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Unformatted text preview: Important Quiz UNIVERSITY OF CALIFORNIA, LOS ANGELES Department of Economics November 12, 1998; Cameron Economics 1 - Midterm Exam; Solution Key (for one variant) Multiple Choice Questions (2 points each; all or nothing grading) 1. The long run is distinguished from the short run in that, in the long run, A) output prices can vary. B) input prices can vary. C) the ratio of capital to labor can vary. D) the quantities of all inputs can vary. 2. There would be no economic problems if A) unemployment were eliminated. B) the money supply were constant. C) all prices were perfectly flexible. D) scarcity were eliminated. 3. In perfect competition, an individual firm A) supplies its product with unitary elasticity. B) faces infinitely elastic demand for what it produces. C) supplies its product with infinite elasticity. D) faces unitary elasticity of demand for what it produces. 4. Depreciation is the A) rate of interest used for calculating net present value. B) fall in the value of a durable input over a given period. C) difference between a firm's nominal profit and real profit. D) difference between accounting cost and nominal cost. 5. The total product curve is a graph of the A) minimum cost of producing a given amount of output using different techniques. B) minimum output attainable for each quantity of variable input employed. C) maximum output attainable for each quantity of variable input employed. D) maximum profit attainable for each unit of output sold. 6. The tendency for the magnitude of the slope of an indifference curve to decrease to the right is known as the A) principle of an increasing marginal rate of substitution. B) principle of a diminishing marginal rate of substitution. C) price effect. D) income effect. 7. In perfect competition, the marginal revenue of an individual firm equals A) its price, but not its average revenue. B) neither its price nor its average revenue. C) its average revenue, but not its price. D) both its price and its average revenue. 8. Which of the following is a normative statement? A) An increase in the college tuition will cause fewer students to apply to college. B) The government must lower the price of pizza so that more students can afford to buy it. C) The level of taxation is twenty percent. D) My economics class lasts for one term. 9. A price ____ makes it illegal to pay a lower price than the specified level. One example is A) ceiling; the minimum wage. B) floor; the minimum wage. C) ceiling; rent control. D) floor; rent control. 10. Suppose firms in a perfectly competitive industry are suffering an economic loss. Over time, A) other firms enter the industry, so the price rises and the economic loss decreases....
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