2010
Fall 1
ECON 2010
Study Guide 6-7-8
1. The short-run elasticity of demand for gasoline sold at gasoline stations is 0.20. If terrorism causes the supply
of gasoline to fall, resulting in a 5 percent drop in quantity, then if other things remain the same, the price per
gallon will increase by:
A. 4 percent.
B. 5 percent.
C. 20 percent.
D. 25 percent.
2. A price elasticity of demand for a good or service of 1.8 tells us that:
A. the price changes by $1.80 when quantity changes by one unit.
B. quantity demanded falls by 1.8% when price rises by 1%.
C. the price rises by 1.8% when quantity demanded falls by 1%.
D. quantity demanded falls by 1.8 units when price changes by $1.
3. If the price of a good goes up by 5% and, in response, the quantity demanded falls by 15%, the price elasticity
of demand would be:
A. .05.
B. 3.
C. 0.3333.
D. 0.15.
4. Refer to the graph above. Calculate the approximate elasticity of demand for the line segment BD:
A. 3
B. 2
C.
D. 3/2
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5. Refer to the graph above. The approximate elasticity of segment AC is:
A. 1/3
B. 1/2
C. 2/3
D. 3/2
Answer the next question(s) on the basis of the following demand schedule:
6. Refer to the above data. The price elasticity of demand is relatively elastic:
A. in the $6-$4 price range.
B. over the entire $6-$1 price range.
C. in the $3-$1 price range.
D. in the $6-$5 price range only.
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7. Refer to the above diagram and assume that price increases from $2 to $10. The coefficient of the price
elasticity of supply (midpoints formula) relating to this price change is about:
A. 5 and supply is elastic.
B. 1 and supply is unit elastic.
C. .25 and supply is inelastic.
D. 2.5 and supply is elastic.
8. A marketing student observes that when the price of ice cream rises by 10%, the quantity of ice cream a
supplier is willing to sells rises by 5%. The student correctly concludes that the elasticity of supply for ice cream
is:
A. .2.
B. .5.
C. 2.
D. 5.
9. Which of the following statements is true about a downward-sloping demand curve that is a straight line?
A. The slope and the elasticity are the same at all points.
B. The slope remains the same, but elasticity rises as you move down the demand curve.
C. The slope remains the same, but elasticity falls as you move down the demand curve.
D. The slope and the elasticity fall as you move down the demand curve.
10. Refer to the graph below.
The demand curve with the greatest elasticity is:
A. A.
B. B.
C. C.
D. D.
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11. Refer to the graph below.
Elasticity is smallest at which point?
A. A.
B. B.
C. C.
D. D.
12. The above diagram shows two product demand curves. On the basis of this diagram we can say that:
A. over range P1P2 price elasticity of demand is greater for D1 than for D2.
B. over range P1P2 price elasticity of demand is greater for D2 than for D1.
C. over range P1P2 price elasticity is the same for the two demand curves.
D. not enough information is given to compare price elasticities.
13. Suppose average movie attendance is 250 million tickets when prices are $7 a ticket and 200 million when
prices are $9 a ticket. Other things being equal, the data imply that the elasticity of demand for movie tickets is:
A. elastic, so the increase in price caused total revenue to rise.
B. elastic, so the increase in price caused total revenue to fall.
C. inelastic, so the increase in price caused total revenue to rise.
D. inelastic, so the increase in price caused total revenue to fall.
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14. Refer to the graph above. Between points E and F demand is:
A. inelastic.
B. elastic.
C. unit elastic.
D. perfectly elastic.
15. The Honolulu tourism commission recently proposed a 7% tax on hotel rooms to pay for an outdoor
amphitheater. A Purdue University economist estimates that the tax would result in a 4% increase in price and an
8% drop in the quantity of hotel rooms demanded. As a result of the tax, the total spent on hotels will:
