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Question;1.;The law;of demand tells us that;a.;the;lower the price of a good, the lower will be the demand for that good.;b.;the;higher the price of a good, the lower will be the quantity demanded of that;good.;c.;the;lower the price of a good, the higher will be the quantity demanded of that good.;d.;both b.;and c.;e.;none of;the above;If you are currently answering questions at a;speed such that the marginal benefits of speed are equal to the marginal;costs of speed, thenYou should speed up, because otherwise you might;run out of timeYou should slow down because otherwise you might;get tired before the end of the examNo other speed will yield higher net benefitsYou should go faster because you have nothing to;lose by doing soBoth (b) and (d) are correct;Ceteris paribus, an decrease in the your income;will causea.;Demand for a;normal good to fall;b.;Demand for a;normal good to rise;c.;Demand for an;inferior good to rise;d.;The price of a;good to rise;e.;Both a. and c.;are correct;The area under an individual consumer?s demand curve, from Q =;0 to Q = Q* = the last unit being;consumed, measuresa. marginal cost of the last unit being consumed;b. marginal benefit of the last unit being consumed;c.;total cost of;consuming Q* units;d. total benefits of consuming Q* units;e.;net benefits of;consuming Q* units;Questions 5 ? 8 are based on the following graph;Assume this graph shows a market equilibrium that maximizes gains;from trade. What is the price and;quantity if this is true?a. P3, Q1;b. P2, Q2;c.;P1, Q3;d. P1, Q1;e.;P3, Q3;Again, assume the graph shows a market in a gains from trade;maximizing equilibrium. What area;represents consumer surplus?a. A + B + C + D + E;+ F;b. A + B + C + D + E;c.;A + B + C;d. D + E + F;e.;None of the above;Now, suppose the government imposes a price ceiling and this price;ceiling changes price, quantity demanded, and quantity supplied. The price ceiling is shown on the graph;(hint: based on the info given in the question, you must figure if the;price ceiling is P1, P2, or P3).;What is the consumer surplus when the price ceiling is;instated (assume the price ceiling is strictly enforced)?a. A + B + C + D + E;+ F;b. A + B + C + D + E;c.;A + B + D;d. B + D + F;e.;F;Using the graph above, what is the dead-weight-loss when the price;ceiling from above is in effect?a. A + B + C;b. D + E + F;c.;C + E;d. N;e.;A + B + D + F;Questions 9 - 12 are based on the following;information. Every Thanksgiving, I drive;halfway across the country to visit my family.;When I do so, I must choose the average speed at which I drive, the;table below shows the marginal benefits and marginal costs of driving at;various speeds. All benefits and costs are measured in dollars, for;convenience, but all of the relevant costs and benefits are taken into account.;Also, for convenience in computing, assume average speeds come only in;10-mile-per-hour (mph) increments, thus, I can average 50 mph or 60 mph, but;not 57 mph.;Average speed (mph) Marginal;benefits;Marginal costs;10;$1000 $;50;20 950 150;30 900 250;40 850 350;50;800 450;60 750 550;70 700 650;80 650 750;90 600 850;Given the information in the table above, what are the total costs;of my trip if I average 30 mph?2504506502400None of the above;Given the information in the table above, at what average speed;should I drive?a. 40;b. 60;c.;70;d. 80;e.;90 or more;because benefits are still positive at 90;Given the information in the table above, what must be true about;the net benefits of averaging 100 mph, compared to not taking the trip at;all (i.e., averaging 0 mph)?a. Greater than 0;b. Greater than $3150;c.;Less than 0;d. Less than $3150;e.;None of the above;Suppose that I must choose between an average speed of 50mph and;an average speed of 90 mph, and these are the only two options. Which;speed should I pick?a. 50 mph;b. 90 mph;c.;I would be;exactly indifferent between these two options;d. Depending on my preferences, I might sensibly select;either;e.;None of the above;Questions 13 ? 15 are based on the following;information;(i) Barley is an important input used in the;production of beer.;(ii) The demand for beer is inelastic;(iii) The supply of beer is elastic;Beginning from an initial equilibrium, suddenly the;price of barley rises.;The result of this increase in the price of barley will be:a reduction in the supply of beeran increase in the supply of beeran increase in the demand for beera reduction in the demand for beerboth (a) and (d) are correct;Thus, as a result of the increase in the price of barley, we can;expect thata. total consumer spending on beer will rise;b. total consumer spending on;beer will fall;c.;total revenues of;beer makers will rise;d. both (a) and (c) are correct;e.;none of the above;Moreover, we can also expect that this rise in the price of barley;will causea. consumer surplus (in the beer market) to rise;b. gains from trade (in the beer market) to rise;c.;gains from trade;(in the beer market) to fall;d. both (a) and (b) are correct;e.;more drunks on;Clemson?s campus after their economics finals are over;The following three questions;are based on this information;Consider the nations of England and Ireland. Each is;capable of producing fish and chips. If Ireland spends all of its time on fish;it can produce a maximum of 10 units a day, leaving