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Unformatted text preview: Fall, 2001 Principles of Microeconomics Phil Graves U. of Colorado EC2010 Second Midterm, V.1 Directions: There is one best answer to each question, after reading all answers; remember that a multiple choice question is just a series of T-F questions in which one of the responses is true. 1) A good sold in a perfectly competitive market can be best characterized as having: a. many sellers and buyers (Correct...so many that no one or group can affect price) b. low prices. c. no close substitutes. d. a range of style and quality variations. e. All of the above are traits of goods sold in perfectly competitive markets. 2) The short-run elasticity of supply is more inelastic than the long-run elasticity of supply because: a. In the short run, a firm cannot alter fixed inputs of machines and buildings. b. In the short run, customers cannot discover substitutes. c. In the short run, new firms cannot enter or exit the industry. d. a and c. (Correct...something is fixed in the short-run which prevents low-cost expansion or new entry) e. All of the above. 3) Diminishing marginal utility means that: a. The usefulness of the good is limited. b. The willingness to pay for an extra unit decreases as more of a good is consumed. (Correct) c. The good is less scarce. d. The market price of the good decreases as more of the good is consumed. e. None of the above. 4) According to the Law of Diminishing Returns (or Law of Diminishing Marginal Product): a. As more of all inputs are employed, the added output decreases. b. As more of one input is employed, holding other inputs unchanged, the added output decreases. (Correct) c. As more of the output is produced, the cost of production diminishes. d. As more of the output is produced, the marginal cost of production diminishes. e. None of the above. 5) At an output level where the marginal cost curve is below the average cost curve: a. The average cost curve is at its minimum. b. The marginal cost curve is at its minimum. c. The marginal cost curve is downward sloping. d. The average cost curve is downward sloping.(Correct) e. The average cost curve is upward sloping. 6) Average revenue: a. Is less than price for a monopoly firm because as it sells more output, it must lower the price. b. Equals price for either a competitive or monopoly firm. (Correct--TR divided by Q is always P for either) c. Is the additional revenue that the firm receives for selling another unit of output. d. Is the extra profit that the firm receives from selling another unit of output, after accounting for all opportunity costs. e. b and d....
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This note was uploaded on 11/13/2007 for the course ECON 2010 taught by Professor Mertens,wi during the Fall '07 term at Colorado.
- Fall '07