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Micro Final Exam 2

question
The above figure shows the apartment rental market in Bigtown. At what rent will there be neither a shortage
nor a surplus of apartments?
A) $1250 per month
B) $750 per month
C) $500 per month
D) $1000 per month
answer
$750
question
The above figure shows the apartment rental market in Bigtown. If the Bigtown Housing Authority imposes a
rent ceiling of $500 per month, how many FEWER apartments will be available for rent after the rent control
is imposed?
A) zero
B) 1 thousand
C) 2 thousand.
D) 3 thousand.
answer
1 thousand
question
The savings in rent for those who benefit from rent ceilings, represents
A) a decrease in consumer surplus
B) an increase producer surplus.
C) a decrease producer surplus.
D) deadweight loss
answer
a decrease producer surplus
question
In the table above, the market is in equilibrium. Then a minimum wage is set at $15 per hour. This will create
suplus supply of labor (unemployment) of ________ workers.
A) 0 million.
B) 1 million.
C) 2 million.
D) 4 million.
answer
4 million
question
In the table above, the market for low wage workers is in equilibrium. If a minimum wage is set at $15 per
hour, this will cause a reduction in employment by __________ workers.
A) 0.
B) 1 million.
C) 2 million.
D) 4 million.
answer
2 million
question
The above figure shows the market for anti-freeze. The government imposes a $3 per gallon sales tax on
sellers. After the tax the price that consumers pay increases by ____ per gallon and the amount that firms
receive falls by ____ per gallon.
A) $2; $1
B) $3; $2
C) $1.50; $1.50
D) $4; $1
answer
$2; $1
question
The above figure shows the market for anti-freeze. The government imposes a $3 per gallon sales tax on sellers. How much tax revenue does the government raise from this tax? A) $2,000
B) $6,000
C) $4,000
D) $3,000
answer
$3000
question
Consumers will incur a higher tax incidence (pay a bigger share of the tax) when
A) the tax is placed on demand B) the tax is placed on supply
C) demand is inelastic, supply is elastic
D) demand is perfectly elastic
answer
demand in inelastic, supply is elastic
question
The government imposes a sales tax on insulin. The tax would be paid entirely by insulin consumers if the
A) supply is perfectly inelastic.
B) demand is perfectly elastic.
C) demand is perfectly inelastic. D) demand and supply are equal
answer
demand is perfectly inelastic
question
Use the following table to answer the question below.

What is the marginal utility of the second unit?
A) 190 utils
B) 90 utils
C) 95 utils
D) 47.5 utils
answer
90 utils
question
In the table above, as more units are consumed the increase in total utility gets ____ demonstrating
the principle of ________________
A) bigger, rising marginal utility
B) smaller, diminishing marginal utility.
C) bigger, diminishing marginal utility
D) smaller, falling total utility
answer
smaller, diminishing marginal utility
question
In deciding what to buy to maximize utility, the consumer should choose the good with the
A) highest marginal utility.
B) lowest marginal utility per dollar spent.
C) highest marginal utility per dollar spent.
D) lowest price.
answer
highest marginal utility per dollar spent
question
Assume that AJ would like to purchase a combination of product A and product B such that, after
she is done spending her limited income, the MUa / Pa = 10 and MUb / Pb = 4. To maximize utility
without spending more money, AJ should purchase ____ of product A and ____ of Product B
A) more; less.
B) less; more.
C) more; more.
D) less; less.
answer
more; less
question
Assume that Lexi currently purchases the combination of product A and product B such that, after she is done spending her limited income, the MUa / Pa = 8 and MUb / Pb = 8. If the price of product a increases, to maximize utility without spending more money, Lexi should purchase ___ of product A and ____ of product B.
A) more: less.
B) less; more
C) more; more.
D) less; less
answer
less; more
question
John either buys a steak or chicken when dining out. Johnʹs marginal utility for steak and chicken is given in
the above table. If the price of a steak is $10 and the price of a chicken is $5 and John has $25 to spend on the
two goods, what affordable combination of steak and chicken will John consume to maximize his utility?
A) 2 steaks and 1 chicken
B) 3 steaks and 2 chickens
C) 0 steak and 5 chickens
D) 1 steak and 3 chickens
answer
2 steaks and 1 chicken
question
The figure illustrates Sallyʹs budget line and her preferences. Sallyʹs best affordable point is ____ and the point that gives her the most utility ____.
A) B; A
B) B; B
C) E; B
D) A; A
answer
B; A
question
A combination on an indifference curve that is farther from the origin is preferred to ________ on an
indifference curve that is closer to the origin.
