Final Exam Review
Q
VC
TC
0
0
1
170
2
D
3
260
4
C
Use the table above to answer questions 1-5
AFC
~
100
AVC
~
A
ATC
~
110
25
1. What is the fixed cost for this market?
a. 50
b. 70
c. 100.
d. 170
2. What is the value that goes in box A?
a. 50
b. 70.
c. 100
d. 170
3. What is the value that goes in box B? (Hint: Figure out box D first)
a. 20
b. 40.
c. 60
d. 80
4. What is the value that goes in box C?
a. 280
b. 290
c. 300
d. 310.
e. Not enough information
5. At Q=1, what is the firms total profit?
a. 280
b. 290
c. 300
d. 310
e. Not enough information
6. Which of the following is NOT an example of an accounting/explicit cost?
a. The opportunity cost of your time.
b. The monetary cost of buying a building
c. The wages you pay to employees
d. The rent you pay for farm land
MC
70
B
50
7. The government is thinking about placing a tax on airplane tickets to generate revenue. What
tax value provides the largest revenue?
a. $0
b. $100
c. $200.
d. $300
e. $400
8. Based on question 6, what will be the shape of the Laffer Curve as the tax size increases?
a. Always decreasing
b. Always increasing
c. It decreases and then increases
d. It increases and then decreases.
9. Externalities are uncompensated impacts of one person’s actions on the well-being of a
bystander. Are externalities positive or negative?
a. Always positive
b. Always negative
c. Can be positive or negative.
d. Neither positive or negative, they are indifferent
10. To reduce the externalities created by pollution, policymakers can create a corrective tax or they
can create tradable pollution permits. Which one of these is most preferred by economist and
why?
a. Corrective Tax because they are more precise because of the downward sloping
demand curve
b. Corrective Tax because they get rid of the most pollution
c. Tradable Pollution Permits because they are more precise because they are not affected
by the downward sloping demand curve.
d. Tradable Pollution Permits because they get rid of the most pollution
11. Which of the following is NOT included in the social equilibrium/optimal quantity?
a. Private cost
b. Private value
c. External cost
d. Internal cost.
1
2
3
4
12. Calculate the Marginal Product of Labor when going from 3 workers to 4 workers:
L
Q
1000
1800
2400
2800
a. 400.
b. 600
c. 800
d. 1000
13. Label the following curve:
14. Label the following curve:
15. When should a firm decide to shut down?
a. TR<VC.
b. TR>VC
c. TR<FC
d. TR>FC
e. TR<TC
f. TR>TC
16. When should a firm decide to exit the market?
a. P<SRATC
b. P>SRATC
c. P<SRAVC
d. P<SRAVC
e. P<LRATC.
f. P>LRATC
g. P<LRAVC
h. P>LRAVC
17. Which of these is true about the following curves in a perfectly competitive market?
MR=Marginal Revenue, MC=Marginal Cost, S=Supply, D=Demand
a. MR=MC, S=D
b. MR=S, MC=D
c. MR=D, MC=S
18. What is the key difference between perfect competition and monopolies?
a. Monopolies make higher profits than perfectly competitive firms
b. Monopolies have market power.
c. Only perfectly competitive markets face government regulation
d. Only perfectly competitive firms can shut down or exit a market
19. Which of the following is NOT a reason why monopolies exist?
a. A single firm owns a key resource
b. Government gives a single firm the exclusive right
c. The monopolies owner has more money than other competitors
d. A single firm can produce the entire market Q at a lower cost than several firms could
20. Are you going to fill out the SI Leader evaluation for ECON 101?
http://apps.dso.iastate.edu/si/course.php?id=616
a. YES
b.
No