it no time for chip;production. Or, if it spends all of its time on chips, it can produce 5 of them;in a day, leaving no time for fish production. Ireland is also capable of;producing any linear combination of these.;England is capable of daily production of at most 20;fish (and no chips) if it specializes completely in fish, or a maximum of 20;chips (and no fish) if it produces only chips. As with Ireland, it is able to;produce any linear combination of these extremes.;For simplicity, assume that Ireland and England can;use their time only for producing these two goods.;Who is the low cost producer of chips?a.;Ireland, because;it can produce the least of them;b.;England, because;it can produce the most of them;c.;England, because;it must sacrifice only one fish to make a chip.;d.;Ireland, because;it must sacrifice only 0.5 chips to make a fish.;e.;Neither, because;they both have the same cost of producing chips.;Who has a comparative advantage in producing;fish?a.;Ireland, because;it can produce the most of them;b.;England, because;it can produce the most of them;c.;Ireland, because;it must sacrifice only 0.5 chips to make a fish;d.;England, because;it is the low cost producer of fish.;e.;none of the above;Suppose the world price of fish is $10 each and;the world price of chips is $15 each. If each nation?s objective is to;collect as much revenue as possible, how will they each organize;production?a.;Ireland will;specialize completely in chips and England will specialize completely in fish;b.;Ireland will;specialize completely in fish and England will specialize completely in chips;c.;both will produce;only chips;d.;both will each;make 5 fish and England will spend the rest of is time making chips;e.;each nation will;divide its time in the ratio 1.5 to 1 in favor of chips, because this is the;ratio of the prices.;If;the cross price elasticity of demand between widgets and kumquats is -2.0;one can conclude thata. widgets and kumquats are substitutes and a rise in the price of;one will cause an increase in the demand for the other;b. widgets and kumquats are complements and a rise in the price of;one will cause an increase in the demand for the other;c.;widgets and kumquats are substitutes and a;rise in the price of one will cause a decrease in the demand for the other;d. widgets and kumquats are complements and a rise in the price of;one will cause a decrease in the demand for the other;e.;none of the above;When we say that Poland has a comparative advantage in producing;sausages, we mean that Italy a. can produce more sausages than beer, the;only other commodity produced there;b. is the low cost producer of;sausages;c. can produce more sausages than can any;other country;d. can produce nothing but sausages;e. both (b) and (c) are correct;If;the income elasticity of demand for kumquats is 0 (yes, ?zero?), a rise in;the incomes of kumquat consumers will lead toa;rise in the equilibrium price and quantity of kumquatsa;fall in the equilibrium price and quantity of kumquatsa;rise in the equilibrium price of kumquats, but a fall in the equilibrium;quantitya;fall in the equilibrium price of kumquats, but a rise in the equilibrium;quantityno;change in the equilibrium price or quantity of kumquats;If;the demand for corn is elastic, a reduction in the supply of corn will;causea.;a reduction in expenditures on corn;b.;a reduction in expenditures on corn only if;the supply of corn is elastic;c.;a change in expenditures on corn that may;be positive or negative, depending on the elasticity of supply of corn;d.;an increase in expenditures on corn only if;the supply of corn is inelastic;e.;an increase in expenditures on corn;Questions 23-25 are based on the following information;All flimflams are made in either Japan or Korea. Americans are;the sole purchasers of these flimflams, and;they do not care whether they buy flimflams made in Korea or;those made in Japan. Assume an outbreak of;Japanese flu kills many of the highly skilled Japanese workers;who produce flimflams. Korean workers are;unaffected, because no workers ever move or travel between Korea;and Japan. (Hint: What effect will this flu have on wages, and thus production;costs, in Japan?);Let the price of flimflams be P and the total quantity of them;be Q, let the amount produced in Korea be Qk;and the amount produced in Japan be Qj. Suppose you observe the;followingchangesas a result of this episode;%?Q = -40%;%?Qk = +25%;%?Qj =;-50%;%?P =;+20%;Given;these observations, what is the elasticity of the demand for flimflams?a. -1.5;b. -2;c. -1;d. -0.5;e. It cannot be determined, because the;demand for flimflams shifts in this problem;Given;these observations, what is the elasticity of the Japanese supply of;flimflams?a. -1;b. +1;c. +0.5;d. +2;e. It cannot be determined, because the;Japanese supply curve shifts in this problem;Given;these observations, what is the elasticity of the Korean supply of flimflams.a. +1.25;b. +2.5;c. -2.0;d. +0.8;e. It cannot be determined, because the;Korean supply curve shifts in this problem.;26.;The figure above shows the situation facing;Smart Digit, Inc., a firm in monopolistic competition that produces;calculators. What is the firm's economic profit in the long run is2);a.;$900.;b.;$600.;c.;zero.;d.;$2,400.;e.;$1,200;27.;For a firm in perfect competition, the marginal;cost curve intersects the average