Final Exam
Economics 3144
Intermediate Microeconomics
Dr. Philip Rothman
July 31, 2003
_______________________________________________________________________
1.
As the price of good X increases from $5 to $8, quantity demanded falls
from 100 to 80. Based upon this information we can conclude that the
demand for X is
a. elastic.
b. inelastic.
c. perfectly inelastic.
d. insufficient information for judgment.
2.
What is the shape of the total revenue curve derived from a linear
downward sloping demand curve?
a. Horizontal.
b. Vertical.
c. U-shaped.
d. Inverted u-shaped.
Use the following information to answer the questions below.
Suppose that the demand for artichokes (Qa) is given as:
Qa = 200 - 4P
3.
Suppose that the price of artichokes is increased slightly from $10. The
total expenditure by consumers on artichokes will _______ and the number
of artichokes sold will _______.
a. rise, rise
b. rise, fall
c. fall, rise
d. fall, fall
Use the following information to answer the questions below.
The demand for erasers (Q) is given as follows:
Q = 240 - 4Pe + 2I + Pb + A2 + A
where Pe is the price of erasers.
I is the level of income.
Pb is the price of another good.
A is the level of advertising.
Suppose that Q = 240, Pe = 10, Pb = 10, and A = 2.
4.
Given the information above, determine I.
a. 0
b. 12
c. 24
d. 36
e. 48
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5.
A local retailer has decided to carry a well-known brand of shampoo. The
marketing department tells them that the quarterly demand by an average
man is:
Qd = 3 - 0.25P
and the quarterly demand by an average woman is:
Qd = 4 - 0.5P
The market consists of 10,000 men and 10,000 women. How may bottles of
shampoo can they expect to sell if they charge $6 per bottle?
a. 20,000
b. 33,000
c. 25,000
d. 10,000
e. none of the above.
6.
The point price elasticity of demand for red herring is -4. The demand
curve for red herring is: Q = 120 - P. What is the quantity demanded of
red herring?
a. 24.
b. 80.
c. 100.
d. 120.
e. none of the above.
7.
A farmer uses L units of labor and K units of capital to produce Q units
of corn using a production function F(K,L). A production plan that uses
K=L=10 to produce Q units of corn where Q < F (10, 10) is said to be
a. technically feasible and efficient
b. technically unfeasible and efficient
c. technically feasible and inefficient
d. technically unfeasible and efficient
e. none of the above
8.
An
a.
b.
c.
9.
If we take the production function and hold the level of output
constant, allowing the amounts of capital and labor to vary, the curve
that is traced out is called:
a. the total product.
b. an isoquant.
c. the average product.
d. the marginal product.
e. none of the above.
isoquant
must be linear.
cannot have a negative slope.
is a curve that shows all the combinations of inputs that yield the
same total output.
d. is a curve that shows the maximum total output as a function of the
level of labor input.
e. is a curve that shows all possible output levels that can be produced
at the same cost.
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10. A firm uses two factors of production. Irrespective of how much of each
factor is used, both factors always have positive marginal products
which imply that
a. isoquants are relevant only in the long run
b. isoquants have negative slope
c. isoquants are convex
d. isoquants can become vertical or horizontal
e. none of the above
11. A production function in which the inputs are perfectly substitutable
would have isoquants that are
a. convex to the origin.
b. L-shaped.
c. linear.
d. concave to the origin.
12. In a production process, all inputs are increased by 10%; but output
increases less than 10%. This means that the firm experiences
a. decreasing returns to scale.
b. constant returns to scale.
c. increasing returns to scale.
d. management incompetence.
13. Which of the following costs always declines as output increases?
a. average cost
b. marginal cost
c. fixed cost
d. average fixed cost
e. average variable cost
14. In
a.
b.
c.
d.
e.
the long run, which of the following is considered a variable cost?
Expenditures for wages.
Expenditures for research and development.
Expenditures for raw materials.
Expenditures for capital machinery and equipment.
all of the above.
Use the following information to answer the questions below.
