Econ 302 Practice Exam Final Problems - Custom Scholars
Home » Flash Cards » Econ 302 Practice Exam Final Problems

# Econ 302 Practice Exam Final Problems

question
Which of the following will cause the price of beer to rise?
Both A shift to the left in supply
question
If the quantity of good A (Qa) is plotted along the horizontal axis, the quantity of good B (Qb) is plotted along the vertical axis, the price of good A is Pa, the Price of good B is Pb, and the consumers income is I, then the slope of the consumers budget constraint is
-Pa/Pb
question
In the short run, a perfectly competitive profit maximizing firm that has not shut down
is operating on the upward sloping portion of its AVC curve
question
A few sellers may behave as if they operate in a perfectly competitive market if the market demand is
very elastic
question
Which of the following inputs are variable in the long run?

a. labor
b. plant size
c. capital and equipment
d. all of these
d. all of these
question
By 2020, automobile market analysts expect that the demand for electric autos will increase as buyers become more familiar with the technology. However, the costs of producing electric autos may increase because of higher costs for inputs (ex. rare earth elements) or they may decrease as the manufacturers learn better assembly methods. (learning by doing) What is the expected impact of these changes on the equilibrium price and quantity for electric autos?

a. Unambiguously higher price, and equilibrium quantity may be higher or lower
b. Unambiguously higher equilibrium price and quantity
c. Unambiguously higher quantity, and equilibrium price may be higher or lower
d. We cannot form any unambiguous expectations for either price or quantity
D.
question
Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as
P=MC
question
Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:
is attempting to convert consumer surplus into producer surplus
question
As a group, US consumers have no income response for their consumption of ice cream so that the income elasticity of demand for ice cream equals zero. Does this mean that the change in ice cream consumption that results from a price increase is entirely composed of the substitution effect?
Yes, the income effect associated with a price change is zero.
question
The authors explain that a firm earning a zero economic profit in the long run has earned a competitive return on their investment. What do they mean by "competitive" return in this context?
The firms return is at least as large as it could have earned in another investment
question
Which of the following is true?

