Econ Midterm #2

question

bounded rationality

answer

the idea that in decision-making, rationality of individuals is limited by the information they have.

question

Marginal analysis is relevant for:

answer

only "how much" decisions.

question

Sri Lanka's comparative advantage over the United States in textiles can be explained by its:

answer

labor abundance.

question

autarky

answer

economic independence or self-sufficiency.

question

Which of the following is not an example of an explicit cost of her attending college?

Answers:
A. computer lab fees
B. tuition
C. textbooks
D. the salary that she could have earned working full-time

answer

D. the salary that she could have earned working full-time

question

optimal quantity

answer

quantity at which marginal benefit is equal to marginal cost, and where the marginal benefit curve intersects with the marginal cost curve.

question

In economics, a marginal value refers to:
A. the value associated with one more unit of an activity.
B. a value that is most appropriately identified in a footnote.
C. a value entered as an explanatory item in the margin of a balance sheet or other accounts.
D. the value associated with an unimportant, or marginal, activity.

answer

A. the value associated with one more unit of an activity.

question

According to the optimal output rule, if the marginal benefit is:
A. more than the marginal cost, net benefit is maximized.
B. more than the marginal cost, an activity should be increased.
C. less than the marginal cost, an activity should be increased.
D. equal to the marginal cost, an activity should be increased.

answer

B. more than the marginal cost, an activity should be increased.

question

At the point at which it is currently producing, Britain must give up the production of 75 hats to produce 25 additional sweaters. The opportunity cost of producing 3 hats is ________ sweaters.

answer

question

According to the Heckscher-Ohlin model, Brazil will have a comparative advantage in oranges if the factors ________ in the production of oranges are ________.

answer

intensive; abundantly available

question

If two firms are identical in all respects except that one has more capital than another, the marginal product curve for the firm with more capital:

A. will show no diminishing marginal returns.
B. will lie below the total marginal curve for the firm with less capital.
C. will lie above the marginal product curve for the firm with less capital.
D. must equal the marginal product curve for the firm with less capital.

answer

C. will lie above the marginal product curve for the firm with less capital.

question

If the combination of two goods occurs at a point of tangency between the budget line and an indifference curve, then:

answer

all available income has been spent and total utility is maximized.

question

Which of the following is not true of indifference curves for ordinary goods?

A. Indifference curves farther away from the origin have lower levels of utility.
B. They slope downward.
C. They never cross.
D. They are convex from the origin.

answer

A. Indifference curves farther away from the origin have lower levels of utility.

question

As output increases, the total cost curve

A. increases at first, and then decreases.
B. gets steeper.
C. gets flatter.
D. becomes horizontal.

answer

B. gets steeper.

question

A fixed cost:

A. can be positive, even if the firm doesn't produce any output in the short run.
B. will exist only in the long run.
C. depends on the level of output.
D. decreases until the point of diminishing returns is reached.

answer

A.
can be positive, even if the firm doesn't produce any output in the short run.

question

f you are willing to give up 10 shirts (on the vertical axis) for 5 pairs of pants (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

A. 0.5.
B. 5
C. 2.
D. 10.

answer

C. 2.

question

In economics, the short run is:

A. enough time to vary output but not plant capacity.
B. enough time to change all inputs to production.
C. less than 1 month.
D. less than 1 week.

answer

A. enough time to vary output but not plant capacity.

question

Suppose Frank buys only milk and cereal, both of which are normal goods, and he always maximizes his utility. Suppose Frank's boss cuts Frank's pay by $200 per month. What happens to Frank's marginal rate of substitution between milk and cereal?

answer

It stays constant.

question

If the price of a cookie is $2 and the price of a brownie is $4, the relative price of cookies in terms of brownies is:

answer

0.5.

question

After learning about indifference curves, Sandy realizes that her marginal rate of substitution of grapes for cheese is equal to 2. Since the price of cheese is $3 and the price of grapes is $1, Sandy:

answer

should buy more grapes and less cheese.

question

The idea of diminishing returns to an input in production suggests that if a local college adds more custodians, the marginal product of labor for the custodial staff will ________.

answer

decrease

question

A university that benefits from lower costs per enrolled student as it builds more buildings and enrolls more students is an example of a service provider with:

answer

economies of scale.

question

Rebecca knows that Becca Furniture's marginal cost curve is above the average total cost curve. This means Becca Furniture's average total cost curve:

A. must be rising.
B. must be falling.
C. may be rising, falling, or flat depending on other things.
D. must be flat.

answer

must be rising.

question

Increases in the price of the good measured on the horizontal axis will make the horizontal intercept ________ and make the budget line ________.