The total cost (TC) of producing computer software diskettes (Q) is given
as: TC = 200 + 5Q
15. What is the variable cost?
a. 200
b. 5Q
c. 5
d. 5 + (200/Q)
e. none of the above
16. What is the fixed cost?
a. 200
b. 5Q
c. 5
d. 5 + (200/Q)
e. none of the above
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17. Use the following two statements to answer this question:
I.
The average total cost of a given level of output is the slope of
the line from the origin to the total cost curve at that level of
output.
II. The marginal cost of a given level of output is the slope of the
line that is tangent to the total cost curve at that level of
output.
a. Both I and II are true.
b. I is true and II is false.
c. I is false and II is true.
d. Both I and II are false.
Use the following diagram to answer the questions below.
18. The diagram below contains _____ cost curves.
a. short run
b. intermediate run
c. long run
d. both short run and long run
19. Which piece of information would not be helpful in calculating the
marginal cost of the 75th unit of output?
a. The total cost of 75 units.
b. The total cost of 74 units.
c. The variable cost of 75 units.
d. The variable cost of 74 units.
e. The firm's fixed cost.
20. Marginal profit is equal to
a. marginal revenue minus marginal cost.
b. marginal revenue plus marginal cost.
c. marginal cost minus marginal revenue.
d. marginal revenue times marginal cost.
e. marginal revenue divided by marginal cost.
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21. The demand curve facing a perfectly competitive firm is
a. the same as its average revenue curve, but not the same as its
marginal revenue curve.
b. the same as its average revenue curve and its marginal revenue curve.
c. the same as its marginal revenue curve, but not its average revenue
curve.
d. not the same as either its marginal revenue curve or its average
revenue curve.
e. not defined in terms of average or marginal revenue.
For the following questions, consider the diagram below where a perfectly
competitive firm faces a price of $40.
22. The firm earns zero profit at what output?
a. 0.
b. 34 and 79.
c. 54.
d. 60.
e. 67.
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23. At
a.
b.
c.
d.
e.
the profit-maximizing level of output, total revenue is
$1200.
$2160.
$2400.
$2680.
$3160.
For the following questions, consider the table below:
Q
0
1
2
3
4
5
6
P
$30
$30
$30
$30
$30
$30
$30
TR
$ 0
$ 30
$ 60
$ 90
$120
$150
$180
MR
--$30
$30
$30
$30
$30
$30
TC
$ 15
$ 25
$ 40
$ 60
$ 85
$115
$150
MC
--$10
$15
$20
$25
$30
$35
24. The total revenue graph consistent with the table above is
a. linear and upward-sloping.
b. linear and horizontal.
c. linear and vertical.
d. linear and downward-sloping.
e. concave downwards.
25. A perfectly competitive firm never operates
a. at the minimum of its ATC curve.
b. at the minimum of its AVC curve.
c. on the downward-sloping portion of its ATC curve.
d. on the downward-sloping portion of its AVC curve.
e. on its long-run marginal cost curve.
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26. In
a.
b.
c.
d.
e.
a constant-cost industry, price always equals
LRMC and minimum LRAC.
LRMC and LRAC, but not necessarily minimum LRAC.
minimum LRAC, but not LRMC.
LRAC and minimum LRMC.
minimum LRAC and minimum LRMC.
Use the following diagram to answer Question #27.
27. If
a.
b.
c.
d.
e.
the market is in equilibrium, total consumer and producer surplus is
$0.
$100.
$800.
$1200.
$2000.
Use the following diagram to answer the questions below.
28. At
a.
b.
c.
d.
e.
price 0H and quantity Q1, consumer surplus is the area
EDGF.
0FGQ1.
HFGB.
EFC.
none of the above.
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29. At
a.
b.
c.
d.
e.
price 0H and quantity Q1, producer surplus is the area
0ABQ1.
0EDQ1.
AHB.
0FGQ1.
none of the above.
30. At
a.
b.
c.
d.
e.
price 0H and quantity Q1, the deadweight loss is
DGC.
BDC.
BGC.
0FGQ1.
none of the above.
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31. For the monopolist shown below, the profit maximizing level of output
is:
a. Q1.
b. Q2.
c. Q3.
d. Q4.
e. Q5.