A. rise because demand is elastic.
B. decline because demand is elastic.
C. rise because demand is inelastic.
D. decline because demand is inelastic.
16. In which of the following instances will total revenue decline?
A. price rises and supply is elastic
B. price falls and demand is elastic
C. price rises and demand is inelastic
D. price rises and demand is elastic
17. Refer to the above diagram. If price falls from $10 to $2, total revenue:
A. rises from A + B to A+ B + D + C and demand is elastic.
B. falls from A + D to B + C and demand is inelastic.
C. rises from C + D to B + A and demand is elastic.
D. falls from A + B to B + C and demand is inelastic.
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18. The state legislature has cut Gigantic State University's appropriations. GSU's Board of Regents decides to
increase tuition and fees to compensate for the loss of revenue. The board is assuming that the:
A. demand for education at GSU is elastic.
B. demand for education at GSU is inelastic.
C. coefficient of price elasticity of demand for education at GSU is unity.
D. coefficient of price elasticity of demand for education at GSU is greater than unity.
19. If the quantity of Big Macs demanded falls from 2.0 million to 1.6 million as the price of Whoppers falls from
$1.40 to $.80, the cross price elasticity of demand for Big Macs is:
A. -2.5.
B. -0.4.
C. 2.5.
D. 0.4.
20. If demand is highly elastic and supply shifts to the right:
A. price will fall significantly; quantity hardly changes at all.
B. price will hardly change at all; quantity will rise significantly.
C. price will rise significantly as will quantity.
D. price and quantity will hardly change at all.
21. If demand is highly inelastic and supply shifts to the right, price:
A. will rise significantly; quantity hardly changes at all.
B. hardly changes at all; quantity will rise significantly.
C. will rise significantly as will quantity.
D. will fall significantly; quantity hardly changes at all.
22. If supply is highly elastic and demand shifts to the right:
A. price will rise significantly; quantity hardly changes at all.
B. price will hardly change at all; quantity will rise significantly.
C. price will rise significantly as will quantity.
D. price and quantity will hardly change at all.
23. George Davis has estimated that for every one percent increase in the price of natural Christmas trees, the
demand for artificial trees rises by .188%. From this information one can conclude that:
A. the income elasticity of demand for natural Christmas trees is less than one.
B. natural Christmas trees are luxuries.
C. natural and artificial Christmas trees are substitutes.
D. natural and artificial Christmas trees are complements.
24. Suppose the demand for margarine increases from 800 to 1,000 pounds when income falls from $40,000 to
30,000. Income elasticity is:
A. 0.02.
B. 50.
C. -0.77.
D. 0.77.
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25. Which of the following is an example of price discrimination?
A. Some retailers hire fewer men than women to sell women's perfume on the shop floor.
B. Grocery stores sell 12 oz. bottles of coke for less than they sell liter bottles.
C. When price of land rises, landowners do not increase the quantity of land supplied.
D. Peak-fare prices are higher than non-peak-fare prices.
26. Price discriminating behavior by a profit maximizer is:
A. the inability to pass along cost increases to those with inelastic demands.
B. the inability to pass along cost increases to those with elastic demands.
C. charging lower prices to those with inelastic demand than to those with elastic demands.
D. charging higher prices to those with inelastic demand than to those with elastic demands
27. Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum
acceptable price to the seller, Nathan, was $30. Jennifer experiences:
A. a consumer surplus of $12 and Nathan experiences a producer surplus of $3.
B. a producer surplus of $9 and Nathan experiences a consumer surplus of $3.
C. a consumer surplus of $9 and Nathan experiences a producer surplus of $3.
D. a producer surplus of $9 and Nathan experiences a producer surplus of $12.
28. Refer to the above diagram. Assuming equilibrium price P1, consumer surplus is represented by areas:
A. a + b.
B. a + b + c + d.
C. c + d.
D. a + c.
29. Refer to the above diagram. If actual production and consumption occur at Q1:
A. efficiency is achieved.
B. consumer surplus is maximized.
C. an efficiency loss (or deadweight loss) of b + d occurs.
D. an efficiency loss (or deadweight loss) of e + d occurs.
30. An efficiency loss (or deadweight loss):
A. is measured as the combined loss of consumer surplus and producer surplus.
B. results from producing a unit of output for which the maximum willingness to pay exceeds the minimum
acceptable price.
