the lodge open only;during those months in which revenues exceed the fixed costs of the;lodge.;D.Keep the lodge;open only during those months in which revenues exceed the variable costs of;serving guests.;48. Refer to the figure above.;When demand is such that the market price is $30, what is the;profit maximizing output;quantity?;A. 45;B. 60;C.80;D. 100;49. Refer to the figure above. At;the profit maximizing quantity for when the market price is at;$30, what is the total cost of;production?;A. $ 3000;B. $ 1200;C.$ 1600;D. $ 2400;50. An increase in consumer;demand for espresso would lead to a(n) ____, while an increase in;the number of firms producing;espresso would lead to a(n) _______.;A. increase in quantity supplied;decrease in supply.;B. increase in supply, increase;in quantity supplied.;C.increase in;quantity supplied, increase in supply.;D. increase in supply, increase in supply.
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