32. As the manager of a firm you calculate the marginal revenue is $152 and
marginal cost is $200. You should
a. expand output.
b. do nothing without information about your fixed costs.
c. reduce output until marginal revenue equals marginal cost.
d. expand output until marginal revenue equals zero.
e. reduce output beyond the level where marginal revenue equals zero.
33. For a monopolist, changes in demand will lead to changes in
a. price with no change in output.
b. output with no change in price.
c. both price and quantity.
d. any of the above can be true.
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Use the following information to answer the questions below.
A monopolist faces the following demand curve, marginal revenue curve, total
cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
34. What level of output maximizes total revenue?
a. 0
b. 90
c. 95
d. 100
e. none of the above
35. What is the profit maximizing level of output?
a. 0
b. 90
c. 95
d. 100
e. none of the above
36. What is the profit maximizing price?
a. $95.
b. $5.
c. $52.50.
d. $10.
37. How much profit does the monopolist earn?
a. $4512.50.
b. $4987.50.
c. $475.
d. $5.
38. Which of the following is NOT associated with a high degree of monopoly
power?
a. An inelastic demand curve for the firm.
b. A small number of firms in the market.
c. Significant price writing among firms in the market.
d. Significant barriers to entry.
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39. Use the following two statements about monopolistic competition to
answer this question.
I.
In the long run, the price of the good will equal the minimum of
the average cost.
II. In the short run, firms may earn a profit.
a. I and II are true
b. I is true, II is false
c. I is false, II is true
d. I and II are false
40. A market with few entry barriers and with many firms that sell
differentiated products is
a. purely competitive.
b. a monopoly.
c. monopolistically competitive.
d. oligopolistic.
41. A monopolistically competitive firm in long-run equilibrium:
a. will make negative profit.
b. will make zero profit.
c. will make positive profit.
d. any of the above are possible.
42. Which of the following can be thought of as a barrier to entry?
a. scale economies.
b. patents.
c. strategic actions by incumbent firms.
d. all of these.
43. The market structure in which there is interdependence among firms is
a. monopolistic competition.
b. oligopoly.
c. perfect competition.
d. monopoly.
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Use the following indifference curve diagram to answer the questions below.
44. Which of the following statements is correct?
a. This individual receives no satisfaction from Good A.
b. This individual receives no satisfaction from Good B.
c. This individual will only consume A and B in fixed proportions.
d. This individual dislikes Good A.
e. This individual dislikes Good B.
45. Which of
a. MU(a)
b. MU(b)
c. MU(a)
d. MU(B)
the following statements is correct?
= 0.
= 0.
is negative.
is negative.
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46. If X and Y are perfect substitutes, which of the following assumptions
about indifference curves is not satisfied?
a. completeness.
b. transitivity.
c. more is preferred to less.
d. diminishing MRS.
e. none of the above (as all of the above assumptions are satisfied).
47. Consider the following three market baskets:
Cheese
Crackers
A
5
8
B
15
6
C
10
7
If baskets A and B are on the same indifference curve and if
indifference curves exhibit diminishing MRS:
a. C is preferred to both A and B.
b. A and B are both preferred to C.
c. C is on the same indifference curve as A and B.
d. either (a) or (b) is correct, but not (c).
48. The endpoints (horizontal and vertical intercepts) of the budget line:
a. measure its slope.
b. measure the rate at which one good can be substituted for another.
c. measure the rate at which a consumer is willing to trade one good for
another.
d. represent the quantity of each good that could be purchased if all of
the budget were allocated to that good.
e. indicate the highest level of satisfaction the consumer can achieve.
49. If the marginal utility of good a is equal to 1/Qa, the marginal utility
of good b is 1/Qb, the price of a is $0.50 and the price of b is $4.00
and the consumer's income is $120.00, how much of good a will the
consumer purchase to maximize utility?
a. 0
b. 12
c. 24
d. 48
e. 120
50. A demand curve of the form: Q = a - bP, where a and b are positive real
numbers:
a. is an upward sloping straight line.
b. has a constant price elasticity of demand.
c. is a downward sloping straight line.
d. is parabolic.
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