Economics Practice Exam

Topics: Microeconomics, Costs, Economics Pages: 22 (4175 words) Published: March 6, 2015
ECN 104 Final Exam
December 9th 2011

104F11FE
Multiple Choice
Identify the choice that best completes the statement or answers the question. ____

1. An increase in income will cause a shift in the budget constraint a. outward.
b. towards the good most consumed.
c. inward.
d. towards the good least consumed.

____

2. If the consumption of one good is reduced, how must a consumer alter his consumption of another good in order to remain indifferent between two bundles?
a. He must not change his consumption of another good.
b. He can reduce, increase or not change his consumption of another good. c. He must reduce his consumption of another good.
d. He must increase his consumption of another good.

____

3. What happens to consumer surplus if the price of a good increases? a. It increases.
b. It may increase, decrease, or remain unchanged.
c. It is unchanged.
d. It decreases.

____

4. When the price of pizza falls, the substitution effect, for normal goods Pepsi and pizza, causes a. Pepsi to be relatively less expensive, so the consumer buys less Pepsi. b. the consumer to feel richer, so the consumer buys more Pepsi. c. the consumer to feel richer, so the consumer buys less Pepsi. d. Pepsi to be relatively more expensive, so the consumer buys less Pepsi.

____

5. When, for a firm, long-run average total cost decreases as the quantity of output increases, we have a situation of
a. fixed costs greatly exceeding variable costs.
b. coordination problems arising from the large size of the firm. c. economies of scale.
d. diseconomies of scale.

____

6. The complete description of a competitive firm's supply curve is as follows: The competitive firm's short-run supply curve is that portion of the
a. average total cost curve that lies above marginal cost.
b. average variable cost curve that lies above marginal cost. c. marginal cost curve that lies above average total cost.
d. marginal cost curve that lies above average variable cost.

2

Name: ________________________

ID: E

Figure 21-10

____

7. Refer to Figure 21-10. If point B is the consumer's optimum and the price of Chocolate Chips is $3 per bag, what is the price of a bag of Marshmallows?
a. $3
b. $1.50
c. $6
d. None of the above are correct.
Scenario 15-3
A monopoly firm maximizes its profit by producing 500 units output (so Q = 500). At that level of output, its marginal revenue is $30, its average revenue is $40, and its average total cost is $34.

____

8. Refer to Scenario 15-3. The firm's profit-maximizing price is a. $30.
b. between $30 and $34.
c. between $34 and $40.
d. $40.

____

9. In a competitive market,
a. the goods offered by the different sellers are markedly different. b. there is a small number of sellers.
c. no single buyer or seller can influence the price of the product. d. All of the above are correct.

____ 10. When the price of pizza falls, the income effect, for normal goods Pepsi and pizza, causes a a. movement along the indifference curve so the consumer buys more Pepsi. b. shift to a higher indifference curve so the consumer buys more Pepsi. c. shift to a lower indifference curve so the consumer buys more Pepsi. d. movement along the indifference curve so the consumer buys less Pepsi.

2

Name: ________________________

ID: E

____ 11. The area below a demand curve and above the price measures a. total surplus.
b. producer surplus.
c. willingness to pay.
d. consumer surplus.
____ 12. When a factory is operating in the short run,
a. it cannot alter variable costs.
b. total cost and variable cost are usually the same.
c. average fixed cost rises as output increases.
d. it cannot adjust the quantity of fixed inputs.
____ 13. When a budget constraint shifts outward
a. the consumer can reach a higher indifference curve.
b. it could only have been caused by an increase in the price of one of the goods. c. the consumer is indifferent to goods X and Y....
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