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Unformatted text preview: PAGE 1 EC 201 Prof. Theofanis Tsoulouhas Name Sample Final Exam . The amount of education that one has is an important factor in the determination of his or her wage rate. This statement is best described as a (a) positive statement. (b) Marxist ideology. (c) normative statement. (d) descriptive economics statement. . A voluntary trade is made between two individuals that makes each one better off. This statement is an example of (a) efficiency. (b) equity. (c) growth. (d) stability. . You know that traffic gets very congested about 7:45. To avoid this congestion, you start leaving for work 15 minutes earlier every day. But many commuters make the same decision and now traffic becomes very congested at 7:30. This is an example of the (a) post hoc, ergo propter hoc fallacy. (b) ceteris paribus fallacy. (c) fallacy of division. (d) fallacy of composition. . Because resources are scarce, the opportunity cost of an investment in capital is (a) zero. (b) forgone future consumption. (c) forgone present consumption. (d) infinite. Capital goods Consumer goods Figure 2.3 The production possibility frontier for Microland . Refer to Figure 2.3. Microland is currently operating at point B. You correctly deduce that (a) in Microland all resources are fully employed and there are no production inefficiencies. (b) Microland has achieved a position of inefficiency. (c) Microland has recently experienced some type of technological breakthrough. (d) Microland has overcome the problem of scarcity. 10. ll. 12. 13. 14. PAGE 2 . Suppose an economy produces television sets and computers in perfectly competitive industries. The economy is currently operating at a point on its ppf. If a firm gains monopoly control over the production of computers which of the following is most likely to happen? (a) The economy will move to a less desirable point on the ppf. (b) The economy's ppf will shift inward. (c) The economy will now be able to produce at a point outside its ppf. (d) The economy's ppf will shift outward, but the maximum number of computers will remain the same. In which form of business organization are the assets and liabilities of the firm the owner's assets and liabilities? (a) proprietorship only (b) partnership only (c) proprietorship and partnership (d) partnership and corporation . The industry structure characterized by a large number of firms producing Virtually identical products is (a) perfect competition. (b) monopolistic competition. (c) oligopoly. (d) monopoly. In which market structure do firms have no price setting power? (a) perfect competition (b) monopolistic competition (c) oligopoly (d) monopoly The market price for lead pencils is 25 cents. The Click Pencil Company tries to sell its lead pencils for 26 cents but finds that it cannot sell any lead pencils at that price. Click Pencil is in what type of industry? (a) perfectly competitive (b) monopolistically competitive (c) oligopolistic (d)_monopolistic Which market structure has the most effective barriers to entry? (a) monopoly (b) oligopoly (c) perfect competition (d) monopolistic competition A monopoly exists (a) any time there is one seller of a product. (b) any time there is one seller of a product with no close substitutes. (c) any time entry into an industry is difficult. (d) any time you own three or more pieces of the same color of real estate. In a monopolistically competitive industry, products are (a) homogeneous. (b) differentiated. (c) produced by one firm, but sold by many. (d) sold at a single price. The difference between perfect competition and monopolistic competition is that in perfect competition , but in monopolistic competition . (a) there is a large number of firms; there is a small number of firms (b) firms produce identical products; firms produce similar but differentiated products (0) firms have some control over price; firms have no control over price (d) there is both price and quality competition; there is only quality competition PAGE 3 15. Which of the following is MOST likely to be a firm in a monopolistically competitive industry? (a) a Wisconsin dairy farmer (b) IBM® (c) KodakC (d) Sharyn's Hair Styling Salon 16. Which of the following statements is FALSE? (a) Entry into an oligopolistic industry is relatively difficult. (b) Firms in a monopolistically competitive industry can raise prices substantially without fear of losing many customers. (c) Firms in a perfectly competitive industry have control over how much they sell but no control over price. (d) In order for a monopoly to remain a monopoly there must be some type of barrier to entry. 17. The industry structure which has the distinguishing characteristic of strategic behavior is (a) perfect competition. (b) monopoly. (c) oligopoly. (d) monopolistic competition. 18. The fastest growing sector of the United States economy has been the (a) government sector. (b) manufacturing sector. (c) service sector. (d) agricultural sector. 