Microeconomics Final Exam - Custom Scholars
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# Microeconomics Final Exam

question
Difference between correlation and causation
Correlation implies a mutual relationship between to things, whereas causation occurs when one thing directly affects the other
question
Likely to exhibit negative correlation
The relationship between level of professional training and unemployment
question
Data show that in 2012, the college enrollment in Caketown increased. In the same year, the sale of hotdogs in Caketown also increased. The relationship between college enrollment and the sale of hotdogs exhibits:
Positive correlation
question
An omitted variable is a variable that
Has been left out, and if included, would explain why the variables considered in a study are correlated
question
On a graph, you observe that variable Y increases when variable X increases. What can you conclude for sure?
The graph shows that the variables are correlated
question
To conduct a randomized experiment, researchers usually classify the participants into a
Treatment group and a control group
question
An example of a natural experiment
A research on the effect of air pollution on lung disorders by observing the health conditions of people who stay close to industrial areas and those who stay away from industries
question
Which of the following statements is true?
Correlation arises when there is causation and can also arise even when there is no causation
question
Which of the following pairs of variables are likely to be positive correlated?
Income and consumption
question
Occurs when the direction of cause and effect is mixed up in a study
Reverse causality
question
Which of the following is NOT an assumption regarding people's preferences in the theory of consumer behavior?
question
The assumption on transitive preferences implies that indifference curves must:
Not cross one another
question
A consumer prefers market basket A to market basket B, and prefers market basket B to market basket C. Therefore, A is preferred to C. The assumption that leads to this conclusion is:
Transitivity
question
A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called:
An indifference curve
question
The slope of an indifference curve is:
Called the marginal rate of substitution
question
If Anna's MRS of chocolates for candy is 2 (chocolate is on the horizontal axis), Anna would willingly give up
2, but no more than 2, units of candy for an additional unit of chocolate
question
An increase in income, holding prices constant, can be represented as:
A parallel outward shift in the budget line
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
Marginal utility measures:
The additional satisfaction from consuming one more unit of a good
question
If Px=Py, then when the consumer maximizes utility,
MU(x) must equal MU(y)
question
The change in the price of one good has no effect on the quantity demanded of another good. These goods are:
None of the answers is correct
question
The curve in the diagram below is called
The price-consumption curve
question
If the Engel curve has a positive slope
The good on the horizontal axis is normal
question
The substitution effect of a price change for product X is the change in consumption of X associated with a change in
The price of X, with the utility held constant
question
Which of the following is true concerning the income effect of a decrease in price?
It will lead to an increase in consumption only for a normal good.
question
Assume that beer is a normal good. If the price of beer rises, then the substitution effect results in the person buying __________ of the good and the income effect results in the person buying __________ of the good.
Less, less
question
The bandwagon effect corresponds best to which of the following?
Positive network externality
question
A person with a diminishing marginal utility of income
Will be risk averse
question
An individual with a constant marginal utility of income will be
Risk neutral
question
One reason individuals are willing to pay for information in uncertain situations is that
Can reduce uncertainty
question
Which of the following inputs are variable in the long run?
All of the answers are correct
question
According to the law of diminishing returns:
The marginal product of an input will eventually decline
question
An isoquant
Is a curve that shows all the combinations of inputs that yield the same total output
question
The marginal rate of technical substitution (MRTS) is equal to the:
Ratio of the marginal products of the inputs
question
Which of the following statements is true regarding the differences between economic and accounting costs?
Accounting costs include only explicit costs
question
In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive, but can be resold, and are therefore an example of
A fixed cost
question
Fixed costs are fixed with respect to change in
Output
question
Which of the following costs always declines as output increases?
Average fixed cost
question
Carolyn knows average total cost and average variable cost for a given level of output. Which of the following costs can she not determine given this information?
Carolyn can determine all of the above costs given the information provided
question
When an isocost line is just tangent to an isoquant, we know that
Output is being produced at minimum cost
question
A price taker is:
A perfectly competitive firms
question
Which of following is an example of a homogeneous product?
Copper
question
Revenue is equal to:
Price times quantity
question
A firm maximizes profit by operating at the level of output where:
Marginal revenue equals marginal cost
question
The demand curve facing a perfectly competitive firm is:
Perfectly horizontal
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
Producer surplus is measured as the:
Area above the supply curve up to the market price
question
Refer to the figure below, when the price is E and the quantity is Q*, consumer surplus is the area:
EFC
question
The burden of a tax per unit of output will fall heavily on consumers when demand is relatively __________ and supply is relatively __________.
