Final-Sample 2

# Final-Sample 2 - Final-Practice Exam#2 Economics 101...

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Final--Practice Exam #2 Economics 101 PRINT NAME___________________________________ Professor H. Quirmbach STUDENT ID NO._______________________________ Final Exam GROUP TIME___________________________________ SCORE___________ INSTRUCTIONS: 1. Fill in all requested information above and on the answer sheet. 2. There are 40 multiple choice questions and one problem. Enter the ONE best answer for each multiple choice question on the answer sheet. There is no penalty for guessing. On the answer sheet, completely darken the letter representing your choice for each question. Do the problem on the test paper itself.

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Final--Practice Exam #2 1. Suppose that the price of bread is \$1 per loaf and that the wage rate for bakers is \$6 per hour. If a competitive bakery finds that the marginal product of its bakers' labor is 8 loaves per hour of labor, the bakery should a. fire some bakers. b. rent more ovens. c. hire some more bakers. d. reduce its output. e. shut down. 2. The point in a Production Possibility Frontier diagram at which an economy actually produces tells us something about how that economy answers a. the "What?" question. b. the "How?" question. c. the "For Whom?" question. d. Both a. and b. e. All of the above. 3. Suppose a monopolist faces a demand curve given by P(Q) = 20 - Q, where Q is total industry output and P is the market price. The monopolist's profit- maximizing output would be Q = 8 if its marginal costs were constant at a. 4. b. 8. c. 12. d. 16. e. 20. 4. Suppose a competitive industry faces a demand curve given by P(Q) = 20-Q, where Q is total industry output and P is the market price. The industry equilibrium output would be Q = 8 if firms' marginal costs were constant at a. 4. b. 8. c. 12. d. 16. e. 20. 5. A contestable industry is characterized by a. free entry. b. no sunk costs. c. zero profits in equilibrium. d. both a. and b. e. all of the above. 6. The "free rider problem" a. arises when public bus fares are set below cost. b. is associated with all goods produced by public agencies. c. refers to the fact that people benefit from a public good even when they do not have to pay for it. d. both a. and b. e. both b. and c.
Final--Practice Exam #2 7. Suppose that when the price of good x is \$5, the last unit Joe rationally purchases has a marginal social benefit of \$8. Which of the following must be true? a. Good x generates a negative externality of \$3 per unit. b. In terms of his own utility, Joe should be buying more x. c. The firm producing good x is selling at a price below marginal cost. d. If Joe is acting rationally, then there is a positive externality being generated. e. The industry producing x is imperfectly competitive. 8. The "capture" theory of regulation suggests that a. price should be regulated to equal marginal cost, so that the maximum social welfare can be captured.

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## This note was uploaded on 10/27/2010 for the course ECON 2112 taught by Professor Arghyaghosh during the Three '10 term at University of New South Wales.

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Final-Sample 2 - Final-Practice Exam#2 Economics 101...

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