C. can result from underproduction, but not from overproduction.
D. can result from overproduction, but not from underproduction.
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Chapter 7:
31. The following table lists the utility that Sarah receives from consuming bananas at 25 cents a banana. What is
the marginal utility of consuming the 4th banana?
A. 40
B. 32
C. 8
D. 2
32. Suppose that the following table lists the utility that Gwen receives from consuming bananas at 25 cents
apiece. What is the total utility of consuming 4 bananas?
A. 46
B. 30
C. 8
D. 2
33. Suppose that when you consume the third piece of chicken, total utility rises from 420 to 520. Marginal utility
for the third piece of chicken is:
A. 520
B. 420
C. 140
D. 100
34. Suppose one Big Mac gives you a marginal utility of 500, and a second Big Mac gives you a marginal utility
of 200. The total utility of buying (and eating) two Big Macs is:
A. 200.
B. 300.
C. 500.
D. 700.
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Refer to the table below. Fill in the table and answer the following question(s).
35. What is the marginal utility of the fourth can of soda?
A. 44 units of utility.
B. 10 units of utility.
C. 8 units of utility.
D. 2 units of utility.
36. The law of diminishing marginal utility states that, as extra units of a product are consumed within a given
period of time, total utility:
A. Decreases at a decreasing rate
B. Decreases at an increasing rate
C. Increases at a decreasing rate
D. Increases at an increasing rate
37. As long as total utility is increasing, we know that marginal utility is:
A. positive.
B. decreasing.
C. increasing.
D. negative.
38. Refer to the above graph. Total utility is at its maximum at point:
A. A.
B. B.
C. C.
D. D.
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39. Refer to the graph below.
Marginal utility is:
A. negative between A and B.
B. negative between B and C.
C. negative between C and D.
D. is not negative anywhere along the total utility curve.
40. Jack Sprat could eat no fat, his wife could eat no lean. And so betwixt them both, they licked the platter clean.
Which of the following is true about Jack and his wife?
A. Marginal utility of fat is negative for Jack; marginal utilit y of lean is negative for his wife.
B. Marginal utility of fat is falling for Jack; marginal utility of lean is falling for his wife.
C. Marginal utility of lean is negative for Jack; marginal utility of fat is negative for his wife.
D. Marginal utility of lean is rising for Jack; marginal utility of fat is rising for his wife.
41. The following table describes utility for consuming cans of soda. At what point does the law of diminishing
marginal utility set in?
A. Between 3 and 4.
B. Between 4 and 5.
C. Marginal utility diminishes everywhere.
D. Marginal utility never diminishes.
42. Joan is deciding where to spend her spring break. If she goes to Cancun, Mexico, the trip will give her 9,000
units of utility and will cost her $300. If she travels to Florida instead, the trip will give her 8,000 units of utility
and will cost her only $200. Joan will do best going to:
A. Mexico because her total pleasure will be greater.
B. Florida because her total cost will be lower.
C. Mexico because her pleasure per dollar will be greater.
D. Florida because her pleasure per dollar will be greater.
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43. Jason is faced with two choices: A BMW costing $40,000 gives him an additional 800 units of utility and a
laser printer costing $1000 gives him an additional 25 units of utility. Rational choice theory would predict that he
would choose:
A. to purchase the BMW.
B. to purchase the laser printer.
C. It is impossible to choose because the goods have different prices.
D. It is impossible to choose because BMWs and laser printers are fundamentally different goods with different
purposes.
44. A Big Mac meal costs $3.00 and gives you an additional 5 units of utility; a meal at the Four Season's Hotel
costs $27.00 and gives you an additional 45 units of utility. Based only on the information you have, using the
theory of rational choice you would most likely:
A. choose to eat the Big Mac meal.
B. choose to eat at the Four Season's Hotel.
C. would be indifferent between eating the Big Mac and eating at the Four Season's Hotel.
D. will decide that eating at the Four Season's Hotel is preferable because though the marginal utilities of both
meals are the same, the total utility is greater in the case of the meal at the Four Season's Hotel.
