Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The figure above shows a consumer's budget line between sodas and DVD rentals. Point d
represents an
A) affordable combination of sodas and DVDs but whether it spends the entire budget cannot be
determined from the figure.
B) unaffordable combination of sodas and DVDs.
C) affordable combination of sodas and DVDs that does not spend the entire budget.
D) affordable combination of sodas and DVDs that spends the entire budget.
E) None of the above answers is correct.
1)
2) Marginal utility is the change in total utility that results from
A) an increase in the price of the good.
B) a change in the budget line.
C) an increase in the consumer's income.
D) a one-unit change in the quantity of a good consumed.
E) a decrease in the price of the good.
2)
3) If we look at the changes in the consumption of beverages during the 1990s in the United States, we
see that the consumption of
A) coffee has increased because its price has risen.
B) bottled water has increased because its price has risen.
C) bottled water has increased because its price has risen.
D) bottled water has increased because its price has fallen.
E) beer has increased because its price has fallen.
3)
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4) Along an indifference curve the
A) marginal rate of substitution is constant.
B) marginal rate of substitution for a good increases as more of the good is consumed.
C) marginal rate of substitution is equal to 0.
D) consumer prefers some of the consumption points to others.
E) consumer does not prefer one consumption point to another.
4)
5) A preference map is a
A) contour map of a consumer's budget.
B) map showing how much a consumer prefers one good for another.
C) positively sloped series of curves, which reflect a consumer's preferences.
D) series of indifference curves.
E) None of the above answers is correct.
5)
6) The figure above shows a consumer's budget line between sodas and DVD rentals. Point b
represents an
A) affordable combination of sodas and DVDs but whether it spends the entire budget cannot be
determined from the figure.
B) affordable combination of sodas and DVDs that does not spend the entire budget.
C) affordable combination of sodas and DVDs that spends the entire budget.
D) unaffordable combination of sodas and DVDs.
E) None of the above answers is correct.
6)
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7) Timmy makes $100 per week as a taxidermist. He spends all this income to buy pizza and hair gel.
The price of a pizza is $10 and the price of a bottle of hair gel is $4. If Timmy buys 6 pizzas per
week, how many bottles of gel can he purchase?
A) 60
B) 40
C) 20
D) 10
E) None of the above answers is correct.
7)
8) A budget line
A) keeps the budgets of all consumers in line with their needs.
B) describes the limits to consumption choices, given the income of the consumer and the prices
of goods and services.
C) shows the satisfaction people get from their budget.
D) has no slope.
E) has a positive slope.
8)
9) Reb earns $1,000 per week as a fishing guide in Texas. With this money he buys fishing lures and
steaks. Lures cost $5 each, steaks cost $10 each. If Reb purchases 124 lures per week, how many
steaks can he buy?
A) 123
B) 38
C) 100
D) 380
E) 620
9)
10) Diminishing marginal utility means that an increase in the consumption of a good leads to
A) no change in marginal utility.
B) a decrease in total utility.
C) an increase in marginal utility.
D) an increase in the consumer's budget.
E) a decrease in marginal utility.
10)
11) A curve that shows combinations of goods among which a consumer does not prefer one
combination to another is
A) a demand curve.
B) a production possibilities curve.
C) an indifference curve.
D) a budget line.
E) a marginal rate of substitution curve.
11)
12) Katie has $15. She likes M&M candies and Hershey's white chocolate bars. M&M candies are $1.50
a pack and (the large) Hershey bars are $3.00 each. Katie can choose to buy
A) 4 Hershey bars and 2 packs of M&Ms.
B) 2 Hershey bars and 6 packs of M&Ms.
C) 5 Hershey bars and 10 packs of M&Ms.
D) Both answer A and answer B are correct.
E) Answer A, answer B, and answer C are correct.
12)
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13) Moving down along an indifference curve,
A) the consumer increasingly prefers the new consumption points to the old consumption
points.
B) the slope of the budget line decreases.
C) total utility decreases.
D) the price of the good measured on the vertical axis decreases.
E) the marginal rate of substitution for the good on the horizontal axis decreases.
13)
14) When the price of one good changes while another good's price does not change, then there has
been a change in the
A) utility price.
B) relative price.
C) marginal utility price.
D) marginal price.
E) absolute price.
14)
15) Kevin likes weasel leg stew. But every bite of the stew that he eats provides him with less and less
total utility. This fact means that Kevin's marginal utility is
A) not changing.
B) increasing, but at a decreasing rate.
C) changing but the rate of change is not certain without more information.
D) decreasing.
E) increasing at an increasing rate.
15)
Quantity of labor
(workers)
0
1
2
3
4
5
Total product
(hair stylings per day)
0
10
25
45
60
70
16) The above table shows the total product schedule for Hair Today, a hair styling salon. The average
product when four workers are hired is
A) 15 hair stylings.
B) 20 hair stylings.
C) 240 hair stylings.
D) 10 hair stylings.
E) the same as when five workers are hired.
