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ECO 365 Final exam Guide New (Updated 01/06/2015) ( NEW) ( Graded A)
Description
Because you can only obtain more of one good by giving up some of another good, the shape of a production possibility curve is _______________.
downward-sloping
perfectly vertical
perfectly horizontal
upward-sloping
2. Refer to the table shown. The average product when eight workers are employed is _____
Number of workers Total Output
-
4
-
10
-
18
-
28
-
35
-
41
-
45
-
48
-
50
-
49
3. A resource is said to have a comparative advantage if
it is equally suited to the production of all goods.
its suitability to the production of one good changes as it produces more of that good.
its suitability to the production of one good does not change as it produces more of that good.
it is better suited to the production of one good than to the production of an alternative good.
4 Refer to the graph shown. Initially, the market is in equilibrium with price equal to $3 and quantity equal to 100. Government imposes a tax on suppliers of $1 per unit. The effect of the tax is to
lower the price consumers pay from $3 to $2.
lower the price sellers keep after paying the tax.
raise the price consumers pay from $3 to $4.
raise the price sellers keep after paying the tax.
5 Refer to the table shown. Diminishing marginal productivity begins when the
fourth worker is hired.
sixth worker is hired.
third worker is hired.
fifth worker is hired
6 Refer to the graph shown. If this monopolistically competitive firm maximizes profit, it will
charge $45 per dress.
charge $85 per dress.
charge $78 per dress.
shut down because it cannot cover its opportunity costs
7 The price of a ticket to a rock concert is set at $35. All the tickets for the concert sell out 1 hour after they go on sale and there are still 1,000 fans who want to buy tickets. It follows that
the quantity of tickets demanded is equal to the quantity supplied at the $35 price.
the equilibrium price of tickets to the concert is less than $35.
the equilibrium price of tickets to the concert is more than $35.
the equilibrium price of tickets to the concert is $35.
8 Which of the following statements is true?
Many different production processes can be economically efficient, but only the method that involves the lowest possible cost is technically efficient.
Many different production processes can be technically efficient, but only the method that involves the lowest possible cost is economically efficient.
There are many production processes that are both technically and economically efficient, but only one of these involves the lowest possible cost.
There is only one production process that is technically efficient, and this process is also economically efficient.
9 State what type of business combination is occurring in the following scenario: Samsung and Sony become partners in a flat screen manufacturing company.
Joint venture
Conglomerate
Vertical merger
Horizontal merger
10 Suppose a firm finds that an additional dollar spent on labor increases output more than does an additional dollar spent on machines. Under these conditions, the firm
should substitute machines for labor if it wants to increase economic efficiency
is economically efficient
is technically efficient
should substitute labor for machines if it wants to increase economic efficiency
11 Economists and laypeople see the pros and cons of international trade in different ways. Which of the following is one of those ways?
Laypeople enjoy the benefits of trade in terms of lower consumer prices.
Laypeople recognize that the United States has a comparative advantage in services.
Laypeople tend to think of foreign trade only in terms of manufactured goods.
Laypeople believe in the law of one price and economists do not.
12 The morel is a prized mushroom that is often abundant in the Western United States in years after forest fires. Suppose two companies are buying morels from workers willing to find them. One company offers to pay workers $5.00 per pound, and the other company will pay workers only $4.00 per pound. Economists would say that
the lower-paying company will attract the more creative and innovative pickers and the higher-paying company will attract the others.
this situation violates the law of one price and is not likely to persist.
the higher-paying company will attract the more creative and innovative pickers and the lower-paying company will attract the others.
the company willing to pay only $4.00 has a comparative advantage in selling morels.
13 Which of the following is the best example of a macroeconomic externality?
One person saving less without considering the effect on their retirement needs
One person starting a business without knowing whether the goods will sell
Many people saving more without considering the effect on unemployment
One person spending more in order to help stimulate the economy
14 If MR < MC, a monopolist should:
maintain the same level of production.
stop producing.
decrease production.
increase production.
15 Opponents of government intervention in the economy argue that externalities
may not be effectively corrected by the government.
are themselves the inevitable result of government policies.
do not create problems for the model.
should be corrected with regulations rather than subsidies.
