FINALW11FormA - Name Test Form A Economics 1 Final Exam...

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Name Test Form A Economics 1 Final Exam March 17, 2011 True-False Questions: Fill in Bubble A for True, Bubble B for False. 1. If the average cost of a firm does not change as it produces more output, the firm’s marginal cost equals its average cost. 2. For this question, assume that the only input a firm can vary is the number of workers it hires and that the wage it pays those workers does not depend on the number it hires. With those assumptions, if the average product of labor rises as the firm hires more workers, the average variable cost of the firm falls as it produces more output. 3. In the short run, a firm should produce the output that minimizes its average variable cost. 4. If a monopolist faces a downward-sloping demand curve for its product, it will maximize its profits by producing the output that maximizes its marginal revenue. 5. At the quantity a profit-maximizing monopolist chooses to supply, the demand for its product is price elastic. 6. If a household is maximizing its utility subject to a budget constraint and two goods have the same marginal utility, the household is purchasing equal amounts of the two goods. 7. If trades are arranged between buyers and sellers so that each buyer who makes a trade has a higher buyer value than the seller cost of the person with whom he or she trades, the outcome of these trades is efficient. 8. If the supply of a good is perfectly inelastic, a per unit subsidy for buyers of the good will not make those buyers better off. 9. When the production of a good causes a negative externality, the private cost of the good is less than its social cost. 10. A profit-maximizing firm hires the number of workers that maximizes labor productivity.
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Economics 1 2 Multiple Choice Questions 11. Several cattle ranches supply the beef that consumers purchase. Every ranch has the same relationship between its costs and the pounds of beef it supplies. With enough time, every ranch could be converted to a wheat farm. Also, with enough time, every wheat farm could be converted to a cattle ranch. The market for beef reaches a long-run equilibrium at a price of $3.25 per pound. A newspaper then reports that a few cattle have mad cow disease. The report reduces the demand for beef sharply, and the price of beef falls rapidly to $2.00 per pound. When long-run equilibrium is reestablished in the beef market, the price will be: (a) $3.25 per pound. (b) $2.00 per pound. (c) less than $2.00 per pound. (d) more than $3.25 per pound. (e) more than $2.00 per pound but less than $3.25 per pound. 12. Several publishers produce guidebooks. Each publisher is a small part of the guidebook market and takes the price of guidebooks as given. The market price of a guidebook is $35. ABC Guidebooks currently produces 10,000 guidebooks a year. At that output, its average
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FINALW11FormA - Name Test Form A Economics 1 Final Exam...

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