Inelastic, elastic
1 of 49
question
Difference between correlation and causation
Correlation implies a mutual relationship between to things, whereas causation occurs when one thing directly affects the other
question
Likely to exhibit negative correlation
The relationship between level of professional training and unemployment
question
Data show that in 2012, the college enrollment in Caketown increased. In the same year, the sale of hotdogs in Caketown also increased. The relationship between college enrollment and the sale of hotdogs exhibits:
Positive correlation
question
An omitted variable is a variable that
Has been left out, and if included, would explain why the variables considered in a study are correlated
question
On a graph, you observe that variable Y increases when variable X increases. What can you conclude for sure?
The graph shows that the variables are correlated
question
To conduct a randomized experiment, researchers usually classify the participants into a
Treatment group and a control group
question
An example of a natural experiment
A research on the effect of air pollution on lung disorders by observing the health conditions of people who stay close to industrial areas and those who stay away from industries
question
Which of the following statements is true?
Correlation arises when there is causation and can also arise even when there is no causation
question
Which of the following pairs of variables are likely to be positive correlated?
Income and consumption
question
Occurs when the direction of cause and effect is mixed up in a study
Reverse causality
question
Which of the following is NOT an assumption regarding people's preferences in the theory of consumer behavior?
question
The assumption on transitive preferences implies that indifference curves must:
Not cross one another
question
A consumer prefers market basket A to market basket B, and prefers market basket B to market basket C. Therefore, A is preferred to C. The assumption that leads to this conclusion is:
Transitivity
question
A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called:
An indifference curve
question
The slope of an indifference curve is:
Called the marginal rate of substitution
question
If Anna's MRS of chocolates for candy is 2 (chocolate is on the horizontal axis), Anna would willingly give up
2, but no more than 2, units of candy for an additional unit of chocolate
question
An increase in income, holding prices constant, can be represented as:
A parallel outward shift in the budget line
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
Marginal utility measures:
The additional satisfaction from consuming one more unit of a good
question
If Px=Py, then when the consumer maximizes utility,
MU(x) must equal MU(y)
question
The change in the price of one good has no effect on the quantity demanded of another good. These goods are:
None of the answers is correct
question
The curve in the diagram below is called
The price-consumption curve
question
If the Engel curve has a positive slope
The good on the horizontal axis is normal
question
The substitution effect of a price change for product X is the change in consumption of X associated with a change in
The price of X, with the utility held constant
question
Which of the following is true concerning the income effect of a decrease in price?
It will lead to an increase in consumption only for a normal good.
question
Assume that beer is a normal good. If the price of beer rises, then the substitution effect results in the person buying __________ of the good and the income effect results in the person buying __________ of the good.
Less, less
question
The bandwagon effect corresponds best to which of the following?
Positive network externality
question
A person with a diminishing marginal utility of income
Will be risk averse
question
An individual with a constant marginal utility of income will be
Risk neutral
question
One reason individuals are willing to pay for information in uncertain situations is that
Can reduce uncertainty
question
Which of the following inputs are variable in the long run?
All of the answers are correct
question
According to the law of diminishing returns:
The marginal product of an input will eventually decline
question
An isoquant
Is a curve that shows all the combinations of inputs that yield the same total output
question
The marginal rate of technical substitution (MRTS) is equal to the:
Ratio of the marginal products of the inputs
question
Which of the following statements is true regarding the differences between economic and accounting costs?
Accounting costs include only explicit costs
question
In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive, but can be resold, and are therefore an example of
A fixed cost
question
Fixed costs are fixed with respect to change in
Output
question
Which of the following costs always declines as output increases?
Average fixed cost
question
Carolyn knows average total cost and average variable cost for a given level of output. Which of the following costs can she not determine given this information?
Carolyn can determine all of the above costs given the information provided
question
When an isocost line is just tangent to an isoquant, we know that
Output is being produced at minimum cost
question
A price taker is:
A perfectly competitive firms
question
Which of following is an example of a homogeneous product?
Copper
question
Revenue is equal to:
Price times quantity
question
A firm maximizes profit by operating at the level of output where:
Marginal revenue equals marginal cost
question
The demand curve facing a perfectly competitive firm is:
Perfectly horizontal
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
Producer surplus is measured as the:
Area above the supply curve up to the market price
question
Refer to the figure below, when the price is E and the quantity is Q*, consumer surplus is the area:
EFC
question
The burden of a tax per unit of output will fall heavily on consumers when demand is relatively __________ and supply is relatively __________.
Inelastic, elastic

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