A. larger in value; flatter
B. smaller in value; steeper
C. smaller in value; flatter
D. larger in value; steeper

answer

smaller in value; steeper

question

If Marie Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be:

answer

increasing.

question

The relative price rule says that at the optimal consumption bundle the marginal rate of substitution between two goods must be equal to their relative price. This is equivalent to saying that:

answer

the marginal utility per dollar is the same for both goods.

question

Which of the following curves is not affected by the existence of diminishing returns?

A. the average variable cost curve
B. the marginal cost curve
C. the average fixed cost curve
D. the average total cost curve

answer

the average fixed cost curve

question

Variable cost divided by the quantity of output produced is:

answer

average variable cost.

question

If the marginal rate of substitution of cookies for brownies equals the relative price of cookies in terms of brownies when the consumer is on the budget line, the consumer:

answer

is maximizing total utility.

question

When Aishe's Bar-B-Que produces 10 pork sandwiches, the total cost is $5. When 11 pork sandwiches are produced, the total cost rises to $6. From this we know that the marginal cost of the eleventh pork sandwich:

answer

is greater than the average cost of 11 pork sandwiches.

1 of 30

question

bounded rationality

answer

the idea that in decision-making, rationality of individuals is limited by the information they have.

question

Marginal analysis is relevant for:

answer

only "how much" decisions.

question

Sri Lanka's comparative advantage over the United States in textiles can be explained by its:

answer

labor abundance.

question

autarky

answer

economic independence or self-sufficiency.

question

answer

D. the salary that she could have earned working full-time

question

optimal quantity

answer

quantity at which marginal benefit is equal to marginal cost, and where the marginal benefit curve intersects with the marginal cost curve.

question

answer

A. the value associated with one more unit of an activity.

question

answer

B. more than the marginal cost, an activity should be increased.

question

At the point at which it is currently producing, Britain must give up the production of 75 hats to produce 25 additional sweaters. The opportunity cost of producing 3 hats is ________ sweaters.

answer

question

According to the Heckscher-Ohlin model, Brazil will have a comparative advantage in oranges if the factors ________ in the production of oranges are ________.

answer

intensive; abundantly available

question

answer

C. will lie above the marginal product curve for the firm with less capital.

question

If the combination of two goods occurs at a point of tangency between the budget line and an indifference curve, then:

answer

all available income has been spent and total utility is maximized.

question

answer

A. Indifference curves farther away from the origin have lower levels of utility.

question

As output increases, the total cost curve

A. increases at first, and then decreases.
B. gets steeper.
C. gets flatter.
D. becomes horizontal.

answer

B. gets steeper.

question

answer

A.
can be positive, even if the firm doesn't produce any output in the short run.

question

answer

C. 2.

question

In economics, the short run is:

A. enough time to vary output but not plant capacity.
B. enough time to change all inputs to production.
C. less than 1 month.
D. less than 1 week.

answer

A. enough time to vary output but not plant capacity.

question

answer

It stays constant.

question

If the price of a cookie is $2 and the price of a brownie is $4, the relative price of cookies in terms of brownies is:

answer

0.5.

question

answer

should buy more grapes and less cheese.

question

The idea of diminishing returns to an input in production suggests that if a local college adds more custodians, the marginal product of labor for the custodial staff will ________.

answer

decrease

question

A university that benefits from lower costs per enrolled student as it builds more buildings and enrolls more students is an example of a service provider with:

answer

economies of scale.

question

answer

must be rising.

question

answer

smaller in value; steeper

question

If Marie Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be:

answer

increasing.

question

The relative price rule says that at the optimal consumption bundle the marginal rate of substitution between two goods must be equal to their relative price. This is equivalent to saying that:

answer

the marginal utility per dollar is the same for both goods.

question

answer

the average fixed cost curve

question

Variable cost divided by the quantity of output produced is:

answer

average variable cost.

question

If the marginal rate of substitution of cookies for brownies equals the relative price of cookies in terms of brownies when the consumer is on the budget line, the consumer:

answer

is maximizing total utility.

question

answer

is greater than the average cost of 11 pork sandwiches.

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Econ Midterm #2

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