a. In the short run, predatory pricing involves pricing the product below average variable cost.
b. American courts frequently find companies guilty of predatory pricing
c. Predatory pricing is a reliable method of monopolizing a market
d. None of the above is true
a. In the short run, predatory pricing involves pricing the product below average variable cost.
question
Which of the following theories explains why the number of firms in a market does not determine the level of competition in that market?
a. The theory of contestable markets
b. The theory of natural monopoly
c. Predatory pricing theory
d. The theory of derived demand
A. The theory of contestable markets
question
Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results in the person buying ______ of the good and the income effect results in the person buying ____ of the good
More / less
question
Substitution effect
The idea that as prices rise (or incomes decrease) consumers will replace more expensive items with less costly alternatives.
question
Income effect
as lower-priced or inferior commodities are eschewed for more expensive, higher-quality goods and services
question
Giffen good
a product that people consume more of as the price rises
question
T/F: For all Giffen goods the substitution effect is larger than the income effect
False
question
T/F: For all inferior goods the substitution effect is larger than the income effect
False
question
Inferior good
a good that decreases in demand when consumer income rises
question
Assume that beer is a normal good. If the price of beer rises, then the substitution effect results in the person buying _____(more/less) of the good and the income effect results in the person buying _____ (more/less) of the good
Less/ less
question
A firms short run average cost curve is U shaped. Which of these conclusions can be reached regarding the firms returns to scale?
The short run average cost curve reveals nothing regarding returns to scale
question
The price elasticity of demand for a demand curve that has a zero slope is
Infinity
question
A change in which of the following would NOT shift the demand curve?
a. Information about the products health effects
b. the price of the product
c. the price of related products
d. the income on consumers
b. the price of the products
question
A firms marginal cost can always be thought of as the change in total cost if
the firm produces one more unit of capital
question
If Fred's marginal rate of substitution for salad (X) with pizza (Y) equals 5, then
he would give up 5 pizzas to get the next salad
question
Suppose a market were currently at equilibrium. A rightward shift of the supply curve would cause a
decrease in price but an increase in quantity
question
income effect is _____(before/after) substitution effect on a graph
before
question
When measuring the substitution effect one uses the change along
the old indifference curve
question
Holding all other factors constant, consumers demand more of a good the
lower its price
question
The percentage change in the quantity demanded in response to a percentage change in the price is known as the
price elasticity of demand
question
the theory of consumer behavior ("well behaved" indifference curves) is based on certain assumptions. The set of four basic assumptions includes;
both completeness and transitivity
question
Suppose a firm has a monopoly and faces a downward sloping demand curve for its product, and its marginal cost curve is upward sloping. If the firm reduces its price, then
consumer surplus increases, producer surplus may increase or decrease..
question
Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will....
become flatter
question
The average total cost to produce 100 cookies is \$0.25 per cookie. The marginal cost is constant at \$0.10 for all cookies produced. The total cost to produce 100 cookies is...
100*.25= \$25
question
Consider the demand curve of the form Q=a-bP. If a is a positive real number, b=0, then demand is
completely elasic
question
When labor usage is at 12 units. output is 36 units. From this we may infer that
the total product of labor is 1/3
question
In the short run, a perfectly competitive firm earning positive economic profit is
on the upward sloping portion of its ATC
question
Under perfect price discrimination, consumer surplus....
equals zero
question
Monica consumes only goods A and B. Suppose her marginal utility from consumer good A is equal to 1/Qa, and her marginal utility from consuming good B is 1/Qb. If the price of A is \$0.50 and the price of B is \$4.00, and Monica's income is \$120.00, how much of Good A will she purchase?
120 bc they both derive the same utility, so only purchase the less expensive one
question
Suppose biochemists discover an enzyme that can double the amount of ethanol that may be derived from a given amount of biomass. Based on this tech development, we expect the
supply curve for ethanol to shift right
question
An L shaped isoquant
would indicate that capital and labor cannot be substituted for each other in production *** perfect compliments
question
If the distance between those isoquants increases as output increases, the firm's production function is exhibiting ______; doubling both inputs will result in placement on an isoquant with less than double the output of the previous isoquant
decreasing returns to scale
question
Which of the following will NOT cause a shift in the supply of gas?
A. An improvement in oil refining tech
B. A decrease in the price of gas
C. A decrease in the price of crude oil
D. An increase in the wage rate of refinery workers
B. A decrease in the price of gas... it would just slide along the existing supply curve but not shift it entirely
question
If one firm buys up all of its competitors, which of the following might still prevent it from raising its price above the competitive level?
Because raising the price might encourage new firms to enter the industry and compete
question
In an increasing-cost industry, expansion of output...
causes input prices to rise as demand for them grows... the more companies that join the industry,,, the more resources that they need so there is an increase in demand for supplies and factors needed for production. These industries tend to need goods or services that are inelastic
question
A firm's producer surplus equals its economic profit when
fixed costs are 0
question
True/ False
I. Markets may be highly competitive even if there are only a few sellers
II. There is no fixed number of firms that determines whether a market is competitive
Both true
1 of 47
question
Which of the following will cause the price of beer to rise?
Both A shift to the left in supply
question
If the quantity of good A (Qa) is plotted along the horizontal axis, the quantity of good B (Qb) is plotted along the vertical axis, the price of good A is Pa, the Price of good B is Pb, and the consumers income is I, then the slope of the consumers budget constraint is
-Pa/Pb
question
In the short run, a perfectly competitive profit maximizing firm that has not shut down
is operating on the upward sloping portion of its AVC curve
question
A few sellers may behave as if they operate in a perfectly competitive market if the market demand is
very elastic
question
Which of the following inputs are variable in the long run?

a. labor
b. plant size
c. capital and equipment
d. all of these
d. all of these
question
By 2020, automobile market analysts expect that the demand for electric autos will increase as buyers become more familiar with the technology. However, the costs of producing electric autos may increase because of higher costs for inputs (ex. rare earth elements) or they may decrease as the manufacturers learn better assembly methods. (learning by doing) What is the expected impact of these changes on the equilibrium price and quantity for electric autos?

a. Unambiguously higher price, and equilibrium quantity may be higher or lower
b. Unambiguously higher equilibrium price and quantity
c. Unambiguously higher quantity, and equilibrium price may be higher or lower
d. We cannot form any unambiguous expectations for either price or quantity
D.
question
Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as
P=MC
question
Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:
is attempting to convert consumer surplus into producer surplus
question
As a group, US consumers have no income response for their consumption of ice cream so that the income elasticity of demand for ice cream equals zero. Does this mean that the change in ice cream consumption that results from a price increase is entirely composed of the substitution effect?
Yes, the income effect associated with a price change is zero.
question
The authors explain that a firm earning a zero economic profit in the long run has earned a competitive return on their investment. What do they mean by "competitive" return in this context?
The firms return is at least as large as it could have earned in another investment
question
Which of the following is true?

