april 2002 prelim 2 - Your Name: _ Check Your TA’s Name:...

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Your Name: _____________________________________________________ Check Your TA’s Name: ____________ Julia ____________Raji ______________ Kuntal _____________ Bin _____________Christine . Econ 101 - Wissink - S02 PRELIM #2 J. WISSINK April 9 th , 2002 INSTRUCTIONS 1) There are three sections in this exam. 2) ANSWER ALL QUESTIONS. TOTAL POINTS = 100 3) Part I: 14 multiple choice questions (2.5 points each) Part II: 3 short essay questions (15 points each) Part III: 1 problem (20 points each) 4) Read all questions carefully . 5) Write legibly and remember to label all graphs . 6) Total time = 90 minutes. GOOD LUCK P.S.: There is a blank work sheet at the end of this exam for your use.
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2 Part I. Multiple choice. Do the following 12 multiple choice questions: Read each question carefully and CIRCLE the best answer. It often helps to jot down a quick graph or do some work next to the question before searching for the answer. 1. A firm's average fixed cost is $5/unit, its average variable cost is $75/unit, and its output is 50 units. Its short run total costs are A. less than $85. B. between $70 and $80. C. between $3500 and $4500. D. greater than $5000. E. less than $3500. 2. Each year, Sally the Soup-Queen develops a new soup recipe and sells it to every soup-shop in New York City for a price of $1000. Jerry and George both run soup-shops in New York City and the soup-shop market is a perfectly competitive market. Jerry and George face exactly the same cost structure for making soup except that Jerry can borrow the recipe from Sally and George must pay her $1000 to get the recipe. Neither Jerry nor George can resell the recipe to anyone. If we consider only the short run, which one of the following is false ? A. Jerry earns more accounting profit than George does this year. B. Jerry earns more economic profit than George does this year. C. Jerry and George have the same short run marginal cost curve. D. Jerry will sell more soup than George to profit maximize. E. It is possible that Jerry earns positive economic profit and George earns negative economic profit. 3. An exogenous increase in the market price of labor (the wage rate for the firm’s variable labor input) will cause a perfectly competitive firm's marginal cost curve to shift vertically ________ and the profit-maximizing level of output to ________. A. down; decrease B. down; increase C. up; decrease D. up; increase E. uncertain; down 4. The seltzer industry is a perfectly competitive industry. Why is it difficult for individual seltzer producers to make persistent positive economic profit? A. Because of the fact that seltzer sellers are price takers. B. Because seltzer makers are stupid. C. Because of the fact that the demand curve facing each seltzer seller is perfectly elastic at the market price. D.
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april 2002 prelim 2 - Your Name: _ Check Your TA’s Name:...

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