total cost curve;a.;at no point.;b.;at the minimum average total cost.;c.;to the left of the minimum average total cost.;d.;to the right of the minimum average total cost.;e.;above the average;total cost curve;In the above graph, the intersection of curve A and curve C is thea. Shutdown point;b. Long-run equilibrium price and quantity;c.;Point where the;producer is indifferent between producing and shutting down;d. profit-maximizing price and quantity;e.;Both (A) and (C);are correct;In the above graph, the average fixed cost curve is:a. Labeled B;b. Labeled C;c.;Not shown;d. Responsible for the distance between curves B and C;getting smaller as quantity increases;e.;Both C and D;An example of a negative consumption externality is:a. Honey production and orange production;b. Flu vaccinations;c.;Pollution;d. Loud parties;e.;Beautiful;architecture that was privately funded;31.;In the figure above, if the market is;unregulated, the price will be;a.;$250 per unit.;b.;$150 per unit.;c.;$200 per unit.;d.;$100 per unit.;e.;Depends on if the;producer is a price taker or a price searcher;32.;Total cost is the sum of fixed costs and;a.;implicit costs.;b.;explicit costs.;c.;accounting costs.;d. variable costs.;e.;marginal costs;33.;A;period of time in which the quantity of at least one resource used by a firm is;fixed is called;a. the market period.;b. the intermediate run.;c.;the;short run.;d. the long run.;e.;the;chicken run;34.;Consider the perfectly competitive firm in the;above figure. If price equals 10, what will the firm choose to do in the short;run and why?;a. Shut;down because the firm incurs an economic loss.;b. Stay;in business because the firm is making an economic profit.;c.;Stay in;business because the firm?s economic loss is less than fixed costs.;d. Stay;in business because it is earning a normal profit (that is, zero economic;profit or loss).;e.;Shut down because the price is below the firms;shutdown point.;35.;A firm in perfect competition maximizes its;profit by producing the output at which its marginal cost equals its;a.;marginal revenue.;b.;average fixed cost.;c.;average variable cost.;d.;price.;e.;Both a.;and d. are correct.;36.;In the above figure, the total fixed cost curve;is curve;a.;A.;b.;B.;c.;C.;d. D.;e.;not shown.;37.;In the above figure, curve D slopes;downward because;a.;there are diminishing returns to capital and;labor.;b. average fixed cost decreases as output;increases.;c.;marginal cost decreases as output increases.;d.;all costs decrease as output increases.;e.;demand is downward sloping.;38.;Suppose demand for a product produced in a;perfectly competitive market permanently decreases. In the long run, the price;a.;does not change because entry increases the;supply of the product.;b.;does not change because price cannot exceed;average total cost in perfect competition.;c.;does not change because exit decreases the;supply of the product.;d. rises and each firm produces more output.;e.;falls and each firm produces less output.;39.;The above figure shows the demand and supply;curves for housing in City A. As a result of a rent ceiling at $500, the;deadweight loss is represented by the area;a.;triangle gfe.;b.;rectangle feag.;c.;triangle acb.;d.;triangle eca.;e.;none of the above;40.;The minimum wage is an example of a;a.;price floor.;b.;price ceiling.;c.;quota.;d.;tax.;e.;subsidy.;41.;The government imposes a sales tax on hot dogs.;The tax would be paid entirely by hot dog sellers if the;a.;demand is perfectly inelastic.;b.;supply is perfectly elastic.;c.;demand is perfectly elastic.;d.;supply is perfectly inelastic.;e.;both c. and d. are correct;42.;It is easier for a monopolist to price;discriminate between groups for a service than for a tangible product because;a.;it is easier to calculate average willingness to;pay for services.;b.;it is easier for consumers to resell products;than services.;c.;it is easier to distinguish between groups of;customers for services than customers for products.;d.;people care less about services than products;e.;customers for products usually do not differ;with respect to their average willingness to pay.;43.;Monopolies earn an economic profit in the long;run because there are;a.;free entry and exit.;b.;barriers to entry.;c.;inelastic consumers.;d.;close substitutes for the product.;e.;a large number of competing firms.;44.;Which of the following is true regarding the;long run for a firm in monopolistic competition?;a.;ATC = MC = MR;b.;P = MC = ATC;c.;P = MC = MR;d.;AVC = MC = MR;e.;P = ATC;45.;If two duopolists can collude successfully, then;both will;a.;price at marginal cost.;b.;earn greater profits than if they did not;collude.;c.;price below average total cost.;d.;set price equal to marginal revenue;e.;lower their economic profits.;46.;Which of the following statements is FALSE;concerning monopolistic competition?;a.;There are no barriers to entry.;b.;Firms sell a differentiated product.;c.;There are many firms.;d.;Firms do not;produce at the minimum of their average total cost.;e.;Monopolistically competitive firms are price;takers because of product differentiation.;Player;A;Confess;Don't;confess;Player B;Confess;A: 3 years;B: 3 years;A: 10 years;B: 1 year;Don't confess;A: 1 year;B: 10 years;A: 2 years;B: 2 years


Paper#58029 | Written in 18-Jul-2015

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