Use the following to answer questions 1-3:

Transcription

1 Ryerson University Department of conomics CN 0 Test Two F09 Instructor: Dr. T.Barbiero Duration: 0 minutes Name Student No. Choose the BST answer and record on your scanner sheet. The questions are of equal weight. Use the following to answer questions -:. Refer to the diagram above wherein the downsloping linear lines are budget lines and I, I, and I comprise an indifference map. With respect to points,, and, it can be said that: A) point entails more utility than, but less than. B) point entails more utility than, but less than. C) point yields more utility than either or. D) the levels of utility associated with these three points cannot be compared. ) Both B and D are correct. Page

2 . Refer to the diagram above where the downsloping linear lines are budget lines and I, I, and I comprise an indifference map. The combinations of products M and N indicated by points,, and are such that: A) point yields more utility than either or. B) points and yield more utility than point. C) points,, and yield equal amounts of utility. D) the levels of utility associated with these three points cannot be compared. ) Both B and D are correct.. Refer to the diagram above where the downsloping linear lines are budget lines and I, I, and I comprise an indifference map. The combinations of products M and N indicated by points,, and are such that: A) all three imply the same level of utility. B) and imply a higher level of utility than does. C) implies a higher level of utility than does or. D) none of the above statements are correct. Use the following to answer questions -: The table below shows the hypothetical utility schedule for a consumer of chocolate candy bars. Number consumed Total utility Refer to the table above. Marginal utility becomes negative with the consumption of the: A) third candy bar. B) fourth candy bar. C) fifth candy bar. D) sixth candy bar. ) seventh candy bar. Page

3 . Refer to the table above. This consumer begins to experience diminishing marginal utility when consuming the: A) first candy bar. B) second candy bar. C) third candy bar. D) fourth candy bar. ) fifth candy bar. Page

4 6. Refer to the data. Average Average fixed variable Output cost cost $0.00 $ Page

5 A) B) C) D) would be zero. would be $0. would be $0. would be $0 plus the opportunity cost of shutting down. Use the following to answer questions 7-9: The following two schedules show the amounts of additional satisfaction (marginal utility) which a consumer would get from successive quantities of products J and K. Units of J 6 7 MUj Units of K 6 7 MUk Refer to the data. What level of total utility is realized from the equilibrium combination of J and K determined in the previous question? A) 6 utils B) utils C) 76 utils D) 6 utils ) utils 8. Refer to the data. If the consumer's money income were cut to $8, she would maximize her satisfaction by purchasing: A) units of J and units of K. B) unit of J and units of K. C) units of J and unit of K. D) units of J and units of K. ) units of J and units of K. Page

6 9. Refer to the data. If the consumer has a money income of $ and the prices of J and K are $8 and $ respectively, the consumer will maximize her utility by purchasing: A) units of J and 7 units of K. B) units of J and units of K. C) units of J and units of K. D) 6 units of J and units of K. ) 7 units of J and units of K. Page 6

7 0. Refer to the table. The average total cost of producing units of output is: Input workers Output TFC TVC Total cost Page 7

8 A) B) C) D) ) $.. $.7. $.90. $.00. $ Refer to the data. The accompanying table shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $0: Output ATC $ The total cost of producing units of output: A) is $. B) is $87. C) is $0. D) is $08. ) is $. Page 8

9 Use the following to answer questions -: The following total utility data is for products L and M. Assume that the prices of L and M are $ and $ respectively and that the consumer's income is $8. Units of L Total utility Units of M Total utility Refer to the above data. What level of total utility does the consumer realize in equilibrium? A) 87 utils B) utils C) utils D) 8 utils ) A and B can both be correct. Refer to the above data. How many units of the two products will the consumer purchase? A) of L and none of M B) of L and of M C) of L and of M D) of L and of M ) of L and of M Use the following to answer questions -7: The marginal utility schedules for product X and product Y for a hypothetical consumer. The price of product X is $ and the price of product Y is $. The income of the consumer is $0. Quantity Product X MUx Quantity Page 9 Product Y MUy 0 6 8

10 . Refer to the table. If the consumer buys both product X and product Y, how much will the consumer buy of each to maximize utility? A) X and Y B) X and Y C) X and Y D) X and Y ) X and Y. Refer to the table. When the consumer purchases the utility-maximizing combination of product X and product Y, total utility will be: A) 7. B) 8. C) 6. D) 6. ) 6 6. Refer to the table. Suppose that the consumer's income increased from $0 to $0. What would be the utility-maximizing combination of products X and Y? A) X and Y B) X and Y C) X and Y D) X and Y ) X and Y 7. Refer to the table. If the consumer can only buy product X, how much will the consumer buy and what will be the total utility per dollar spent? A) X and 0 B) X and 0 C) X and 6 D) X and 6 ) X and 0 Page 0

