PracticeExam3_A

# PracticeExam3_A - Practice Exam A for Exam 3 Maymester 2009...

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Practice Exam A for Exam 3 – Maymester 2009 1. When the price of an inferior good rises, the substitution effect of the price change will encourage a consumer to purchase ____________ of the good while the income effect of the price change will encourage a consumer to purchase _______________ of the good. a. more; less b. less; more c. less; less d. the same amount; more 2. The effect of a change in price on the quantity bought when the consumer remains indifferent between the original situation and the new one, is called the a. substitution effect. b. income effect. c. indifference curve effect. d. price effect. 3. According to the graph below, the substitution effect of the price decrease would __________ consumption of milkshakes from ______ to ________. a. Decrease; 3; 2 b. Decrease; 5; 2 c. Increase; 2; 3 d. Increase; 2; 5 4. In the short run, when the marginal product of labor is maximized, ____________________. a. the average product of labor is maximized b. the total cost of production is maximized c. the marginal cost of output is minimized d. the average cost of output is minimized

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5. If a company triples its plant size and its average cost decreases, then the firm is experiencing: a. diseconomies of scale b. diminishing marginal returns c. increasing marginal returns d. economies of scale 6. Using the table below, when do diminishing returns first set in? a. When the 2 nd worker is hired b. When the 3 rd worker is hired c. When the 4 th worker is hired d. When the 5 th worker is hired Employees Total Output (Whatsits per Day) 0 0 1 9 2 20 3 30 4 39 5 47 6 53 7. Using the same table, what is the average product of 5 workers?

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## This note was uploaded on 02/06/2012 for the course ECON 251 taught by Professor Blanchard during the Summer '08 term at Purdue.

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PracticeExam3_A - Practice Exam A for Exam 3 Maymester 2009...

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