ECON 202 Exam 2 Study Guide
ECON 202 Exam 2 Study Guide Econ 202
Popular in Principles of Microeconomics
verified elite notetaker
Popular in Economcs
This 9 page Study Guide was uploaded by AnnMarie on Wednesday February 10, 2016. The Study Guide belongs to Econ 202 at Louisiana Tech University taught by Dr. Karki in Winter 2016. Since its upload, it has received 262 views. For similar materials see Principles of Microeconomics in Economcs at Louisiana Tech University.
Reviews for ECON 202 Exam 2 Study Guide
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 02/10/16
Chapter 9 1. If a nation that does not allow international trade in steel has a domestic price of steel lower than the world price, then a) the nation has a comparative advantage in producing steel and would become a steel exporter if it opened up to trade. b) the nation has a comparative advantage in producing steel and would become an importer if it opened up to trade. c) the nation does not have a comparative advantage in producing steel and would become an exporter if it opened up to trade. d) the nation does not have a comparative advantage in producing steel and would become an importer if it opened up to trade. 2. When the nation of Ectenia opens itself to trade in coffee beans, the domestic price of coffee beans falls. Which of the following describes the situation? a) Domestic production of coffee rises, and Ectenia becomes a coffee importer. b) Domestic production of coffee rises, and Ectenia becomes a coffee exporter. c) Domestic production of coffee falls, and Ectenia becomes a coffee importer. d) Domestic production of coffee falls, and Ectenia becomes a coffee exporter. 3. When a nation opens itself to trade in a good and becomes an importer, a) producer surplus decreases, but consumer surplus and total surplus both increase. b) producer surplus decreases, but consumer surplus increases, and so the impact on total surplus is ambiguous. c) producer surplus and total surplus increase, but consumer surplus decreases. d) producer surplus, consumer surplus, and total surplus all increase. 4. If a nation that imports a good imposes a tariff, it will increase a) the domestic quantity demanded. b) the domestic quantity supplied. c) the quantity imported from abroad. d) all of the above. 5. Which of the following trade policies would benefit producers, hurt consumers, and increase amount of trade? a) The increase of a tariff in an importing country. b) The reduction of a tariff in an importing country. c) Starting to allow trade when the world price is greater than the domestic price. d) Starting to allow trade when the world price is less than the domestic price. 6. The main difference between imposing a tariff and handing out licenses under an import quota is that a tariff increases a) consumer surplus b) producer surplus c) international trade d) government revenue Chapter 8 7. Atax on a good has dead weight loss if a) the reduction in consumer and producer surplus id greater than the tax revenue b) the tax revenue is greater than the reduction in consumer and producer surplus c) the reduction in consumer surplus is greater than the reduction in producer surplus d) the reduction in producer surplus is greater than the reduction in consumer surplus 8. Jane pays Chuck $50 to mow her lawn every week. When the government levies a mowing tax of $10 on Chuck, he raises his price to $60. Jane continues to hire him at the higher price. What is the change in producer surplus, change in consumer surplus, and dead weight loss? a) $0, $0, $10 b) $0, -$10, $0 c) +$10, -$10, $10 d) +$10, -$10, $0 9. Eggs have a supply curve that is linear and upward-sloping and a demand curve that is linear and downward sloping. If a 2 cent per egg tax is increased to 3 cents, the dead weight loss of the tax a) increases by less than 50 percent and may even decline b) increases by exactly by 50 percent c) increases by more than 50 percent d) The answer depends on whether supply or demand is more elastic 10. Peanut butter has an upward-sloping supply curve and a downward-sloping demand curve. If a 10 cent per pound tax is increased to 15 cents, the government's tax revenue a) increases by less than 50 percent and may even decline b) increases by exactly by 50 percent c) increases by more than 50 percent d) The answer depends on whether supply or demand is more elastic 11. If a policymaker wants to raise revenue by taxing goods while minimizing the dead weight losses, he should look for goods with _________ elasticities of demand and ________ elasticities of supply. a) small, small b) small, large c) large, small d) large, large Chapter 13 12. Raj opens up a lemonade stand for two hours. He spends $10 for ingredients and sells $60 worth of lemonade. In the same two hours, he could have mowed his neighbor's lawn for $40. Raj has an accounting profit of __________ and an economic profit of _________. a) $50, $10 b) $90, $50 c) $10, $50 d) $50, $90 13. Diminishing marginal product explains, why as a firm's output increases, a) the production function and total-cost curve both get steeper b) the production function and total-cost curve both get flatter c) the production function gets steeper, while the total-cost curve gets flatter d) the production function gets flatter, while the total-cost curve gets steeper 14. Afirms is producing 1,000 units at a total cost of $5,000. If it were to increase production to 1,001 units, its total cost would rise to $5,008. What does this information tell you about the firm? a) Marginal cost is $5, and average variable cost is $8 b) Marginal cost is $8, and average variable cost is $5 c) Marginal cost is $5, and average total cost is $8 d) Marginal cost is $8, and average total cost is $5 15. Afirm is producing 20 units with an average total cost of $25 and