Principles of Microeconomics Exam 2
Principles of Microeconomics Exam 2 econ 2020-4
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ECON 2030 - 2
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This 7 page Study Guide was uploaded by Seon Notetaker on Sunday March 13, 2016. The Study Guide belongs to econ 2020-4 at Auburn University taught by Ghislain Nono Gueye in Spring 2016. Since its upload, it has received 300 views. For similar materials see Principles of Microeconomics in Economcs at Auburn University.
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Date Created: 03/13/16
~ ECON 2020 – PRINCIPLES OF MICROECONOMICS ~ AUBURN UNIVERSITY MIDTERM 2 Version 1 1- Which of the following is TRUE about a firm, which has market power? a. The firm is a price taker. b. The firm has a downward sloping demand curve. c. The firm is a perfectly competitive firm. d. The firm is in equilibrium. e. None of the above. 2- A firm, which has market power can: a. Control the market entirely. b. Force other firms to shut down. c. Set their own price. d. Avoid taxes. e. All of the above. 3- Which of the following is the correct order in terms of market power (from the market structure with the lowest market power to the one with the highest)? A- Perfectly competitive firms B- Monopolies C- Oligopolies D- Monopolistically competitive firms a. B, C, A, D b. D. A, B, C c. C, B, A, D d. A, D, C, B e. None of the above. 4- Which of the following is NOT a feature of monopolistically competitive firms? a. They have high barriers to entry. b. They have many sellers. c. They sell differentiated products. d. They have low barriers to entry. e. All of the above. 1 | P a g e 5- Which of the following grants monopolistically competitive firms market power? a. Market conditions b. Barriers to entry c. Number of sellers d. Differentiated products e. None of the above 6- Which of the following is NOT a basis for product differentiation? a. Location b. Quality c. Time of production d. Style or type e. All of the above 7- The marginal revenue curve of a monopolistically competitive firm lies above the demand curve of the firm. a. True b. False 8- It is better for a monopolistically competitive firm to get out of business if: a. The total revenue is higher than the total cost. b. The total revenue of the firm is high enough to cover all the fixed costs. c. The total revenue of the firm is not high enough to cover all the variable costs. d. The total revenue is higher than the marginal revenue. e. None of the above. 9- Is it possible for a monopolistically competitive firm to make a profit in the short- run? a. Yes b. No 10- Is it possible for a monopolistically competitive firm to make a profit in the long- run? a. Yes b. No 11- What is the reason for your answer in question 10? a. Product differentiation b. Market power c. Market equilibrium d. Low barriers to entry e. None of the above 12- Which of the following is NOT considered a cost for a company? a. Water and electricity bills b. Wages paid to workers c. Revenues from sales 2 | P a g e d. Machinery e. All of the above 13- What are the two main categories of costs? a. Clear costs and ambiguous costs b. Explicit costs and implicit costs c. Low costs and high costs d. Rigid costs and flexible costs e. None of the above Aubie’s Cakes is a bakery on Auburn campus managed by Aubie The Tiger. Identify which kind of explicit cost the following items are: 14- Machinery ($100), Wheat ($20), Delivery car ($1000) and cooking oil ($10) a. Variable cost, fixed cost, variable cost, fixed cost b. Variable cost, variable cost, fixed cost, fixed cost c. Fixed cost, fixed cost, variable cost, variable cost d. Fixed cost, variable cost, fixed cost, variable cost e. None of the above 15- What is the bakery’s total variable cost, total fixed cost and total cost? a. TVC = $120, TFC = $1010, TC = $1130 b. TVC = $1100, TFC = $30, TC = $1130 c. TVC = $30, TFC = $1100, TC = $1130 d. TVC = $110, TFC = $1020, TC = $1130 e. None of the above Aubie’s Cakes produced 120 cakes. 90 cakes were sold for $5 a piece and the rest was sold for $7 a piece. We also know that, instead of baking cakes, Aubie could have used his time and skills to earn $50 in photo shoots for a magazine. 16- What is the company’s total revenue? a. TR = $660 b. TR = $650 c. TR = $500 d. TR = $450 e. None of the above 17- Aubie’s Cakes is making a profit: a. True b. False 18- What is the company’s accounting profit/loss? a. An accounting profit of $470 b. An accounting loss of $470 c. An accounting loss of $520 d. An accounting profit of $520 e. None of the above 19- What is the company’s economic profit/loss? a. An economic loss of $420 b. An economic profit of $420 c. An economic loss of $520 d. An economic profit of $520 e. None of the above 3 | P a g e 20- Which of the following is NOT true about the production function a. It shows the relationship between a variable input and output b. Its behavior is closely linked to the behavior of the marginal product function c. It has 3 different shapes that determine each production phase d. It is at its peak when the marginal product curve is at 0. e. None of the above 21- Which of the following is TRUE about the first short-run production phase? a. The production level increases at an increasing rate b. The production level is constant c. The production level increases at a decreasing rate d. The production exhibits decreasing returns to scale e. None of the above 22- Which of the following is TRUE about the second short-run production phase? a. The production exhibits negative returns to scale b. The production decreases at an increasing