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Exam March 22 Spring 2017, questions
Microeconomics (Northeastern University)
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ECON 1116 | Sec. 02
Exam II (Version 1)
March 22, 2017
Northeastern University
Department of Economics
Principles of Microeconomics
Professor Michael Stone, Ph.D.
Name: ___________________________________________________________________________________________________
Note : Please remember to write your name and NUID in the scantron form (you need to fill the bubbles in the scantron for the
NUID). A pencil is required for writting your answers.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Choose the name of your TA :
A) Carlos Cassó Domínguez
C) Robert Bradley
B) Pukar KC
D) Richard Paulsen
2) Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys
one on sale for $125. Paul's consumer surplus from the purchase is
A) $325.
B) $200.
C) $125.
D) $75.
3) The difference between the ________ and the ________ from the sale of a product is called producer surplus.
A) cost to produce a product; profit received
B) highest price a firm would have been willing to accept; lowest price it was willing to accept
C) lowest price a firm would have been willing to accept; price it actually receives
D) cost to produce a product; price a firm actually receives
4) Rent control is an example of
A) a price floor.
C) a black market.
B) a subsidy for low-skilled workers.
D) a price ceiling.
5) To affect the market outcome, a price floor
A) must be set above the price ceiling.
C) must be set above the legal price.
B) must be set above the equilibrium price.
D) must be set above the black market price.
6) If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from
consuming the second, and 15 from the third, the total utility of consuming the three units is
A) 57 utility units.
B) 35 utility units.
C) 15 utility units.
D) unknown as more information is needed to determine the answer.
7) In order to derive an individual's demand curve for salmon, we would observe what happens to the
utility-maximizing bundle when we change
A) tastes and preferences and hold everything else constant.
B) the price of the product and hold everything else constant.
C) the price of a close substitute and hold everything else constant.
D) income and hold everything else constant.
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ECON 1116
Exam II (V01)
Figure 4-4
Figure 4-4 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80.
Now suppose producers decide to cut output to 40 in order to raise the price to $18.
8) Refer to Figure 4-4. What is the value of the deadweight loss at a price of $18?
A) $100
B) $180
C) $660
D) $1,040
9) Refer to Figure 4-4. At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp. Is this an
economically efficient quantity?
A) Yes, otherwise consumers would not buy 40 units.
B) No, the marginal cost of the 40th unit exceeds the marginal benefit of the 40th unit.
C) No, the marginal benefit of the 40th unit exceeds the marginal cost of that 40th unit.
D) Yes, because $18 shows what consumers are willing to pay for the product.
10) The law of diminishing marginal utility states that
A) the extra satisfaction from consuming a good decreases as more of a good is consumed, other things
constant.
B) eventually total utility falls as more of a good is consumed, other things constant.
C) the extra satisfaction from consuming a good increases slowly as more of a good is consumed, other
things constant.
D) when the extra satisfaction from consuming a good becomes negative, total utility starts falling, other
things constant.
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ECON 1116
Exam II (V01)
Figure 4-15
Figure 4-15 shows the market for beer. The government plans to impose a per-unit tax in this market.
11) Refer to Figure 4-15. How much of the tax is paid by buyers?
A) $2
B) $5
C) $7
D) $12
12) Refer to Figure 4-15. How much of the tax is paid by sellers?
A) $2
B) $5
C) $7
D) $12
13) A network externality occurs when
A) there is production cost savings from being networked with suppliers.
B) the usefulness of a good is affected by how many other people use the good.
C) there is production cost savings from being networked with buyers.
D) the usefulness of a good is affected by celebrities who use the good.
14) Identify the one statement that does not demonstrate how social effects influence consumer choice.
A) Some products that people consume are determined by the social popularity of the products.
B) Companies such as Zappos.com and Netflix invite their consumers to write reviews about their
experience with their products which are then posted on the internet for others to see.
C) Students in an Economics class are required to purchase a textbook assigned by the professor.
D) There is utility gained from consuming goods or services that others are consuming.
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ECON 1116
Exam II (V01)
Table 10 -1
Quantity of
Pita Wraps
1
2
3
4
5
6
7
Total Utility
60
102
132
144
144
138
128
Quantity of
Bubble Tea
1
2
3
4
5
6
7
Total Utility
40
70
91
106
112
115
115
Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6 and the price of a glass of Bubble
Tea is $3. Table 10-1 shows his total utility from different quantities of the two items.
15) Refer to Table 10 -1. What is Keegan's optimal consumption bundle?
A) 3 pita wraps and 4 bubble teas
B) 5 pita wraps and 0 bubble teas
C) 3 pita wraps and 3 bubble teas
D) 4 pita wraps and 2 bubble teas
16) Sunk costs
A) are important for optimal decision making.
B) are costs that have already been paid and cannot be recaptured in any significant way.
C) are costs associated with repairing something you already own.
D) are costs that firms sink into marketing.
