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exam2_pract - Exam II Practice Spring 2008 I Multiple...

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Page 1 Exam II. Practice. Spring 2008. I. Multiple Choice. 3 points each. 1. We can measure total producer surplus for good X as: A) the sum of the individual producer surpluses for all buyers of X. B) the area below the supply curve for X and above the price of X. C) the area bounded by the supply curve for X and the two axes. D) all of the above. 2. If the price of the good is \$4, consumer surplus will equal: A) \$5. B) \$10. C) \$20. D) \$40. 3. If you want to reduce the inefficiency costs of taxation, you should devise taxes to fall on goods for which the supply is price _______ and the demand is price ___________. A) elastic; elastic B) inelastic; inelastic C) elastic; inelastic D) inelastic; elastic 4. For most firms, economic profit is: A) less than accounting profit. B) equal to accounting profit. C) greater than accounting profit. D) negative.

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Page 2 5. According to the marginal decision rule, if marginal benefit: A) exceeds marginal cost, an activity should be reduced. B) is less than marginal cost, an activity should be reduced. C) is equal to marginal cost, an activity should be reduced. D) exceeds marginal cost, net benefit is maximized. 6. If the government imposes a tax of \$1 in this market, consumers will pay ____ more per unit and purchase _______ fewer units. A) \$1; 5 B) \$1; 25 C) \$0.50; 5 D) \$0.50; 20 7. The short run is defined as a: A) period of time less than 1 year. B) period of time less than 6 months. C) planning period in which some inputs are considered to be fixed in quantity. D) time period in which some inputs are fixed, but it cannot exceed 1 year.
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exam2_pract - Exam II Practice Spring 2008 I Multiple...

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