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Econ 3251 Exam 1

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Econ 3251 Exam 1
Ted McGraw
Quiz by Ted McGraw, updated more than 1 year ago
Ted McGraw
Created by Ted McGraw about 9 years ago
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Question 1

Question
Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect
Answer
  • The price of steel to fall.
  • The demand curve for steel to shift to the right.
  • The demand curve for plastic to shift to the left.
  • Nothing to happen to steel because it is only a substitute for plastic.
  • The demand curve for steel to shift to the left.

Question 2

Question
Which of the following will not cause a shift in the supply of gasoline?
Answer
  • An increase in the wage in the rate of refinery workers.
  • A decrease in the price of gasoline
  • An improvement in oil refining technology.
  • A decrease in the price of crude oil.

Question 3

Question
A consumer prefers market basket A to market basket B, and prefers market basket B to market basket C. Therefore, A is preferred to C. the assumption that leads to this conclusion is
Answer
  • Transitivity
  • Completeness
  • All goods are good
  • Diminishing MRS
  • Assumption of rationality

Question 4

Question
The slope of an indifference curve reveals:
Answer
  • That preferences are complete
  • The marginal rate of substitution of one good for another good
  • The ratio of market prices
  • That preferences are transitive
  • None of the above

Question 5

Question
Refer to the figure below. At any consumption bundle with the quantity of good X exceeding the quantity of good Y (that is, a bundle located below the 45 degree line, like point A) Alvin’s marginal rate of substitution of good X for good Y is
Image:
2508cfb3-934a-4430-b48b-cb2f9b5fe168 (image/png)
Answer
  • Diminishing
  • Positive
  • Constant and positive
  • Zero

Question 6

Question
Consider the following three market baskets. If baskets A and B are on the same indifference curve and if indifference curves exhibit diminishing MRS:
Image:
a337f1bc-8c74-429e-ba66-4cd91b110e1e (image/png)
Answer
  • C is preferred to both A and B
  • A and B are both preferred to C
  • C is on the same indifference curve as A and B
  • There is not enough information to determine preferences for
  • C relative to the other goods

Question 7

Question
If Jill’s MRS of popcorn for candy is 2, Jill would willingly give up:
Answer
  • 2, but no more than 2 units of popcorn for an additional unit of candy.
  • 2, but no more than 2, units of candy for an additional unit of popcorn.
  • 1, but no more than 1 unit of candy for an additional 2 units of popcorn.
  • 2, but no more than, units of popcorn for an additional 2 units of candy.

Question 8

Question
According to the law of diminishing returns
Answer
  • The total product of an input will eventually be negative
  • The total product of an input will eventually decline
  • The marginal product of an input will eventually be negative
  • The marginal product of an input will eventually decline
  • None of the above

Question 9

Question
What describes the graphical relationship between average product and marginal product?
Answer
  • Average product cuts marginal product from above, at the maximum point of marginal product.
  • Average product cuts marginal product from below, at the maximum point of marginal product.
  • Marginal product cuts average product from above, at the maximum point of average product.
  • Marginal product cuts average product from below, at the maximum point of average product.
  • Average and marginal product do not intersect.

Question 10

Question
An examination of the production isoquants in the diagram below reveals that :
Image:
214d8965-6408-4d35-8d84-8dd90d6fc70f (image/png)
Answer
  • Capital and labor must be used in fixed proportions
  • Capital and labor are perfectly substitutable
  • The MRTS is constant along the line
  • The MRTS is constant along the line 7 Capital and labor are perfectly substitutable are
  • None of the above

Question 11

Question
The isoquant below is illustrating
Image:
81878446-1145-4835-ae14-989bfdd485e2 (image/png)
Answer
  • Two inputs are perfect substitutes
  • Diminishing marginal rate of technical substitution (MRTS)
  • Constant MRTS
  • Increasing MRTS
  • Diminishing Marginal returns.

Question 12

Question
In a production process, all inputs are increased by 10%, but output increases less than 10%. This means that the firm experiences
Answer
  • Decreasing return to scale
  • Constant returns to scale
  • Increasing returns to scale
  • Negative returns to scale

Question 13

Question
Refer to the figure. The situation pictured is one of..
Answer
  • Constant returns to scale, because the line through the origin is linear
  • Decreasing returns to scale, because the isoquants are convex.
  • Decreasing returns to scale, because doubling inputs results in less than double the amount of output.
  • Increasing returns to scale, because the isoquants are convex.
  • output.

Question 14

Question
14. Constantine purchased 100 shares of IBM stock several years ago for $150 per share. The price of these shares has fallen to $55 per share. Constantine’s investment strategy is “buy low, sell high.” Therefore he will not sell his IBM stock until the price rises above $150 per share. If he sells at a price lower than 150 per share he will have “bought high and sold low.” Constantine’s decision:
Answer
  • Is correct and shows solid command of the nature of opportunity cost
  • Is incorrect because the original price paid for he shares is a sunk cost and should have no bearing on whether the shares should be held or sold.
  • Is incorrect because when the price of a stock falls, the law of demanded states that he should buy more shares.
  • Is incorrect because it treats the price of the shares as an explicit cost.

Question 15

Question
The difference between the economic and accounting costs of a firm are
Answer
  • The accountant’s fees
  • The corporate tax on profits.
  • The opportunity costs of the factors of production that the firm owns.
  • The sunk costs incurred by the firm.
  • The explicit costs of the firm.

Question 16

Question
When marginal product is increasing, which of the following is true?
Answer
  • Marginal cost is decreasing
  • Average cost is decreasing
  • Average product is decreasing
  • Marginal Cost is increasing
  • Average product is increasing

Question 17

Question
Consider the following statements when answering this question. I---Whenever a firim’s average variable costs are falling as output rises, marginal costs must be falling oo. II----Whenever a firms average total costs are rising as output rises, average variable costs must be rising too.
Answer
  • I is true, II is false
  • I is false, and II is true
  • I and II are both true
  • I and II are both false

Question 18

Question
In the long run,
Answer
  • ATC>AVC
  • All inputs and costs are variable
  • Fixed cost is a positive constant
  • AVC>ATC
  • AFC>AVC

Question 19

Question
Which of the following is always true along the isoquant curve?
Answer
  • MRTS-slope of the isoquant
  • MRTS=MPl/MPk
  • MRTS=w/r
  • All of the above
  • Only MRTS-slope of the isoquant & MRTS=MPl/MPk are correct

Question 20

Question
If a firms average cost decreases as the produce more outputs, the firm is experiencing
Answer
  • Economies of scale
  • Diseconomies of scale
  • Constant return to scale
  • Diminishing marginal returns
  • None of the above
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