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16)
Output
(pizzas per hour)
0
1
2
3
4
5
6
Total cost
(dollars)
20
35
49
61
71
79
85
17) Paulette owns a pizza parlor. Her total cost schedule is in the above table. Her total variable cost of
producing four pizzas per hour is
A) $49.
B) $51.
C) $20.
D) $71.
E) Some amount but more information is needed to determine this total variable cost.
17)
18) Once production has reached the maximum average product of labor, if production increases then
A) total costs decrease.
B) the plant size must be increased.
C) total product decreases.
D) average fixed cost rises.
E) decreasing marginal returns occur.
18)
19) Jeremiah runs a bullfrog farm in Frogville, Oklahoma. Jeremiah notices that each additional worker
he employs adds more to the total output than does the previous worker. Jeremiah must be
A) experiencing increasing marginal returns to labor.
B) producing at a point where the average product of labor decreases as more workers are
employed.
C) producing at a point where the average product of labor exceeds the marginal product of
labor.
D) mistaken because the law of decreasing returns points out that it cannot be the case that the
marginal product increases as more workers are employed.
E) producing at a point below his total product curve.
19)
20) The cost of all the factors of production the firm uses is called the ________ cost.
A) total
B) explicit
C) fixed
D) marginal total
E) complete
20)
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21) Lauren runs a chili restaurant in San Francisco. Her total revenue last year was $110,000. The rent
on her restaurant was $48,000, her labor costs were $42,000, and her materials, food and other
variable costs were $20,000. Lauren could have worked as a biologist and earned $50,000 per year.
An economist calculates her implicit costs as
A) $63,000.
B) $150,000.
C) $50,000.
D) $110,000.
E) $0 because Lauren did not work as a biologist.
21)
22) Suppose Billy owns a hair salon in Dallas. He has one large hair dryer for which he paid $1,000. If
he can sell the dryer one year later for $800, his total economic depreciation equals
A) $200.
B) $1,000.
C) $800.
D) $500.
E) None of the above answers are correct.
22)
23) Paula is currently spending all of her budget and she finds that the marginal utility per dollar from
dresses exceeds the marginal utility per dollar from hats. To maximize her utility, Paula should
therefore buy
A) more hats and fewer dresses.
B) more dresses and fewer hats.
C) more dresses and hats.
D) fewer dresses and hats.
E) probably change her purchases but more information is needed to determine if she should
buy more or fewer dresses and hats.
23)
24) In order to draw a budget line for a consumer, we need to know
A) both the consumer's budget and the prices of the goods the consumer demands.
B) only the consumer's budget.
C) the utilities of the goods the consumer buys.
D) only the prices of the goods the consumer demands.
E) the consumer's budget, the prices of the goods the consumer demands, and the utilities of the
goods the consumer buys.
24)
25) Luke enjoys eating tuna sashimi and drinking Pepsi. His consumer equilibrium occurs where his
budget line
A) just touches the highest indifference curve at one point.
B) touches every indifference curve.
C) just touches the lowest indifference curve at one point.
D) is below every indifference curve.
E) More information about Luke's budget is needed to determine his consumer equilibrium.
25)
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26) Juan's marginal utility from strawberries is 200 and his marginal utility from cream is 100. Juan
spends all his budget. The price of strawberries is $5 per pound and the price of cream is $5 per
pint. To maximize his utility, Juan should
A) buy less cream and more strawberries.
B) buy more cream and more strawberries.
C) buy less cream and fewer strawberries.
D) buy more cream and fewer strawberries.
E) change nothing because Juan is maximizing his utility now.
Quantity of labor
(workers)
0
1
2
3
4
5
6
26)
Total product
(dogs groomed per week)
0
40
100
150
190
220
240
27) Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna's total product
schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for her salon.
These are her only costs. When Anna has a staff of 2 workers, her total cost equals
A) $12.00.
B) $1,200.
C) $10.00.
D) $300.
E) $600.
27)
28) The main sources of economies of scale are
A) caused by the difficulty of coordinating and controlling large enterprises.
B) an increase in a firm's bargaining power to lower the wage rate and the cost of capital as the
firm's output increases.
C) decreasing marginal cost and increasing marginal product.
D) specialization of resources such as labor and capital.
E) increasing marginal cost and decreasing marginal product.
28)
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29) The figure above shows Sarah's budget line. Sarah earns $500 per week selling baskets made out of
tree vines. With this money she buys sushi and rose bushes. Each piece of sushi costs $1 and each
rose bush costs $10. At what point on Sarah's budget line will she be if she decides not to buy any
rose bushes?
A) Point b
B) Point c
C) Point d
D) Point f
E) Point a
Quantity of labor
(workers)
0
1
2
3
4
5
29)
Total product
(hair stylings per day)
0
10
25
45
60
70
30) The above table shows the total product schedule for Hair Today, a hair styling salon. Based on the
table, the marginal product for Hair Today
A) reaches a maximum with the 5th worker.
B) never reaches a maximum.
C) reaches a maximum with the 4th worker.
D) reaches a maximum with the 3rd worker.
E) decreases after the 1st worker.
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30)