A) No combination
B) Some combinations
C) Most combinations
D) Any combination
answer
any combination
question
In the above figure, if income is $8, the initial price of a soft drink is $1, and the initial price of a milkshake is
$2, a decrease in the price of a milkshake to $1 will move the consumer from point a on the intitial budget line
to point ________ on the new budget line.
A) b
B) d
C) c
D) d
answer
C
question
In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the
price of a milkshake decreases to $1, the substitution effect, which holds utility at the initial level, leads to an
increase in milkshake consumption from 2 to ___ per week.
A) 3
B) 4
C) 5
D) 8
answer
3
question
In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the
price of a milkshake decreases to $1, the increase in purchase power which moves the consumer from point b
to point c is called the ____.
A) substitution effect
B) income effect
C) price effect
D) elasticity effect
answer
income effect
question
The sole proprietor of the Milwaukee Machine Company generates an annual accounting profit of
$78,000. She has a standing salary offer of $35,000 a year to work for a large corporation. If she
had invested her capital outside her own company, she estimates it would have returned $22,000
this year. What is the sole proprietor's economic profit?
A) $21,000
B) $13,000
C) $43,000
D) $0
answer
$21,000
question
Economic costs of production
A) include implicit and explicit costs.
B) only include monetary payments.
C) consist only of explicit costs. D) are the same as accounting costs.
answer
include implicit and explicit costs
question
Suppose that a firm earns $200,000 a year in revenue. The explicit costs of production are $100,000 and the implicit costs of production are $50,000. The firm earns an accounting profit of ________ and an economic profit of ________.
A) $100,000; $50,000
B) $150,000; $100,000
C) $100,000; $100,000
D) $150,000; $50,000
answer
$100,000; $50,000
question
A major disadvantage of a proprietorship or partnership is that the ________.
A) owner has limited liability
B) ownerʹs entire wealth is at risk
C) firm has perpetual life
D) profits are taxed twice
answer
Owner's entire wealth is at risk
question
In the short run,
A) all inputs are fixed.
B) some inputs are fixed.
C) all inputs vary.
D) no inputs are fixed.
answer
some inputs are fixed
question
The law of diminishing returns implies that, with the quantity of capital fixed, as the use of labor rises
A) the total product of labor will fall below the marginal product of labor.
B) the production process will become technologically inefficient eventually.
C) total product will fall eventually.
D) the marginal product of labor will fall eventually.
answer
the marginal product of labor will fall eventually
question
Based on the production data for Patʹs Pizza Parlor in the above table, the marginal product of the 4th worker
is ________ pizzas.
A) 8
B) 10
C) 45
D) 5
answer
8
question
Based on the production data for Patʹs Pizza Parlor in the above table, which worker has the largest marginal
product?
A) Worker 1
B) Worker 2
C) Worker 3
D) Worker 4
answer
worker 2
question
The principal-agent problem refers to the fact that firms must
A) choose between a managerial and an incentive system.
B) devise incentives to get employees to work in the best interest of the firmʹs owners.
C) choose between economic efficiency and technological efficiency.
D) choose between operating as a partnership or corporation.
answer
devise incentives to get employees to work in the best interest of the firm's owners.
question
Use the following graph to answer the next question.
The diagram shows the short-run average total cost curves for five different plant sizes of a firm. If
in the long run the firm expects to produce output of X, which is the optimal plant size?
A) #4.
B) #3.
C) #2.
D) #1.
answer
#2
question
The table above shows four methods for producing 100 shirts a day. If the cost of a worker is $100 a day and
the cost of capital is $50 a day, the method that is economically efficient (cheapest) is ________.
A) A
B) B
C) C
D) D
answer
A
question
The table above shows four methods for producing 100 shirts a day. Of the four methods, ________ ism technologically inefficient because it wastes resources.
A) A
B) B
C) C
D) D
answer
B
question
Increasing marginal returns means that as the firm expands its output, its
A) short-run average total cost decreases.
B) short-run average total cost increases.
C) long-run average total cost decreases.
D) long-run average total cost increases.
answer
short-run average total cost decreases
question
Use the following figure to answer the next question.

If the firm is producing at Q1, the difference between A and B is the ________ of producing Q1
units of output
A) average marginal cost
B) average fixed cost
C) total cost
D) total fixed cost
answer
average fixed cost
question
In the above figure, the average costs to produce the product fall as output is expanded between 5 and 10 units of output. This demonstrates ___________
A) diseconomies of scale.
B) economies of scale.
C) constant returns to scale.