19. The purpose of the North American Free Trade Agreement (NAFTA) is to (a) reduce the United States's dependency on imported oil. (b) reduce the amount the United States imports from Canada and Mexico. (c) reduce trade barriers between the United States, Canada, and Mexico. (d) speed up the transfer of technology among the United States, Canada and Mexico. 20. Which of the following market structures would most likely define the marketplace for textbook publishers? (a) perfect competition (b) monopolistic competition (c) oligopoly (d) monopoly 21. The Setrite Corporation produces chairs. An economist working for the firm predicts that "if people's incomes rise next year, then the demand for our chairs will increase, ceteris paribus." The accuracy of the economist's prediction depends on whether the chairs Setrite produces (a) have many complementary goods. (b) have few substitutes. (c) have few complementary goods. (d) are normal goods. 22. When the decrease in the price of one good causes the demand for another good to decrease, the goods are (a) normal. (b) inferior. (c) substitutes. (d) complements. PAGE 4 Price 0 Number of gardenburgers Q Figure 4.14 23. Refer to Figure 4.14. An increase in the wage rate of Gardenburger makers will cause a movement from point B on supply curve 52 to (a) point A on supply curve 52. (b) point B on supply curve 82. (c) supply curve S3. (d) supply curve 81. Price D.) I I I I I I I 100 150 250 350 400 Q Millions of pounds of chicken Figure 5.1 24. Refer to Figure 5.1. The market is initially in equilibrium at point B. If demand shifts from D2 to D1 and the price of chicken remains constant at $4.00, there will be (a) an excess supply of 200 million pounds of chicken. (b) an excess demand of 200 million pounds of chicken. (c) an excess supply of 100 million pounds of chicken. (d) an excess demand of 100 million pounds of chicken. PAGE 5 25. People scalping tickets for the Super Bowl will be successful (a) any time the Super Bowl is popular. (b) when prices are too high. (c) when the price set by the National Football League is less than the market equilibrium price. (d) only when there is excess supply. 26. The price of hot dogs increases by 22% and the quantity of hot dogs demanded falls by 25%. This indicates that demand for hot dogs is (a) elastic. (b) inelastic. (c) unitarily elastic. (d) perfectly elastic. 27. If the price elasticity of demand is 0, then demand must be (a) unitarily elastic. (b) perfectly elastic. (c) perfectly inelastic (d) revenue elastic. Units of Y Units of X Figure 6.7 28. Refer to Figure 6.7. Along budget constraint AB, the price of good X is $10 and the price of good Y is $12. If the price of Y increases to $15, the budget constraint (a) will swivel in at point B. (b) will swivel out at point A. (c) will shift in parallel to AB. (d) will swivel in at point A. 29. My ratio of the marginal utility of coffee to the marginal utility of donuts is four. This implies that (a) a cup of coffee is four times more valuable to me than a donut. (b) a cup of coffee is four times less valuable to me than a donut. (c) I always eat donuts with my coffee. (d) the price ratio is four to one. 30. The marginal rate of substitution of peanut butter for cheese is 5 and the ratio of the price of peanut butter to the price of cheese is 4. To maximize utility, the consumer should (a) continue to consume the same amount of peanut butter and cheese since she is already maximizing utility. (b) consume more peanut butter and less cheese. (c) consume less peanut butter and more cheese. (d) consume more of both peanut butter and cheese. PAGE 6 31. A perfectly elastic demand curve implies that, ceteris paribus, (a) a firm can sell more by lowering its price. (b) if a firm raises its price even a bit above the market price, it will sell nothing. (c) the price a firm charges is irrelevant since it will sell the same amount regardless of the price charged. (d) a firm can raise its price and not lose all its customers. 32. Which of the following statements is FALSE? (a) Labor can never be fixed in the short run. (b) In the short run firms can neither exit nor enter an industry. (c) In the short run there is at least one fixed factor of production. (d) The length of time that the short run lasts will vary from firm to firm and industry to industry. q 'U (D B o E U) E a (.5 "C! E 2. 8 ----- -- E z 3 — — — — 1 2 L Number of employees Figure 7.6 33. Refer to Figure 7.6. The marginal product of the second worker is lawns mowed. (a) 4 (b) 5 (c) 5.5 (d) 11 PAGE 7 Number of cars washed per day Number of workers Figure 7.10 34. Refer to Figure 7.10. Diminishing marginal returns set in after the worker is hired. (a) first (b) fifth (c) eighth (d) sixteenth 35. A graph showing all the combinations of capital and labor that can be used to produce a given amount of output is A (a) an indifference curve. (b) an isoquant. (c) an isocost line. (d) a production function. PAGE 8 $ 1 a B 3 'E 3 56 Q g A L) Number of sleeping bags ‘1 Figure 8.9 Cost Curve for Outdoor Equipment 36. Refer to Figure 8.9. The curve labeled 1 is Outdoor Equipment's (a) marginal cost curve. (b) average variable cost curve. (c) average total cost curve. (d) average fixed cost curve. 