a. In the short run, predatory pricing involves pricing the product below average variable cost.
b. American courts frequently find companies guilty of predatory pricing
c. Predatory pricing is a reliable method of monopolizing a market
d. None of the above is true
a. In the short run, predatory pricing involves pricing the product below average variable cost.
question
Which of the following theories explains why the number of firms in a market does not determine the level of competition in that market?
a. The theory of contestable markets
b. The theory of natural monopoly
c. Predatory pricing theory
d. The theory of derived demand
A. The theory of contestable markets
question
Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results in the person buying ______ of the good and the income effect results in the person buying ____ of the good
More / less
question
Substitution effect
The idea that as prices rise (or incomes decrease) consumers will replace more expensive items with less costly alternatives.
question
Income effect
as lower-priced or inferior commodities are eschewed for more expensive, higher-quality goods and services
question
Giffen good
a product that people consume more of as the price rises
question
T/F: For all Giffen goods the substitution effect is larger than the income effect
False
question
T/F: For all inferior goods the substitution effect is larger than the income effect
False
question
Inferior good
a good that decreases in demand when consumer income rises
question
Assume that beer is a normal good. If the price of beer rises, then the substitution effect results in the person buying _____(more/less) of the good and the income effect results in the person buying _____ (more/less) of the good
Less/ less
question
A firms short run average cost curve is U shaped. Which of these conclusions can be reached regarding the firms returns to scale?
The short run average cost curve reveals nothing regarding returns to scale
question
The price elasticity of demand for a demand curve that has a zero slope is
Infinity
question
A change in which of the following would NOT shift the demand curve?
a. Information about the products health effects
b. the price of the product
c. the price of related products
d. the income on consumers
b. the price of the products
question
A firms marginal cost can always be thought of as the change in total cost if
the firm produces one more unit of capital
question
If Fred's marginal rate of substitution for salad (X) with pizza (Y) equals 5, then
he would give up 5 pizzas to get the next salad
question
Suppose a market were currently at equilibrium. A rightward shift of the supply curve would cause a
decrease in price but an increase in quantity
question
income effect is _____(before/after) substitution effect on a graph
before
question
When measuring the substitution effect one uses the change along
the old indifference curve
question
Holding all other factors constant, consumers demand more of a good the
lower its price
question
The percentage change in the quantity demanded in response to a percentage change in the price is known as the
price elasticity of demand
question
the theory of consumer behavior ("well behaved" indifference curves) is based on certain assumptions. The set of four basic assumptions includes;
both completeness and transitivity
question
Suppose a firm has a monopoly and faces a downward sloping demand curve for its product, and its marginal cost curve is upward sloping. If the firm reduces its price, then
consumer surplus increases, producer surplus may increase or decrease..
question
Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will....
become flatter
question
The average total cost to produce 100 cookies is \$0.25 per cookie. The marginal cost is constant at \$0.10 for all cookies produced. The total cost to produce 100 cookies is...
100*.25= \$25
question
Consider the demand curve of the form Q=a-bP. If a is a positive real number, b=0, then demand is
completely elasic
question
When labor usage is at 12 units. output is 36 units. From this we may infer that
the total product of labor is 1/3
question
In the short run, a perfectly competitive firm earning positive economic profit is
on the upward sloping portion of its ATC
question
Under perfect price discrimination, consumer surplus....
equals zero
question
Monica consumes only goods A and B. Suppose her marginal utility from consumer good A is equal to 1/Qa, and her marginal utility from consuming good B is 1/Qb. If the price of A is \$0.50 and the price of B is \$4.00, and Monica's income is \$120.00, how much of Good A will she purchase?
120 bc they both derive the same utility, so only purchase the less expensive one
question
Suppose biochemists discover an enzyme that can double the amount of ethanol that may be derived from a given amount of biomass. Based on this tech development, we expect the
supply curve for ethanol to shift right
question
An L shaped isoquant
would indicate that capital and labor cannot be substituted for each other in production *** perfect compliments
question
If the distance between those isoquants increases as output increases, the firm's production function is exhibiting ______; doubling both inputs will result in placement on an isoquant with less than double the output of the previous isoquant
decreasing returns to scale
question
Which of the following will NOT cause a shift in the supply of gas?
A. An improvement in oil refining tech
B. A decrease in the price of gas
C. A decrease in the price of crude oil
D. An increase in the wage rate of refinery workers
B. A decrease in the price of gas... it would just slide along the existing supply curve but not shift it entirely
question
If one firm buys up all of its competitors, which of the following might still prevent it from raising its price above the competitive level?
Because raising the price might encourage new firms to enter the industry and compete
question
In an increasing-cost industry, expansion of output...
causes input prices to rise as demand for them grows... the more companies that join the industry,,, the more resources that they need so there is an increase in demand for supplies and factors needed for production. These industries tend to need goods or services that are inelastic
question
A firm's producer surplus equals its economic profit when
fixed costs are 0
question
True/ False
I. Markets may be highly competitive even if there are only a few sellers
II. There is no fixed number of firms that determines whether a market is competitive
Both true

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

## Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.