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# eco exam 2 sample q’s

question
If total utility is increasing, then marginal utility:
is positive, but it may be either increasing or decreasing
question
Suppose an individual's preferences are described by the Cobb-Douglass utility function U = X0.5Y0.5 and consider
the following three combinations (or bundles) of X and Y: Bundle A (4,3); Bundle B (4,2); Bundle C (5,2). Given
the individual's preferences, the bundles ranked from most-preferred to least preferred are:
Bundle A, Bundle C, Bundle B
question
Consider an individual whose utility function is U = 2X + 4Y. The indifference function associated with the
bundle X = 2 and Y = 1 is:
Y = 2 - 0.5X
question
Suppose an individual's preferences are described by the utility function U = X0.5Y0.5. The combinations (or
bundles) of X and Y that yield a common (or constant) level of utility = 4 are described by which of the
following indifference functions?
Y = 16/X
question
Any combination of goods lying outside of the budget line:
is unobtainable, given the consumer's income
question
Suppose an individual is allocating income over two goods such that MUx/Px is less than MUy/Py. The consumer
can increase total utility by purchasing:
more of Y and less of X
question
Assume MUx and MUy represent the marginal utility which a consumer gets from products X and Y, the respective
prices of which are Px and Py. The consumer will increase her total utility by spending more on X and less on Y if
initially:
MUx/Px > MUy/ Py
question
Consider a small farm that uses machinery and laborers to grow and harvest fruits or vegetables. Which of the
following would most likely be a fixed cost in the short run?
loan or insurance payments on machinery
question
9. If the total variable cost of 9 units of output is \$90 and the total variable cost of 10 units of output is \$120, then:
the average variable cost of 9 units is \$10, and the firm is operating in the range of decreasing marginal product
question
When average fixed costs are falling:
average variable cost may be either rising or falling
question
The fact that a purely competitive firm's demand curve is horizontal implies that:
product price is constant
question
If a firm in a purely competitive industry is confronted with a market price of \$5, its marginal revenue:
will also be \$5
question
Suppose a perfectly competitive firm is producing at a level of output where MR=\$8.50; ATC=\$6.00;
AVC=\$4.00; MC=\$7.50. In order to maximize profit, the firm should
increase output but not price
question
The fact that a purely competitive firm's total revenue curve is linear and upward sloping implies that:
product price is constant at all levels of output
question
Suppose that at 100 units of output (Q) a firm is producing such that marginal revenue (MR) is equal to marginal
cost (MC). The firm is selling its output at a price (P) of \$7 per unit and is incurring average variable costs
(AVC) of \$6 per unit and average total costs (ATC) of \$8 per unit. On the basis of this information we can
conclude that in the short run a purely competitive firm:
is operating at a loss that is less than the loss incurred by shutting down
1 of 15
question
If total utility is increasing, then marginal utility:
is positive, but it may be either increasing or decreasing
question
Suppose an individual's preferences are described by the Cobb-Douglass utility function U = X0.5Y0.5 and consider
the following three combinations (or bundles) of X and Y: Bundle A (4,3); Bundle B (4,2); Bundle C (5,2). Given
the individual's preferences, the bundles ranked from most-preferred to least preferred are:
Bundle A, Bundle C, Bundle B
question
Consider an individual whose utility function is U = 2X + 4Y. The indifference function associated with the
bundle X = 2 and Y = 1 is:
Y = 2 - 0.5X
question
Suppose an individual's preferences are described by the utility function U = X0.5Y0.5. The combinations (or
bundles) of X and Y that yield a common (or constant) level of utility = 4 are described by which of the
following indifference functions?
Y = 16/X
question
Any combination of goods lying outside of the budget line:
is unobtainable, given the consumer's income
question
Suppose an individual is allocating income over two goods such that MUx/Px is less than MUy/Py. The consumer
can increase total utility by purchasing:
more of Y and less of X
question
Assume MUx and MUy represent the marginal utility which a consumer gets from products X and Y, the respective
prices of which are Px and Py. The consumer will increase her total utility by spending more on X and less on Y if
initially:
MUx/Px > MUy/ Py
question
Consider a small farm that uses machinery and laborers to grow and harvest fruits or vegetables. Which of the
following would most likely be a fixed cost in the short run?
loan or insurance payments on machinery
question
9. If the total variable cost of 9 units of output is \$90 and the total variable cost of 10 units of output is \$120, then:
the average variable cost of 9 units is \$10, and the firm is operating in the range of decreasing marginal product
question
When average fixed costs are falling:
average variable cost may be either rising or falling
question
The fact that a purely competitive firm's demand curve is horizontal implies that:
product price is constant
question
If a firm in a purely competitive industry is confronted with a market price of \$5, its marginal revenue:
will also be \$5
question
Suppose a perfectly competitive firm is producing at a level of output where MR=\$8.50; ATC=\$6.00;
AVC=\$4.00; MC=\$7.50. In order to maximize profit, the firm should
increase output but not price
question
The fact that a purely competitive firm's total revenue curve is linear and upward sloping implies that:
product price is constant at all levels of output
question
Suppose that at 100 units of output (Q) a firm is producing such that marginal revenue (MR) is equal to marginal
cost (MC). The firm is selling its output at a price (P) of \$7 per unit and is incurring average variable costs
(AVC) of \$6 per unit and average total costs (ATC) of \$8 per unit. On the basis of this information we can
conclude that in the short run a purely competitive firm:
is operating at a loss that is less than the loss incurred by shutting down

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