D) deflation
answer
economies of scale
1 of 35
question
The above figure shows the apartment rental market in Bigtown. At what rent will there be neither a shortage
nor a surplus of apartments?
A) $1250 per month
B) $750 per month
C) $500 per month
D) $1000 per month
answer
$750
question
The above figure shows the apartment rental market in Bigtown. If the Bigtown Housing Authority imposes a
rent ceiling of $500 per month, how many FEWER apartments will be available for rent after the rent control
is imposed?
A) zero
B) 1 thousand
C) 2 thousand.
D) 3 thousand.
answer
1 thousand
question
The savings in rent for those who benefit from rent ceilings, represents
A) a decrease in consumer surplus
B) an increase producer surplus.
C) a decrease producer surplus.
D) deadweight loss
answer
a decrease producer surplus
question
In the table above, the market is in equilibrium. Then a minimum wage is set at $15 per hour. This will create
suplus supply of labor (unemployment) of ________ workers.
A) 0 million.
B) 1 million.
C) 2 million.
D) 4 million.
answer
4 million
question
In the table above, the market for low wage workers is in equilibrium. If a minimum wage is set at $15 per
hour, this will cause a reduction in employment by __________ workers.
A) 0.
B) 1 million.
C) 2 million.
D) 4 million.
answer
2 million
question
The above figure shows the market for anti-freeze. The government imposes a $3 per gallon sales tax on
sellers. After the tax the price that consumers pay increases by ____ per gallon and the amount that firms
receive falls by ____ per gallon.
A) $2; $1
B) $3; $2
C) $1.50; $1.50
D) $4; $1
answer
$2; $1
question
The above figure shows the market for anti-freeze. The government imposes a $3 per gallon sales tax on sellers. How much tax revenue does the government raise from this tax? A) $2,000
B) $6,000
C) $4,000
D) $3,000
answer
$3000
question
Consumers will incur a higher tax incidence (pay a bigger share of the tax) when
A) the tax is placed on demand B) the tax is placed on supply
C) demand is inelastic, supply is elastic
D) demand is perfectly elastic
answer
demand in inelastic, supply is elastic
question
The government imposes a sales tax on insulin. The tax would be paid entirely by insulin consumers if the
A) supply is perfectly inelastic.
B) demand is perfectly elastic.
C) demand is perfectly inelastic. D) demand and supply are equal
answer
demand is perfectly inelastic
question
Use the following table to answer the question below.

What is the marginal utility of the second unit?
A) 190 utils
B) 90 utils
C) 95 utils
D) 47.5 utils
answer
90 utils
question
In the table above, as more units are consumed the increase in total utility gets ____ demonstrating
the principle of ________________
A) bigger, rising marginal utility
B) smaller, diminishing marginal utility.
C) bigger, diminishing marginal utility
D) smaller, falling total utility
answer
smaller, diminishing marginal utility
question
In deciding what to buy to maximize utility, the consumer should choose the good with the
A) highest marginal utility.
B) lowest marginal utility per dollar spent.
C) highest marginal utility per dollar spent.
D) lowest price.
answer
highest marginal utility per dollar spent
question
Assume that AJ would like to purchase a combination of product A and product B such that, after
she is done spending her limited income, the MUa / Pa = 10 and MUb / Pb = 4. To maximize utility
without spending more money, AJ should purchase ____ of product A and ____ of Product B
A) more; less.
B) less; more.
C) more; more.
D) less; less.
answer
more; less
question
Assume that Lexi currently purchases the combination of product A and product B such that, after she is done spending her limited income, the MUa / Pa = 8 and MUb / Pb = 8. If the price of product a increases, to maximize utility without spending more money, Lexi should purchase ___ of product A and ____ of product B.
A) more: less.
B) less; more
C) more; more.
D) less; less
answer
less; more
question
John either buys a steak or chicken when dining out. Johnʹs marginal utility for steak and chicken is given in
the above table. If the price of a steak is $10 and the price of a chicken is $5 and John has $25 to spend on the
two goods, what affordable combination of steak and chicken will John consume to maximize his utility?
A) 2 steaks and 1 chicken
B) 3 steaks and 2 chickens
C) 0 steak and 5 chickens
D) 1 steak and 3 chickens
answer
2 steaks and 1 chicken
question
The figure illustrates Sallyʹs budget line and her preferences. Sallyʹs best affordable point is ____ and the point that gives her the most utility ____.
A) B; A
B) B; B
C) E; B
D) A; A
answer
B; A
question
A combination on an indifference curve that is farther from the origin is preferred to ________ on an
indifference curve that is closer to the origin.