45. Joe is maximizing utility by consuming 3 colas at $2 a piece and 4 hot dogs. The last cola gave him 200 units
of utility and the last hot dog gave him 300 units of utility. The price of each hot dog is:
A. $3.00.
B. $1.50.
C. $1.00.
D. $0.50.
46. Suppose Jack purchases four rolls of brown paper for which he receives 100 units of total utility and two
quarts of vinegar for which he receives 50 units of total utility. Assuming Jack maximizes utility, if the price of
brown paper is $2 a roll, the cost of two quarts of vinegar must be:
A. $1 a quart.
B. $2 a quart.
C. 50 cents a quart.
D. It is impossible to tell.
Refer to the table below.
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47. If the price of one can of Alpo is $.50 and the price of each McBurger is $1, which of the following would Ms.
Tightwad, a utility maximizing consumer, buy with her $4?
A. 4 McBurgers.
B. 3 McBurgers and 2 cans of Alpo.
C. 2 McBurgers and 4 cans of Alpo.
D. 1 McBurger and 6 cans of Alpo.
Refer to the table below.
48. If the price of one Weight Watcher's frozen dinner is $2 and the price of one dozen jelly donuts is $1, which of
the following would Kent, a utility maximizing consumer, buy with his $6?
A. 3 frozen dinners.
B. 2 frozen dinners and 2 dozen jelly donuts.
C. 1 frozen dinner and 4 dozen jelly donuts.
D. 6 dozen jelly donuts.
49. Refer to the table below. At this level of consumption of Goods A and B, the consumer:
A. is maximizing satisfaction for the given expenditure.
B. could increase total satisfaction for a given expenditure by increasing the consumption of A and decreasing
that of B.
C. could increase total satisfaction for a given expenditure by increasing the consumption of B and decreasing that
of A.
D. should only consume A.
50. Diamonds cost more than water because:
A. the total utility of diamonds is greater than the total utility of water.
B. the marginal utility diamonds of is greater than the marginal utility of water.
C. the opportunity cost of diamonds is greater than the opportunity cost of water.
D. diamonds have more substitutes than water.
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51. The last Big Mac va consumes costs $2.00 and gives her 24 units of utility. The last Whopper she consumes
costs $1.50 and gives va 18 units of utility. va is maximizing her utility. If the price of the Whopper falls t o
$1.30, and given diminishing marginal utility, va should:
A. consume more Big Macs and fewer Whoppers.
B. consume more Whoppers and fewer Big Macs.
C. keep consuming the current amounts of both Big Macs and Whoppers.
D. realize that she doesn't have enough information to answer the question.
Answer the next question(s) based on the table below showing the marginal utility schedules for product X and
product Y for a hypothetical consumer. The price of product X is $4 and the price of product Y is $2. The income
of the consumer is $20.
52. Refer to the above table. If the consumer can only buy product X, how much will the consumer buy and what
will be the total utility?
