spring+2014+midterm+2

8/11/2019 Spring+2014+Midterm+2

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Professor: M. Rush

ECO 2023

SPRING 2014

MIDTERM 2

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CHECK YOUR FORM CODE AND UF ID NUMBER. IF YOU GET EITHER OF

THESE WRONG, YOUR TEST MIGHT NOT BE GRADED AND IF IT IS GRADED,

YOU WILL LOSE 3 POINTS!

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1) In the short run, it ____ possible for a perfectly competitive firm to earn aneconomic profit and in the long run, it ____ possible for a perfectly competitive firmto earn an economic profit.

A) is; is

B) is; is not

C) is not; isD) is not; is not

Output(units per day)

Total cost(dollars)

0 30

3 50

8 70

12 90

14 110

15 130

2) , 14 A) $0.

B) $10.

C) $30.

D) $110.

E) unknown without more information.

3) In the above table, the marginal cost of a unit of output going from 12 to 14 units is

A) $0.

B) $10.

C) $90.

D) $110.E) $7.50.

4) A firms average variable cost is $6, its total fixed cost is $300, and its output is 60units. Its average total cost is

A) less than or equal to $5.00.

B) between $5.01 and $7.00.

C) between $7.01 and $34.00

D) between $34.01 and $75.00.

E) more than or equal to $75.01.

5) If a single-price monopoly is producing a level of output such that marginal cost

exceeds marginal revenue, to increase its profits the firm should _____ its price and_____ its output.

A) raise; decrease

B) lower; increase

C) lower; decrease

D) raise; increase

E) raise; not change


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6) Compared to a similar perfectly competitive market, a single-price monopoly

A) creates a deadweight loss and decreases economic profit.

B) produces more output.

C) creates a deadweight loss and decreases consumer surplus.

D) is more efficient because there is no wasteful competition.

7) At the best affordable point, the budget lineA) is flatter than the highest attainable indifference curve.

B) is tangent to the highest attainable indifference curve.

C) is steeper than the highest attainable indifference curve.

D) does not touch the highest attainable indifference curve.

8) The figure represents a dairy farmer in a perfectly competitive market. If the price is$2.50 per gallon, the farmer will produce

A) 0 gallons per day.

B) 25 gallons per day.

C) 40 gallons per day.

D) 45 gallons per day.

E) between 46 and 60 gallons per day.

9) A monopoly is making an economic profit when ____ and a perfectly competitivefirm is making an economic profit when ____.

A) MR = MC;MR=MC

B) MR=MC; P>ATC

C) PATC; P>ATC

E) None of the above answers are correct.


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10) Janes Garage Cleaning is a perfectly competitive firm that currently cleans 40garages a week. Janes marginal cost is $40, her price is $50, and her average totalcost is $40. Jane is

A) maximizing her profit and is earning an economic profit.

B) not maximizing her profit but is earning an economic profit anyway.

C) maximizing her profit and is earning a normal profit.

D) not maximizing her profit and is incurring an economic loss.E) None of the above answers are correct.

11) In a small town, a monopoly pizza producer maximizes its profit by producing1,000 pizzas and setting a price of $15 for each pizza. The marginal revenue from the1,000th pizza is

A) more than $15.

B) equal to $15.

C) less than $15.

D) More information is needed to determine whether the marginal revenue is more than,less than, or equal to $15.

12) Sue consumes apples and bananas. Suppose Sues income doubles and the prices ofapples and bananas do not change. Sues budget line will

A) shift leftward and its slope will not change.

B) remain unchanged.

C) shift rightward and its slope will not change.

D) shift rightward and become steeper.

E) shift leftward and become flatter.

13) A perfectly competitive firm is producing at the point where its marginal costequals its marginal revenue. If the firm boosts its output, its total revenue will ____and its total cost will ____.

A) rise; rise by moreB) rise; rise, but not by as much.

C) fall; will rise.

D) fall; fall by more

E) None of the above answers are correct.

14) All points above a given indifference curve are definitely

A) inferior to any point on the indifference curve.

B) preferred to any point on the indifference curve.

C) affordable.

D) not affordable.

E) Both answers B and D are correct.

15) If some firms in a perfectly competitive market exit, then the

A) market demand curve shifts leftward.

B) price of the product falls.

C) profits of the remaining firms decrease.

D) output of the industry increases.

E) market supply curve shifts leftward.


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16) Joe, a hair dresser, offers students a discount price on haircuts. This form of pricingis an example of

A) a marginal cost pricing rule.