16 State what type of business combination is occurring in the following scenario: IBP meat processing firm buys American Cattle, a very large cattle ranch.
Joint venture
Vertical merger
Horizontal merger
Conglomerate
17 Refer to the graph shown. At which point is elasticity zero?
B
D
C
A
18 A Wall Street Journal headline reads: "Cigar Shortage Draws New Brands into Market." The shortage resulted from a renewed interest in smoking cigars. What best describes the facts behind the headline?
Price is too low, quantity demanded exceeds quantity supplied.
The cigar market is in equilibrium.
Price is too low, demand exceeds supply.
A shift in supply has equilibrated supply and demand.
19. Refer to the graph shown. If hamburger dinners are produced by a perfectly competitive industry with a market demand D:
price will equal marginal cost.
output will be the same as it would be under monopoly.
price will equal $6.
price will be greater than marginal revenue.
20 State what type of business combination is occurring in the following scenario: Golf Smith, a golf supply retailer buys its competitor, Vango golf.
Horizontal merger
Conglomerate
Joint venture
Vertical merger
21 According to the text, Microeconomics, Colander (2013), economics is the study of how
government policies can be used to meet individuals' wants and desires.
human beings coordinate their wants and desires.
scarce resources are allocated to their most productive uses.
governments allocate resources while facing constraints.
22 Oligopoly is characterized by
low market concentration.
inability to set price.
no barriers to entry.
few sellers.
23 When Ross Perot ran for president as a third party candidate in 1992, he argued that free trade with Mexico would result in massive job losses in the United States because Mexican wages were so low. Which of the following is the best explanation for why few economists agreed with Perot?
Although economists agreed that in some areas the United States would lose jobs, they expected that the United States would gain jobs in other areas.
Economists believed that the U.S. unemployment rate would rise.
Although economists predicted that unemployment would rise, the increased profits of corporations would raise stock prices enough to compensate for the lost jobs.
Economists did not believe that any jobs would be lost in the United States
24 Refer to the graph shown. The figure shows the demand and supply curves for eggs and shows two equilibrium points, E1 and E2. An increase in demand from D1 to D2 would cause
price to decline from $1.25 to $1.00 a dozen and a shortage of 2,000 dozen eggs per week.
price to rise from $1.00 to $1.25 a dozen and a surplus of 2,000 dozen eggs per week.
price to rise from $1.00 to $1.25 a dozen and equilibrium quantity to be 3,000 dozen eggs per week.
price to remain at $1.00 a dozen and a shortage of 2,000 dozen eggs per week
25 Germany restricts the use of nonrefillable bottles and cans. The European Union argues that the rules aren't just protecting the environment; they also are protecting German beverage makers from competition. The EU sees Germany's environmentalism as _____________________.
a quota
a tariff
a regulatory trade restriction
an embargo
26 Oligopoly is probably the best market for technological change because
funds for research and development are available in an oligopoly due to innovation, which motivates the need for research and development.
the typical oligopoly lacks the funds for research and development and therefore will use basic research from universities.
pricing within the typical oligopoly tends to be very close to average total cost because of the entry of new rivals if its profits are excessively high.
research and development occurs only if government subsidizes such activity, and government tends to subsidize oligopolies
27 George Davis and Michael Wohlgenant estimate that for every 1 percent increase in the price of Christmas trees, quantity demanded falls by 0.6 percent. The demand for Christmas trees is __________________.
perfectly inelastic
inelastic
elastic
unit elastic
28 State what type of business combination is occurring in the following scenario: A tobacco producer buys a carbonated beverage plant.
Joint venture
Conglomerate
Vertical merger
Horizontal merger
29 Suppose the minimum possible price of constructing homes is $50 per square foot. As a result of a sharp drop in the demand for home construction, the equilibrium price of home construction falls to $40 per square foot. Assuming the home construction industry is perfectly competitive and there are no specialized inputs, firms will
exit the industry, and the price will remain at $40 in the long run.
enter the industry as the price rises above $40 in the long run.
exit the industry, and the price will rise above $40 in the long run.
exit the industry, and the price will fall below $40 in the long run.
30 Refer to the table shown. At what level of employment is the marginal product of labor seven?
7
5
2
4