eco exam 2 sample q’s

question

If total utility is increasing, then marginal utility:

answer

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:

answer

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:

answer

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?

answer

Y = 16/X

question

Any combination of goods lying outside of the budget line:

answer

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:

answer

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:

answer

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?

answer

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:

answer

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:

answer

average variable cost may be either rising or falling

question

The fact that a purely competitive firm's demand curve is horizontal implies that:

answer

product price is constant

question

If a firm in a purely competitive industry is confronted with a market price of $5, its marginal revenue:

answer

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

answer

increase output but not price

question

The fact that a purely competitive firm's total revenue curve is linear and upward sloping implies that:

answer

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:

answer

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:

answer

is positive, but it may be either increasing or decreasing

question

answer

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:

answer

Y = 2 - 0.5X

question

answer

Y = 16/X

question

Any combination of goods lying outside of the budget line:

answer

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:

answer

more of Y and less of X

question

answer

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?

answer

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:

answer

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:

answer

average variable cost may be either rising or falling

question

The fact that a purely competitive firm's demand curve is horizontal implies that:

answer

product price is constant

question

If a firm in a purely competitive industry is confronted with a market price of $5, its marginal revenue:

answer

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

answer

increase output but not price

question

The fact that a purely competitive firm's total revenue curve is linear and upward sloping implies that:

answer

product price is constant at all levels of output

question

answer

is operating at a loss that is less than the loss incurred by shutting down

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eco exam 2 sample q’s

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