A. 4X and 20
B. 4X and 104
C. 5X and 16
D. 5X and 120
53. Assume that Tonya consumes only two products, pizza and potato chips. Both are normal goods for Tonya. If
the price of pizza decreases, then Tonya's consumption of pizza will:
A. Decrease due to the income effect
B. Decrease due to the substitution effect
C. Increase due to the income effect
D. Increase due to the law of diminishing marginal utility
54. An increase in the price of product X results in a decrease in the quantity demanded for product X. A possible
explanation is:
A. The substitution effect
B. The elasticity of demand
C. X is a normal good
D. X is an inferior good
55. A downward sloping demand curve can be derived for a normal product by decreasing its price in the
consumer-behavior model and noting:
A. The decrease in the utility-maximizing quantity of that product demanded
B. A substitution effect that encourages less consumption of that product
C. A substitution effect that encourages more consumption of that product
D. An income effect that encourages less consumption of that product
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56. A downward sloping demand curve can be derived for a normal product by increasing its price in the
consumer-behavior model and noting:
A. The increase in the utility-maximizing quantity of that product demanded
B. A substitution effect that encourages more consumption of that product
C. An income effect that encourages more consumption of that product
D. An income effect that encourages less consumption of that product
57. The fact that an ounce of gold is priced higher than an ounce of chocolate suggests that:
A. The marginal utility of the last unit of gold consumed is greater than the marginal utility of the last unit of
chocolate consumed
B. The total utility of gold is greater than the total utility of chocolate
C. Gold is a normal good while chocolate is an inferior good
D. There are many substitutes for chocolate, but few for gold
58. Health insurance often pays 80 percent of health care cost. This situation will encourage the rational consumer
to:
A. Consume less health care because the cost is too expensive
B. Obtain health insurance that pays less than 80 percent of medical care costs
C. Use more medical services than they would if they had to paid the full price
D. Eliminate their health care coverage because it does not cover 100 percent of the cost
59. Decreases in the price of a product causes the consumer's:
A. Indifference curves to shift outward from the origin
B. Indifference curves to shift inward to the origin
C. Budget line to shift outward from the origin
D. Budget line to shift inward to the origin
Good A
60. Refer to the above graphs. Which pairs of budget constraints represent only a decrease in the price of Good A,
but no change in income?
A. Graph A
B. Graph B
C. Graph C
D. Graph D
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61. Refer to the above graphs. Which pairs of budget constraints represent an increase in the price of X and a
decrease in the price of Y?
A. Graph A
B. Graph B
C. Graph C
D. Graph D
Chapter 8:
62. A business owner makes 50 items by hand in 6 hours. She could have earned $10 an hour working for
someone else. If each item sells for $5 and the explicit costs total $14, economic profit equals:
A. $0.
B. $64.
C. $176.
D. $236.
63. A business produces 400 items and sells them for $15 each for a total of $6,000. The total cost of producing
the items is $4,500 explicit cost and $1,000 implicit cost. Economic profit is:
A. $0.
B. $500.
C. $1,000.
D. $1,500.
64. Rachel left her job as a graphic artist, where she earned $42,000 per year, to open her own graphic arts firm.
Her explicit costs for her new business include:
A. only the expenses incurred for office space, equipment, and supplies.
B. only her foregone salary of $42,000 per year.
C. both the expenses incurred for office space, equipment, and supplies and her foregone salary of $42,000 per
year.
D. neither the expenses incurred for office space, equipment, and supplies nor her foregone salary of $42,000 per
year.
65. Can accounting profit be positive, while economic profits are negative?
A. No. The two concepts are identical.
B. Yes, if total revenue covers opportunity costs but not explicit costs.
C. Yes, if total revenue covers explicit costs but not opportunity costs.
D. No. Economic profits must always be larger than accounting profits.
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66. Which of the following is the best example of a long-run decision?
A. An automobile manufacturing company is considering whether or not to invest in robotic equipment to
develop a more cost-effective production technique.
B. An automobile manufacturing company is considering whether or not to expand its existing workforce, while
keeping the same factory and equipment.
C. A business consulting firm is considering whether or not to hire some interns to assist with research and
data-processing.
D. A business consulting firm is considering whether or not to add new computers while maintaining the same
number of employees.
67. A regional airline owns ten aircraft and employs twenty pilots. The airline makes an average of three trips per
day with each of its ten aircraft. The aircraft and their ground crews are idle part of the day. Minimum rest
requirements for its pilots mean that if the airline wants to increase its flights, it must hire more pilots. The
decision to hire more pilots is:
A. a short-run decision because the number of aircraft is held constant while the labor input is changed.
B. a short-run decision because the number of pilots is being increased; if the number of ground crew were
decreased instead, it would be a long-run decision.