rate c. The production increases at an increasing rate d. The production exhibits decreasing returns e. None of the above 23- Which of the following is TRUE about the third short-run production phase? a. The production level is constant b. The production exhibits decreasing returns c. The production exhibits negative returns d. The production exhibits increasing returns e. None of the above 24- The ATC (average total cost), AVC (average variable cost), AFC (average fixed cost) curves are all short-run cost curves? a. True b. False Following is a table containing information on the revenue and cost structure of Mr Reyes’ firm. Tota Margin l Total Tota Avera Avera Avera Total ge Outp Pric Reven al Fixe Variab l Margin ge Variab ge ut e ue Reven d le Cos al Cost Fixed le Total ue Cos Cost t Cost Cost t Cost 0 5 B - 100 0 100 - - - - 1 A B C D 30 F 30 100 30 J 2 A B C D E 150 G 50 I 75 3 A B C D 65 165 15 H 21.7 55 4 A B C D 77 F 12 25 I 44.3 5 A B C D E 187 10 H 17.4 J 6 A B C D 100 200 G 16.7 I 33.4 7 A B C D 120 F 20 H 17.1 31.4 8 A B C D E 260 G 12.5 I 32.5 9 A B C D 220 F 60 11.1 24.4 J 4 | P a g e 10 A B C D 300 400 G H I 40 Table 1 25- Knowing that Mr. Reyes’ firm is a perfectly competitive firm, what is the value of A? a. 3 b. 0 c. 4 d. 5.5 e. 5 26- What are the values of B? a. 0, 5, 10, 15, 20, 25, 30, 35, 40, 45, 50 b. 0, 2, 4, 6, 8, 10, 12, 14, 16, 18, 20 c. 0, 3, 6, 9, 12, 15, 18, 21, 24, 27, 30 d. 0, 10, 20, 30, 40, 50, 60, 70, 80, 90, 100 e. 0, 7, 14, 21, 28, 35, 42, 49, 56, 63, 70 27- Again, knowing that Mr. Reyes’ firm is a perfectly competitive firm, what is the value of C? a. 4 b. 5 c. 6 d. 7 e. 3 28- Mr. Reyes is in the construction business. He bought a brick maker (I don’t even know whether there is such a machine!) for a $100. What is the value of D? a. 105 b. 100 c. 90 d. 95 e. 101 29- What are the values of E? a. 25, 50, 75 b. 200, 207, 272.5 c. 50, 87, 160 d. 105, 105, 105 e. 10, 20, 30 30- What are the values of F? a. 111, 122, 133, 145 b. 125, 132, 146, 154 c. 130, 177, 220, 320 d. 50, 100, 150, 200 e. 150, 160, 173, 181 31- What are the values of G? a. 20, 10, 50, 70 b. 25, 30, 37, 35 c. 17, 20, 25, 23 d. 23, 32, 40, 45 e. 20, 13, 40, 80 5 | P a g e 32- What are the values of H? a. 15, 16.2, 17.6, 17 b. 30, 34, 35, 40 c. 33.3, 20, 14.28, 10 d. 24, 23.7, 22.5, 22 e. 30, 28.2, 27.3, 25 33- What are the values of I? a. 20, 19.7, 18, 19.3, 19.7 b. 25, 19.25, 16.67, 20, 30 c. 27, 25.8, 24, 24.5, 26 d. 28, 27, 26.5, 27.5, 28 e. 26, 25, 27, 28.5, 29 34- What are the values of J? a. 130, 37.4, 35.5 b. 127, 90, 87.5 c. 128, 111, 105 d. 129, 100, 85 e. 145, 137, 130, 128.6 35 What production period is Mr. Reyes’ firm in? a. The short-run b. The long-run c. The long term d. The short term e. None of the above 36- Which of the following statements best describes a perfectly competitive market? a. The demand curve and the marginal curve are both downward sloping b. There are many buyers and a few sellers c. Firms are price-takers and are allowed to freely enter and exit the market d. Firms have the ability to set their own price e. None of the above 37- Which of the following statements best describes a perfectly competitive firm making a profit? a. The average variable cost curve and the average total cost curve are the same b. The average total cost is lower than the price of each good c. The firm produces at the lowest level of the average total cost d. The marginal cost curve cuts the average total cost from above e. The marginal revenue curve slopes upwards and cuts the marginal cost curve 38- What accounts for the downward sloping part of the long-run average total cost curve? a. Constant returns to scale b. Decreasing returns to scale c. Diseconomies of scale d. Diminishing returns to scale e. Economies of scale 39- The lowest point of the short-run average total cost curve is called: a. The trough 6 | P a g e b. The efficient scale c. The tipping point d. The peak e. The lowest cost point 30- What is the shape of the demand curve for a perfectly competitive firm? a. A vertical line b. A horizontal line c. A downward sloping line d. An upward sloping line e. None of the above 31- What is the reason for that shape? a. Perfectly competitive firms have many buyers and many sellers b. They all produce similar products c. They are price takers d. They are easy to create e. None of the above 32- If a perfectly competitive firm is making a loss in the short-run, which of the following conditions can lead to a complete shutdown? a. The price is less than the average total cost b. The price is less than the average fixed cost c. The price is less than the average variable cost d. The price is less than the marginal cost e. None of the above 33- Is it possible for a perfectly competitive firm to make an economic profit in the long-run? a. Yes b. No 34- Why is that? a. Because the industry has no barriers to entry b. Because the industry has many sellers and many buyers c. Because the industry sells similar goods and services d. Because the industry is made up of price-taking firms e. None of the above 35- What is the profit-maximizing condition for any firm? a. Marginal revenue is greater than marginal cost b. Produce at a level where producing and selling one more output yields no profit c. Marginal revenue is less than marginal cost d. Average Total Cost is at its lowest point e. None of the above Bonus: When you transport something with a car it is called a “ship”ment. When you transport something with a ship, it is called a “car”go. Shouldn’t it be “car”ment and “ship”go instead? 7 | P a g e
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