17) A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the point
on
A) the indifference curve that intersects the vertical axis.
B) an indifference curve that is tangent to the budget constraint.
C) the indifference curve that intersects the horizontal axis.
D) the budget constraint where it intersects one of the axes.
18) A firm has successfully adopted a positive technological change when
A) it produces less pollution in its production process.
B) it sees an increase in worker productivity.
C) it can pay its workers less yet increase its output.
D) it can produce more output using the same inputs.
19) A characteristic of the long run is
A) there are both fixed and variable inputs
B) there are fixed inputs.
C) all inputs can be varied.
D) plant capacity cannot be increased or decreased.
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ECON 1116
Exam II (V01)
Figure 11 -2
20) Refer to Figure 11-2. The curve labeled "E" is
A) the marginal product curve.
C) the output supply curve.
B) the average product curve.
D) the total product curve.
Table 11 -1
Number of
Workers
1
2
3
4
5
6
Mushrooms per
Day (pounds)
12
30
45
50
54
56
Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May.
21) Refer to Table 11-1. Diminishing marginal returns sets in when the ________ worker is hired.
A) 2nd
B) 3rd
C) 4th
D) None of the above; the production function displays increasing marginal returns.
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ECON 1116
Exam II (V01)
Figure 11 -5
22) Refer to Figure 11-5. Identify the curves in the diagram.
A) E = average fixed cost curve; F = variable cost curve; G = total cost curve, H = marginal cost curve
B) E = average fixed cost curve; F = average total cost curve; G = average variable cost curve, H = marginal
cost curve
C) E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed
cost curve.
D) E = marginal cost curve; F = total cost curve; G = variable cost curve, H = average fixed cost curve
23) Refer to Figure 11-5. The vertical difference between curves F and G measures
A) marginal costs.
B) sunk costs.
C) average fixed costs.
D) fixed costs.
24) Perfect competition is characterized by all of the following except
A) homogeneous products.
B) heavy advertising by individual sellers.
C) sellers are price takers.
D) a horizontal demand curve for individual sellers.
25) Both individual buyers and sellers in perfect competition
A) can influence the market price by their own individual actions.
B) have to take the market price as a given.
C) can influence the market price by joining with a few of their competitors.
D) have the market price dictated to them by government.
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ECON 1116
Exam II (V01)
Figure 11 -10
26) Refer to Figure 11-10. Suppose for the past 8 years the firm has been producing Q d units per period using
plant size ATC 4. Now, following a permanent change in demand, it plans to cut production to Q c units.
What will happen to its average cost of production?
A) In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41.
B) In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even
further to $37.
C) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.
D) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41.
27) Refer to Figure 11-10. Identify the minimum efficient scale of production.
A) Q a
B) Q b
C) Q c
D) Q d
28) If a perfectly competitive firm's price is less than its average total cost but greater than its average variable
cost, the firm
A) should shut down.
B) is incurring a loss.
C) is breaking even.
D) is earning a profit.
29) A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of
production is $20,000. The price of each good is $10. Should the firm continue to produce in the short run?
A) No, it should shut down because it is making a loss.
B) Yes, it should continue to produce because it is minimizing its loss.
C) Yes, it should continue to produce because its price exceeds its average fixed cost.
D) There is insufficient information to answer the question.
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ECON 1116
Exam II (V01)
Figure 12-16
30) Refer to Figure 12-16. Which panel best represents the perfectly competitive organic produce market in
which some firms are experiencing short-run losses, and consumers are displaying an increased preference
for organic produce?
A) Panel A
B) Panel B
C) Panel C
D) Panel D
31) Refer to Figure 12-16. Which panel best represents the perfectly competitive organic produce market in
which some firms are earning short-run economic profits, and the Surgeon General announces that
switching from non-organic produce to organic produce will add 5 years to the average life span of
consumers?
A) Panel A
B) Panel B
C) Panel C
D) Panel D
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ECON 1116
Exam II (V01)
32) If a perfectly competitive firm achieves productive efficiency then
A) the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of
the good sold.
B) it is producing at minimum efficient scale.
C) it will raise its price in order to earn an economic profit.
D) it is producing the good it sells at the lowest possible cost.
Figure 12-1
33) Refer to Figure 12-1. If the firm is producing 700 units
A) it should increase its output to maximize profit.
B) it should cut back its output to maximize profit.
C) it is making a loss.
D) it is making a profit.
34) The long-run supply curve for a perfectly competitive, constant-cost industry
A) is upward-sloping.
B) is found by adding up the marginal cost curves for all firms in the industry.
C) is horizontal.
D) is downward-sloping.
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Answer Key
Testname: EXAM 2 (V01.1)
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No Correct Answer Was Provided.
D
C
D
B
A
B
A
C
A
B
A
B
C
A
B
B
D
C
A
B
C
C
B
B
D
B
B
B
D
A
D
B
C
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