C. a long-run decision because hiring pilots will increase revenues over a long period of time for the airline.
D. a long-run decision because customers will become accustomed to the new flight schedule.
68. Refer to the graph above. With efficient production, this firm can maximize production at point:
A. A.
B. B.
C. C.
D. D.
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69. Refer to the graph above which shows total product. At point A:
A. marginal product is at its minimum point.
B. marginal product is at its maximum point.
C. marginal product is zero.
D. average product per worker is at its maximum point.
70. Refer to the table above. The average product when 8 workers are employed is:
A. 3.
B. 4.
C. 5.
D. 6.
71. Refer to the table above. If 7 workers are employed then total output equals:
A. 5.
B. 35.
C. 53.
D. 56.
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72. Refer to the table above. Marginal product declines when which worker is hired?
A. The fifth.
B. The sixth.
C. The seventh.
D. The ninth.
73. Mr. Woodard's cabinet shop is experiencing rapid growth in sales. As sales have increased, Mr. Woodard has
found it necessary to hire more workers. However, he has observed that doubling the number of workers has less
than doubled his output. What is the likely explanation?
A. The law of diminishing marginal utility.
B. The law of diminishing marginal productivity.
C. The law of supply.
D. The law of demand.
74. Refer to the graph above. Within which section(s) of the production function is marginal product increasing?
A. A.
B. B.
C. C.
D. A and B.
75. If a firm shuts down for a week, then during that week:
A. total cost is zero.
B. total cost equals total fixed cost.
C. total cost equals total variable cost.
D. total variable cost exceeds total fixed cost.
76. Fixed costs exist only in the:
A. long run when some inputs are fixed.
B. long run when all inputs are fixed.
C. short run when some inputs are fixed.
D. short run when all inputs are fixed.
77. A firm is producing 100 units of output at a total cost of $400. The firm's average variable cost is $3 per unit.
What is the firm's total fixed cost?
A. $1.
B. $50.
C. $100.
D. $300.
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78. When output is 50, fixed costs are $1,000 and variable costs are $2,000, what is the average total cost?
A. $20.
B. $40.
C. $60.
D. $80.
79. If fixed costs are $960, variable costs are $1,440, and output is 12, then average total cost equals:
A. $ 80.
B. $100.
C. $120.
D. $200.
80. The average total cost of producing electronic calculators in a factory is $20 at the current output level of 100
units per week. If fixed cost is $1,000 per week:
A. average fixed cost is $20.
B. total cost is $3,000.
C. variable cost is $2,000.
D. average variable cost is $10.
81. Refer to the table above. If the output of bicycles is 4 per week, then the marginal cost of producing another
bicycle per week is:
A. $110.
B. $120.
C. $130.
D. $140.
82. Refer to the table above. The marginal cost of producing the fourth unit of output is:
A. $2.
B. $3.
C. $4.
D. $5.
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83. Which short-run cost curve continually declines as output increases?
A. Total cost
B. Average variable cost
C. Average fixed cost
D. Marginal cost
The following graph shows average fixed costs, average variable costs, average total costs, and marginal costs of
production.
84. Refer to the graph above. Why does the distance between curves II and III get smaller as quantity increases?
A. Because marginal cost is increasing
B. Because average variable cost is increasing
C. Because average fixed cost is declining
D. Because average fixed cost is increasing
85. Refer to the graph above. Marginal cost is minimized when output equals:
A. 6 units.
B. 12 units.
C. 21 units.
D. 25 units.
86. Refer to the graph above. The distance EF represents:
A. average variable cost.
B. average total cost.
C. average fixed cost.
D. marginal cost.
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87. Refer to the graph above. The line segment that represents average variable costs of producing Q* is:
A. AQ*
B. BQ*
C. CQ*
D. AB
88. The average variable cost curve is a mirror image of the:
A. total product curve.
B. marginal product curve.
C. average product curve.
D. marginal cost curve.
89. At the level of output where marginal product begins to fall, marginal costs will:
A. begin to fall.
B. begin to rise.
C. remain constant.
D. equal marginal product.
90. If marginal cost is greater than average total cost, then average total cost:
A. is minimized.
B. is falling.
C. will not change.
D. is rising.
91. If marginal cost equals average total cost, then:
A. average total cost is minimized.
B. marginal cost is minimized.
C. average variable cost is minimized.
D. average variable cost is falling.
92. If the average cost of producing 9 sweaters is $6.50 and the marginal cost of producing the 10th sweater is
$6.25, then the average cost of producing 10 sweaters will:
A. be $6.50.
B. be more than $6.50.
C. be less than $6.50.
D. be exactly $6.25.
93. A firm encountering economies of scale over some range of output will have a:
A. Rising long-run average cost curve
B. Falling long-run average cost curve
C. Constant long-run average cost curve
D. Rising, then falling, then rising long-run average cost curve
94. Round Things, Inc.'s production process exhibits economies of scale. Currently their long-run average cost =
$1/unit. If Round Things doubles its use of all inputs, its new long-run average total cost will be:
A. $1/unit
B. Less than $1/unit
C. Greater than $2/unit
D. Greater than $1/unit but less than $2/unit
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The table shows three short-run cost schedules for three plants of different sizes that a firm might build in the
long run.
95. Refer to the above table. What is the long-run average cost of producing 30 units of output?
A. $7
B. $8
C. $9
D. $10
96. Which would contribute most to a firm experiencing "economies of scale"?
A. Rising long-run average costs
B. The law of diminishing marginal returns
C. Specialization of production within a firm
D. Deterioration of information and control within a firm
97. If all resources used in the production of a product are increased by 10 percent and output increases by less
than 5 percent, then the firm is experiencing:
A. Economies of scale
B. Diseconomies of scale
C. Constant returns to scale
D. Decreasing average total costs
98. Popquick Popcorn of upper north-central Indiana experiences a long-run ATC = $1,500 per 1,000 pounds
after doubling its plant size. The original long-run ATC was $500 per 1,000 pounds. Popquick Popcorn is now
operating:
A. Where AFC > MC
B. At the minimum of its long-run ATC curve
C. On the upward-sloping portion of its long-run ATC curve
D. On the downward-sloping portion of its long-run ATC curve
Plant sizes get larger as you move from ATC-1 to ATC-4.
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99. Refer to the above table. Which plant size would produce at least cost for the 3000-4000 level of output?
A. 1
B. 2
C. 3
D. 4
100. Refer to the above graph. There are economies of scale:
A. To the left of point A
B. To the right of point B
C. At points A and B
D. Between points A and B
101. The following schedule gives the cost data for a firm:
Diseconomies of scale start between:
A. 0 and 10 units of output
B. 40 and 50 units of output
C. 20 and 30 units of output
D. 30 and 40 units of output
102. A natural monopoly is characterized by:
A. Collusion with other competitors to divide up the market
B. A decreasing average-cost curve over the feasible range of output
C. A firm protected from competition by a government regulation
D. A firm having control over the entire supply of a basic input in the production process
24
Study Guide 6-7-8 Key
ECON 2010 Fall 2010
1. D
3. B
5. C
7. C
9. C
11. D
13. C
15. B
17. D
19. D
21. D
23. C
25. D
27. C
29. C
31. C
33. D
35. C
37. A
39. C
41. A
43. B
45. A
47. B
49. C
51. B
53. C
55. C
57. A
59. C
61. D
63. B
65. C
67. A
69. B
71. C
73. B
75. B
77. C
79. D
81. D
83. C
85. B
87. A
89. B
91. A
93. B
95. A
97. B
99. B
101. B
2. B
4. C
6. A
8. B
10. D
12. A
14. A
16. D
18. B
20. B
22. B
24. C
26. D
28. A
30. A
32. B
34. D
36. C
38. D
40. A
42. D
44. C
46. D
48. B
50. B
52. D
54. A
56. D
58. C
60. C
62. C
64. A
66. A
68. C
70. D
72. A
74. A
76. C
78. C
80. D
82. B
84. C
86. C
88. C
90. D
92. C
94. B
96. C
98. C
100. A
102. B