B) an average cost pricing rule.

C) price discrimination.

D) perfect price discrimination.

17) The limited liability enjoyed by McDonalds Corporation is a benefit that protects

A) its employees.

B) its Board of Directors.

C) its stockholders.

D) its customers.

E) All of the above.

18) Suppose the nation has two groups of people: young, healthy individuals who areunlikely to use health care and older, sickly individuals who are more likely to usehealth care. The average cost per person of providing healthcare insurance ishighest when

A) everyone buys health care insurance.

B) only young people buy health care insurance.

C) only older people buy health care insurance

D) None of the above are correct. because the average cost per person is the same nomatter who buys the insurance.

19) Bruce Copperwoods utility of wealth curve is illustrated in the above figure. Bruce,

owns a sea cottage worth $100,000. There is a 20 percent probability that a hurricanewill destroy the cottage, in which case he will have no wealth. Will Bruce be willingto pay $20,000 for insurance that pays him $100,000 if the cottage is destroyed and$0 if the cottage is not destroyed?

A) Yes, he definitely will buy the insurance

B) He might buy the insurance.

C) No, he definitely will not buy the insurance.

D) More information is needed to answer the question.


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20) Ryan and Olivier jointly own a company. Their profits are taxed once and they haveunlimited liability. Their business is organized as a

A) proprietorship.

B) partnership.

C) corporation.

D) multi-employee company.

21) As more of a good is consumed, total utility ____, marginal utility ____.

A) increases; does not change

B) increases; increases

C) decreases; decreases

D) increases; decreases

E) does not change; decreases

22) Most natural monopolies, such as regulated electric, gas, and water utilities, have____ fixed cost and ____ marginal cost.

A) low; high

B) high; lowC) high; high

D) low; low

E) no; low

23) The above figure shows one of Sams indifference curves between gasoline andcoffee. Which of the following about a movement along Sams indifference curve iscorrect?

A) As he moves leftward along the curve, he likes the combinations of gasoline and coffeebetter and better.

B) As he moves rightward along the curve, he likes the combinations of gasoline andcoffee better and better.

C) He likes all combinations of gasoline and coffee along the curve equally well.

D) None of the above are true.


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24) If a perfectly competitive firm raised the price of its product,

A) its profits would increase.

B) the quantity of output it can sell would decrease to zero.

C) rival firms will follow suit and raise their prices also.

D) the firm will be forced to advertise more.

25) Carter spends his income on pizza and Mt. Dew. He maximizes his utility when heallocates his entire budget and buys pizza and Mt. Dew so that the

A) marginal utility from pizza is equal to the marginal utility from Mt. Dew.

B) marginal utility from both pizza and Mt. Dew is maximized.

C) marginal utility per dollar spent on pizza is equal to the marginal utility per dollar spenton Mt. Dew.

D) total utility per dollar for both pizza and Mt. Dew are equal.

E) marginal utility from pizza equals that from Mt. Dew.

26) If a monopoly price discriminates between two groups of consumer, the monopolistcharges lower prices to consumers with

A) lower supply elasticities.

B) higher supply elasticities.

C) lower willingness-to-pay.

D) higher willingness-to-pay.

27) The rutabaga market is perfectly competitive and the price of a rutabaga rises. As aresult, Rudy, a rutabaga farmer, will

A) decrease his production of rutabagas.

B) not change his production of rutabagas because Rudys firm is a price taker.

C) increase his production of rutabagas.

D) at first decrease and then increase his production of rutabagas.

Quantity ofDiet Pepsi Total utility fromDiet Pepsi

0 01 14

2 26

3 36

4 44

5 50

6 54

7 56

28) The table above gives your total utility from consuming Diet Pepsi. What is the

marginal utility you get from the 4th Diet Pepsi?A) 44.

B) 36.

C) 12.

D) 11.

E) 8


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29) (The is an out-of-the-stock market essays question.) In an efficient market,

A) big profits can be earned indefinitely.

B) there are no transaction costs.

C) price changes are easily predicted.

D) price changes are not easily predicted.

30) After the scores are posted, if you have a question about your test score, email thegrader at [email protected] and the director is so fat that (HINT:Be SURE to answer this question because youll get credit for any answer.)

A) a picture of him takes two frames.

B) when he works at the theater, he works as the screen.

C) when he goes to a restaurant, he looks at the menu and says okay!.

D) when he lies down on the beach, Greenpeace tries to haul him back into the water.

E) when he gets in an elevator, it HAS to go down

spring+2014+midterm+2

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