marginal cost of $15. If it were to increase production to 21 units, which of the following must occur? a) Marginal cost would decrease b) Marginal cost would increase c) Average total cost would decrease d) Average total cost would increase 16. The government imposes a $1000 per year license fee on all pizza restaurants. Which cost curves shift as a result? a) Average total cost and marginal cost b) average total cost and average fixed cost c) average variable cost and marginal cost d) average variable cost and average fixed cost 17. If a higher level of production allows workers to specialize in particular tasks, a firm will likely exhibit ________ of scale and ___________ average total cost. a) Economies, falling b) economies, rising c) diseconomies, falling d) diseconomies, rising Chapter 14 18. Aperfectly competitive firm a) chooses its price to maximize profits b) sets its price to undercut other firms selling similar products c) takes its price as given by market conditions d) picks the price that yields the largest market share 19. Acompetitive firm maximizes profit by choosing the quantity at which a) average total cost is at its minimum b) marginal cost equals the price c) average total cost equals the price d) marginal cost equals average total cost 20. Acompetitive firm's short-run supply curve is its __________ cost curve above its _________ cost curve. a) Average total, marginal b) average variable, marginal c) marginal, average total d) marginal, average variable 21. If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will a) keep producing in the short run but exit the market in the long run b) shut down in the short run but return to production in the long run c) shut down in the short run and exit the market in the long run d) keep producing in both the short run and in the long run. 22. In the long-run equilibrium of a competitive market with identical firms, what is the relationship between price P, marginal cost MC, and average total costATC? a) P > MC and P >ATC b) P > MC and P =ATC c) P = MC and P >ATC d) P = MC and P =ATC 23. Pretzel stands in New York City are perfectly competitive industry in long-run equilibrium. One day, the city starts imposing a $100 per month tax on each stand. How does this policy affect the number of pretzels consumed in the short run and in the long run? a) Down in the short run, no change in the long run b) up in the short run, no change in the long run c) no change in the short run, down in the long run d) no change in the short run, up in the long run Chapter 15 24. Afirm is a natural monopoly if it exhibits the following as its output increases: a) decreasing marginal revenue b) increasing marginal cost c) decreasing average revenue d) decreasing average total cost 25. For a profit-maximizing monopoly that charges the same price to all consumers, what is the relationship between price P, marginal revenue MR, and marginal cost MC? a) P = MR and MR = MC b) P > MR and MR = MC c) P = MR and MR > MC d) P > MR and MR > MC 26. If a monopoly's fixed costs increase, its price will ______ and its profit will ______. a) increase, decrease b) decrease, increase c) increase, stay the same d) stay the same, decrease 27. Compared to the social optimum, a monopoly firm chooses a) a quantity that is too low and a price that is too high b) a quantity that is too high and a price that is too low c) a quantity and a price that are both too high d) a quantity and a price that are both too low 28. The deadweight loss from monopoly arises because a) the monopoly firm makes higher profits than a competitive firm would b) some potential consumers who forgo buying the good value it more than its marginal cost c) comsumers who buy the good have to pay more than marginal cost, reducing their consumer surplus d) the monopoly firm chooses a quantity that fails to equate price and average revenue 29. When a monopolist switches from charging a single price to perfect price discrimination, it reduces a) the quantity produced b) the firm's profit c) consumer surplus d) total surplus Chapter 16 30. Which of the following conditions does NOT describe a firm in a monopolistically competitive market? a) It makes a product different from its competitors. b) It takes its price as given by market conditions. c) It maximizes profit both in the short-run and in the long-run. d) It has the freedom to enter or exit in the long-run. 31. Which of the following goods best fits the definition of monopolist competition? a) Wheat b) tap water c) crude oil d) soft drinks 32. Amonopolistically competitive firm will increase its production if a) marginal revenue is greater than marginal cost b) marginal revenue is greater than average total cost c) price is greater than marginal cost d) price is greater than average total cost 33. New firms will enter a monopolistically competitive market if a) marginal revenue is greater than marginal cost b) marginal revenue is greater than average total cost c) price is greater than marginal cost d) price is greater than average total cost 34. What is true of a monopolistically competitive market in long-run equilibrium? a) Price is greater than marginal cost. b) Price is equal to marginal cost. c) Firms make positive economic profits. d) Firms produce at the minimum of average total cost. 35. If advertising makes consumers more loyal to particular brands, it could __________ the elasticity of demand and ____________ the markup of price over marginal cost. a) Increase, increase b) increase, decrease c) decrease, increase d) decrease, decrease 1. A 2. C 3. A 4. B 5. C 6. D 7. A 8. B 9. D 10. A 11. A 12. A 13. D 14. D 15. C 16. B 17. A 18. C 19. B 20. D 21. A 22. D 23. C 24. D 25. B 26. D 27. A 28. B 29. C 30. B 31. D 32. A 33. D 34. B 35. C
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'