econ Fall mid term 2 - Fall 2001 Principles of...

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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: of the good is limited. unit decreases as more of a good is consumed. (Correct) The good is less scarce. decreases as more of the good is consumed. above. 4) According to the Law of Diminishing Returns (or Law of Diminishing Marginal Product): employed, the added output decreases. input is employed, holding other inputs unchanged, the added output decreases. (Correct)
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is produced, the cost of production diminishes. the output is produced, the marginal cost of production diminishes. 5) At an output level where the marginal cost curve is below the average cost curve: minimum. The marginal cost curve is downward sloping. average cost curve is downward sloping.(Correct) average cost curve is upward sloping.
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