A) No combination
B) Some combinations
C) Most combinations
D) Any combination
answer
any combination
question
In the above figure, if income is $8, the initial price of a soft drink is $1, and the initial price of a milkshake is
$2, a decrease in the price of a milkshake to $1 will move the consumer from point a on the intitial budget line
to point ________ on the new budget line.
A) b
B) d
C) c
D) d
answer
C
question
In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the
price of a milkshake decreases to $1, the substitution effect, which holds utility at the initial level, leads to an
increase in milkshake consumption from 2 to ___ per week.
A) 3
B) 4
C) 5
D) 8
answer
3
question
In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the
price of a milkshake decreases to $1, the increase in purchase power which moves the consumer from point b
to point c is called the ____.
A) substitution effect
B) income effect
C) price effect
D) elasticity effect
answer
income effect
question
The sole proprietor of the Milwaukee Machine Company generates an annual accounting profit of
$78,000. She has a standing salary offer of $35,000 a year to work for a large corporation. If she
had invested her capital outside her own company, she estimates it would have returned $22,000
this year. What is the sole proprietor's economic profit?
A) $21,000
B) $13,000
C) $43,000
D) $0
answer
$21,000
question
Economic costs of production
A) include implicit and explicit costs.
B) only include monetary payments.
C) consist only of explicit costs. D) are the same as accounting costs.
answer
include implicit and explicit costs
question
Suppose that a firm earns $200,000 a year in revenue. The explicit costs of production are $100,000 and the implicit costs of production are $50,000. The firm earns an accounting profit of ________ and an economic profit of ________.
A) $100,000; $50,000
B) $150,000; $100,000
C) $100,000; $100,000
D) $150,000; $50,000
answer
$100,000; $50,000
question
A major disadvantage of a proprietorship or partnership is that the ________.
A) owner has limited liability
B) ownerʹs entire wealth is at risk
C) firm has perpetual life
D) profits are taxed twice
answer
Owner's entire wealth is at risk
question
In the short run,
A) all inputs are fixed.
B) some inputs are fixed.
C) all inputs vary.
D) no inputs are fixed.
answer
some inputs are fixed
question
The law of diminishing returns implies that, with the quantity of capital fixed, as the use of labor rises
A) the total product of labor will fall below the marginal product of labor.
B) the production process will become technologically inefficient eventually.
C) total product will fall eventually.
D) the marginal product of labor will fall eventually.
answer
the marginal product of labor will fall eventually
question
Based on the production data for Patʹs Pizza Parlor in the above table, the marginal product of the 4th worker
is ________ pizzas.
A) 8
B) 10
C) 45
D) 5
answer
8
question
Based on the production data for Patʹs Pizza Parlor in the above table, which worker has the largest marginal
product?
A) Worker 1
B) Worker 2
C) Worker 3
D) Worker 4
answer
worker 2
question
The principal-agent problem refers to the fact that firms must
A) choose between a managerial and an incentive system.
B) devise incentives to get employees to work in the best interest of the firmʹs owners.
C) choose between economic efficiency and technological efficiency.
D) choose between operating as a partnership or corporation.
answer
devise incentives to get employees to work in the best interest of the firm's owners.
question
Use the following graph to answer the next question.
The diagram shows the short-run average total cost curves for five different plant sizes of a firm. If
in the long run the firm expects to produce output of X, which is the optimal plant size?
A) #4.
B) #3.
C) #2.
D) #1.
answer
#2
question
The table above shows four methods for producing 100 shirts a day. If the cost of a worker is $100 a day and
the cost of capital is $50 a day, the method that is economically efficient (cheapest) is ________.
A) A
B) B
C) C
D) D
answer
A
question
The table above shows four methods for producing 100 shirts a day. Of the four methods, ________ ism technologically inefficient because it wastes resources.
A) A
B) B
C) C
D) D
answer
B
question
Increasing marginal returns means that as the firm expands its output, its
A) short-run average total cost decreases.
B) short-run average total cost increases.
C) long-run average total cost decreases.
D) long-run average total cost increases.
answer
short-run average total cost decreases
question
Use the following figure to answer the next question.

If the firm is producing at Q1, the difference between A and B is the ________ of producing Q1
units of output
A) average marginal cost
B) average fixed cost
C) total cost
D) total fixed cost
answer
average fixed cost
question
In the above figure, the average costs to produce the product fall as output is expanded between 5 and 10 units of output. This demonstrates ___________
A) diseconomies of scale.
B) economies of scale.
C) constant returns to scale.
D) deflation
answer
economies of scale
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