PracticeMidterm4 - Economics 201(Section 025 Introduction...

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1 Economics 201 (Section 025) – Introduction to Microeconomics Practice Midterm Exam 4 Instructor: G. Lepori Instructions: fill in your name and student number both on this sheet and on the attached scantron sheet. For each question circle, fill in ONE bubble on the scantron sheet that you feel is the most appropriate solution to the question. There are 40 questions and each question is worth one point. You have 90 minutes to complete the exam. 1) In which of the following circumstances would a buyer be indifferent about buying a good? a. The amount of consumer surplus the buyer would experience as a result of buying the good is zero. b. The price of the good is equal to the buyer’s willingness to pay for the good. c. The price of the good is equal to the value the buyer places on the good. d. All of the above are correct. ANS: D 2) Suppose Bart, Benjamin, and Brent each purchase a particular type of electric pencil sharpener at a price of $20. Bart’s willingness to pay was $22, Benjamin's willingness to pay was $25, and Brent's willingness to pay was $30. Which of the following statements is correct? a. Had the price of the pencil sharpener been $26 rather than $20, only Brent would have been a buyer. b. Brent’s consumer surplus is the smallest of the three individual consumer surpluses. c. For the three individuals together, consumer surplus amounts to $60. d. The fact that all three individuals paid $20 for the same type of pencil sharpener indicates that each one placed the same value on that pencil sharpener. ANS: A 3) Suppose the demand for nachos increases. What will happen to producer surplus in the market for nachos? a. It increases. b. It decreases. c. It remains unchanged. d. It may increase, decrease, or remain unchanged. ANS: A
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2 4) Average total cost is equal to a. output/total cost. b. total cost - total quantity of output. c. average variable cost + total fixed cost. d. total cost/output. ANS: D 5) At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The marginal cost of producing the twenty-first pair of boots is $83. We can conclude that the average a. variable cost of 21 pairs of boots is $23. b. total cost of 21 pairs of boots is $23. c. total cost of 21 pairs of boots is $15.09. d. total cost of 21 pairs of boots cannot be calculated from the information given. ANS: B 6) Constant returns to scale occur when a. long-run total costs are constant as output increases. b. long-run average total costs are constant as output increases. c. the firm's long-run average cost curve is falling as output increases. d. the firm's long-run average cost curve is rising as output increases. ANS: B
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This note was uploaded on 03/30/2008 for the course ECON 201 taught by Professor C.liedholm during the Spring '07 term at Michigan State University.

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PracticeMidterm4 - Economics 201(Section 025 Introduction...

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