37. If marginal revenue is greater than marginal cost, the profit-maximizing firm should (a) increase output. (b) do nothing since it is already maximizing profits. (c) decrease output. (d) exit the industry. 38. 39. 40. 200 700 1,000 1,400 q Bushels of Soybeans Figure 8.16 Cost and demand conditions for a soybean Farmer PAGE 9 Refer to Figure 8.16. If this farmer is producing the profit maximizing level of output her profit is (a) $0. (b) $2,800. (c) $3,000. (d) $12,000. When will a profit—maximizing firm not operate at MC = MR? (a) (b) (c) (01) when when, when when Which of They imply that a given percentage increase in all inputs results in a smaller percentage increase in output. (a) (b) (C) (d) They imply a reduction in average cost as output increases. Most it is suffering a loss but P > AVC. it is earning a zero economic profit. it is earning normal profits. it is suffering a loss and P < AVC. the following is NOT true of economies of scale? economies of scale are technological in nature. They may result from sheer size. 41. 42. 43. 44. 45. 46. Price per unit 20 22 24 26 Units of output Figure 13.5 PAGE 10 Refer to Figure 13.5. The profit maximizing level of output for this monopolist is (a) (b) (C) (d) units of output. 20 22 24 26 For a monopolist, price (a) (b) (C) (d) equals marginal revenue. is less than marginal revenue. is greater than marginal revenue. can be greater than or less than marginal revenue. The slope of the marginal curve is (a) (b) (C) (d) always equal to one. the same as the slope of the demand curve. half as steep as the demand curve. twice as steep as the demand curve. A profit—maximizing monopolist will produce that output level where (a) (b) (C) (d) marginal revenue is zero. marginal cost is minimized. price equals marginal cost. marginal revenue equals marginal cost. An industry that realizes such large economies of scale in producing its product that single-firm production of that good or service is most efficient is called (a) (b) (C) (d) a fixed cost monopoly. an economies of scale monopoly. a government franchise monopoly. a natural monopoly. Monopolistic competition differs from perfect competition primarily because (a) (b) (C) (d) in monopolistic competition, firms can differentiate their-products. in perfect competition, firms can differentiate their products. in monopolistic competition, entry into the industry is blocked. in monopolistic competition, there are relatively few barriers to entry. PAGE 11 20 50 60 q Number of Silk-Screened T-shirts per day Figure 14.6 Demand and Cost Conditions Facing Trollio's T-shirts 47. Refer to Figure 14.6. If Trollio's T-shirts is in long—run equilibrium it is producing silk—screened T—shirts and selling each T-shirt at a price of (a) 20; $5 (b) 50; $10 (c) 50; $16 (d) 60; $15 48. If firms in a monopolistically competitive industry are earning economic profits, then in the long run (a) these firms can continue earning economic profits since entry into the industry is blocked. (b) new firms producing close substitutes will enter the industry and this entry will continue until economic profits are eliminated. (c) new firms producing the exact same product will enter the industry and this entry will continue until economic profits are eliminated. (d) the government will most likely regulate firms in this industry to reduce these economic profits. 49. Which of the following statements best describes the outcome under monopolistic competition? (a) It is efficient because entry is free and economic profits are eliminated in the long run. (b) It is not efficient because too little output is produced, but is efficient in that the output produced is produced at minimum average total cost. (c) It is efficient because the right amount of output is produced, but not efficient in that the output produced is produced at a cost above minimum average total cost. (d) It is not efficient because too little output is produced and the output that is produced is produced at a cost above minimum average total cost. 50. A group of firms that gets together to make price and output decisions is called (a) a concentrated industry. (b) an oligopoly. (c) a cartel. (d) price leadership. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. ANSWER KEY FOR TEST - UNTITLED (a) (a) (d) (C) (a) (C) (a) (a) (a) (a) (b) (b) (b) (d) (b) (c) (c) (c) (d) (c) (d) (a) (c) (a) (c) (a) (a) (b) (b) PAGE 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. (a) (b) (b) (b) (a) (a) (c) (d) (a) (b) (c) (d) (d) (d) (a) (c) (b) (d) (C) PAGE ...
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This note was uploaded on 06/20/2008 for the course EC 201 taught by Professor Xasdf during the Summer '08 term at N.C. State.

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final201 - PAGE 1 EC 201 Prof. Theofanis Tsoulouhas Name...

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