econ 2020 exam 3 actual test
econ 2020 exam 3 actual test Econ 2020
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This 7 page Study Guide was uploaded by Natalie Partain on Monday May 2, 2016. The Study Guide belongs to Econ 2020 at Auburn University taught by William M. Finck in Spring 2016. Since its upload, it has received 36 views. For similar materials see Principles of Economics: Microeconomics in Business at Auburn University.
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Date Created: 05/02/16
VERSION 1 Name _________________ ECON 2020 Exam #3 DIRECTIONS: Read each question and EVERY possible answer VERY carefully. Select the best answer from the alternatives. Good luck! Use the following table to answer question 1. K L W Q MP L MC 1 0 $20 0 ----- ----- 1 1 $20 10 $2.00 1 2 $20 A $4.00 1 3 $20 4 1. The correct value for the blank labeled "A" is A. 14 B. 19 C. 15 D. 5 E. 20 2. Which of the following statements about utility is TRUE? A. We cannot compare the utils assigned to a good by multiple people. B. We cannot compare the utils assigned to multiple goods by one person. C. We can compare the utils assigned to a good by multiple people. D. A and B only E. B and C only 3. Which of the following will cause a decrease in the long run cost curves? A. an improvement in technology B. an increase in the price of an input C. an increase in taxes D. all of the above 4. Dale considers pancakes and chocolate chips to be perfect complements. If the price of a pancake is $3, and the price of a package of chocolate chips is $5, and Dale has $120 to spend, which bundle will he purchase? A. 40 pancakes and 0 packages of chocolate chips B. 0 pancakes and 24 packages of chocolate chips C. 15 pancakes and 15 packages of chocolate chips D. 8 pancakes and 8 packages of chocolate chips E. “I didn’t want salmon! I said it four times!” 1 VERSION 1 Use the following table to answer questions 5 – 7. Q TFC TVC TC MC AFC AVC ATC 0 0 ---- ---- ---- ---- 1 180 35 180 215 2 A 25 90 3 270 30 4 180 45 85 5 110 54 B 5. The correct value for the blank labeled "A" is A. 180 B. 115 C. 65 D. 60 E. “Your voice is like a combination of Fergie and Jesus.” 6. The correct value for the blank labeled "B" is A. 99 B. 139 C. 90 D. 550 E. “You better not go to sleep, because as soon as your eyes shut I’m gonna punch you square in the face.” 7. If the above firm sells 3 units at $100 each, what is the firm’s profit? A. $300 B. $30 C. $10 D. -$150 8. Suppose that for Dr. Doback’s planned consumption bundle, MUx/Px is less than MUy/Py for the last unit of each good purchased. If Dr. Doback is currently planning to spend all of his income, he could increase his total utility by purchasing: A. less of Y only B. less of X only C. less of Y and more of X D. less of X and more of Y 9. Diseconomies of scale occur when A. long run average total cost decreases as output increases B. long run average total cost increases as output increases C. long run total cost decreases as output increases D. long run total cost increases as output increases E. “Did we just become best friends?!” 2 VERSION 1 Use the following graph to answer question 10. Crossbows 8 BL2 BL1 Chewbacca masks 8 12 10. A movement of the budget line from BL1 to BL2 would represent A. a fall in consumer income B. a fall in the price of Chewbacca masks C. a rise in the price of Chewbacca masks D. a rise in the price of crossbows E. a fall in the price of crossbows Use the following graph of Dale’s consumption to answer questions 11 - 12. DW drums A 6 5 4 B C IC1 IC2 D IC3 Pearl drums 4 5 6 11. Which of the following statements is TRUE? A. DW drums are more expensive than Pearl drums. B. Dale considers Pearl drums and DW drums to be perfect substitutes. C. Dale considers Pearl drums and DW drums to be perfect complements. D. A and B only E. A and C only 12. Which bundle represents Dale’s optimal consumption? A. A B. B C. C D. D E. “It’s just weird, ‘cause it seems like someone definitely touched my drum set.” 3 VERSION 1 Use the following graph to answer questions 13 – 16. Helicopters 4 A B C IC3 2 D IC2 E IC1 Wine 40 80 13. Which point on the above graph has the lowest marginal rate of substitution? A. A B. B C. C D. D E. E 14. If the consumer has $12,000 to spend, what is the price of one bottle of wine? A. $150 B. $300 C. $3000 D. $200 E. $20 15. Which of the following statements about the points on the above graph is TRUE? A. Bundle A yields a higher level of total utility than bundles D and E. B. Bundle D yields a higher level of total utility than bundles A and E. C. Bundle E yields a higher level of total utility than bundles A and D. D. Bundles A, D, and E yield the same level of total utility. E. Bundles A and E yield a higher level of total utility than bundle D. 16. If the consumer is at consumption bundle A, then total utility could be increased by A. buying fewer helicopters and fewer bottles of wine. B. buying more helicopters and more bottles of wine. C. buying fewer helicopters and more bottles of wine. D. buying more helicopters and fewer bottles of wine. E. he is already maximizing total utility 17. Which of the following statements about fixed costs is FALSE? A. Fixed costs are usually associated with capital. B. Fixed costs still exist (in the SR) when output is zero. C. Fixed costs cannot be varied in the long run. D. Fixed costs do not change as output changes. 4 VERSION 1 Use the following information to answer question 18. Price of X = $6 Income = $48 Price of Y = $9 Qx TUx MUx MUx/Px Qy TUy MUy MUy/Py 1 72 1 72 8 2 10 2 126 3 186 54 3 171 5 4 234 4 207 36 5 270 6 5 234 18. At the optimal consumption bundle, the consumer will derive A. 396 utils B. 144 utils C. 477 utils D. 357 utils E. 258 utils 19. Prestige Worldwide is a firm earning normal profit. Which of the following statements about Prestige Worldwide is TRUE? A. The firm is earning less than it could in another industry. B. The economic profit is equal to zero. C. The accounting profit is equal to zero. D. A and B only E. A and C only Use the Relative Price Rule with the following table to answer question 20. Bundle Qx MUx Qy MUy A 2 400 160 50 B 4 300 90 150 C 6 200 48 200 D 8 100 12 400 20. If the price of good X is $16 and the price of good Y is $2, what is the optimal consumption bundle? A. A B. B C. C D. D E. not enough information 5 VERSION 1 21. Brennan gets a raise at PetSmart and increases his demand for pirate hats. How will the utility Brennan receives from pirate hats change? A. his marginal utility from the last unit consumed will increase B. his marginal utility from the last unit consumed will decrease C. his total utility will increase D. A and C only E. B and C only 22. Which of the following statements about the Law of Diminishing Marginal Returns is FALSE? A. LDMR states that as successive units of a variable resource are added to a fixed resource, the marginal product of the variable resource eventually increases. B. LDMR explains why short run cost curves eventually decrease as output increases. C. LDMR only applies in the short run. D. all of the above E. A and B only 23. Which of the following is one of the properties of most indifference curves? A. indifference curves closer to the origin represent a higher level of total utility B. indifference curves never cross C. indifference curves are upward sloping D. A and B only E. A and C only 24. Nancy has $96 to spend on goods X and Y. Good X has a price of $4 and good Y has a price of $8. What is the opportunity cost of one unit of good Y? A. 0.5 units of X B. 24 units of X C. 8 units of X D. 12 units of X E. 2 units of X 25. If Nancy from the above question spends all of her income on a consumption bundle containing units of good X and good Y, and the bundle contains 4 units of good X, how many units of good Y did she buy? A. 8 B. 12 C. 10 D. 24 6 VERSION 1 7
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