midterm 1 with answers - Micro Principles Midterm 1...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Micro Principles Midterm 1 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. Multiple choice questions 1-5 are worth 1 point each ____ 1. Trade is based on a. absolute advantage. b. comparative advantage. c. production costs. d. relative dollar prices. ____ 2. Which of the following is true? a. Buyers determine supply and sellers determine demand. b. Buyers determine demand and sellers determine supply. c. Buyers and sellers as one group determine supply. d. Buyers and sellers as one group determine demand. ____ 3. For each good produced in a market economy, demand and supply determine a. the price of the good, but not the quantity. b. the quantity of the good, but not the price. c. both price and quantity. d. neither price nor quantity is determined by demand and supply, because prices are ulti- mately set by producers. ____ 4. When adding another unit of labor leads to an increase in output that is smaller than increases in output that resulted from adding previous units of labor, we have the property of a. diminishing labor. b. diminishing output. c. diminishing marginal product. d. negative marginal product. ____ 5. The amount by which total cost rises when the firm produces one additional unit of output is called a. average cost. b. marginal cost. c. fixed cost. d. variable cost. Multiple choice questions 6 through 20 are worth 2 points each ____ 6. When marginal cost exceeds average total cost, a. average fixed cost must be rising. b. average total cost must be rising. c. average total cost must be falling. d. marginal cost must be falling. ____ 7. The Wheeler Wheat Farm sells wheat to a grain broker in Seattle, Washington. Since the market for wheat is generally considered to be competitive, the Wheeler Wheat Farm maximizes its profit by choosing a. to produce the quantity at which average total cost is minimized. b. to produce the quantity at which average fixed cost is minimized. c. to sell its wheat at a price where marginal cost is equal to average total cost. d. the quantity at which market price is equal to the farm's marginal cost of production. ____ 8. In a perfectly competitive market, the process of entry and exit will end when, for firms in the market,
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
a. price is equal to average variable cost. b. marginal revenue is equal to average variable cost. c. economic profits are zero. d. All of the above are correct. ____ 9. If all existing firms and all potential firms have the same cost curves, there are no inputs in limited quantities, and the market is characterized by free entry and exit, then the long-run a. market supply curve is equal to the sum of marginal cost. b.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/02/2009 for the course ECON 32985 taught by Professor Hickenbottam during the Spring '09 term at University of Texas at Austin.

Page1 / 9

midterm 1 with answers - Micro Principles Midterm 1...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online