11 Use the following to answer questions 8-: The following table provides information on the production of a product that requires one variable input. Input Total product Refer to the table above. With the addition of the first unit of input, the marginal product is: A) and the average product is 8.. B) and the average product is.0. C) 8 and the average product is 8.. D) 8 and the average product is 0.0. ) 8 and the average product is.0 9. Refer to the table above. There are negative marginal returns when the: A) fifth unit of input is added. B) sixth unit of input is added. C) seventh unit of input is added. D) eight unit of input is added. ) ninth unit of input is added. 0. Refer to the table above. Diminishing returns set in with the addition of the: A) first unit of input. B) second unit of input. C) third unit of input. D) fourth unit of input. ) fifth unit of input. Page

12 . Refer to the table above. When the marginal product is zero, then total product is: A). B) 0. C). D) 6. ) none of the above. Refer to the table above. There are increasing marginal returns through the: A) third unit of variable input. B) fourth unit of variable input. C) fifth unit of variable input. D) sixth unit of variable input. ) none of the above.. Assume that product Alpha and product Beta are both priced at $ per unit and that llie has $0 to spend on Alpha and Beta. The marginal utility of Alpha is 0 and the marginal utility of Beta is 0. This indicates that: A) llie should make no change in consumption. B) given another dollar, llie should buy an additional unit of Beta. C) in order to maximize utility, llie should buy more of Beta and less of Alpha. D) in order to maximize utility, llie should buy more of Alpha and less of Beta. ) none of the above.. Assume you are spending your full budget and purchasing such amounts of X and Y that the marginal utility from the last units consumed is 0 and 0 utils respectively. Assume (a) the prices of X and Y are $8 and $ respectively; (b) it takes hours to consume a unit of X and hour to consume a unit of Y; and (c) your time is worth $ per hour. You A) should substitute X for Y until the marginal utility per hour is the same for both products. B) are consuming X and Y in the optimal amounts. C) should consume less of Y and more of X. D) should consume less of X and more of Y. ) should consume more of X and more of Y. Page

13 . The ABC Corporation decreases all of its inputs by percent and finds that its output falls by only 8 percent. This means that initially it was producing: A) in the range of diseconomies of scale. B) in the range of economies of scale. C) where AP is less than MP. D) at the point of minimum efficient scale. ) at the point of maximum efficient scale. 6. The budget line shift from cd to ab in the figure below is consistent with: A) B) C) D) ) decreases in the prices of both M and N. an increase in the price of M and a decrease in the price of N. a decrease in money income. an increase in money income. both A and D are correct. Page

14 Use the following to answer questions 7-: The following cost data is for a firm which is selling in a perfectly competitive market: Total product Average fixed cost $ Average variable cost $ Page Average total cost $ Marginal cost $

15 7. Refer to the data above. If there were,000 identical firms in this industry and total or market demand is as shown below, equilibrium price will be: Price Quantity demanded $0,000 6, ,000,000 0,000 9,00 A) B) C) D) ) $. $. $6. $. $6. 8. Refer to the data above. If the market price for the firm's product is $, the competitive firm will: A) produce units at an economic profit of $6. B) produce units at a loss of $0. C) produce 8 units at a loss equal to the firm's total fixed cost. D) produce 7 units at an economic profit of $.0. ) produce 8 units at an economic profit of $6 Page

16 9. Refer to the data above. If the market price for the firm's product is $, the competitive firm will produce: A) units at a loss of $09. B) units at an economic profit of $.7. C) 8 units at a loss of $8.80. D) zero units at a loss of $00. ) zero units at a loss of $00. Page 6

17 0. Refer to the data above. Which of the following is the firm's short-run supply schedule? (A) (B) (C) (D) Price Qs Price Qs Price Qs Price Qs $0 $0 $0 $ Page 7

18 A) B) C) D) ) column (A) column (B) column (C) column (D) both A and B are correct.. Refer to the data above. If the market price for the firm's product is $8, the competitive firm will: A) produce units at a loss of $7.0. B) produce 7 units at a loss of $.00. C) close down in the short run. D) produce 6 units at a loss of $.80. ) produce units at a loss of $.0. Page 8

19 . Refer to the data below. If product price is $, the firm will: The following cost data is for a perfectly competitive seller: Total Output cost 0 $ A) B) C) D) ) shut down and realize a $90 loss. shut down and realize a $0 loss. produce units and realize a $6 loss. produce units and realize a $0 economic profit. none of the above. Page 9

20 . Refer to the data. Output Total cost 0 $ The average fixed cost of producing units of output: A) is $8. B) is $6.0. C) is $.0. D) is $6. ) is $6. Suppose that a firm produces 00,000 units a year and sells them all for $0 each. The explicit costs of production are $,00,000 and the implicit costs of production are $00,000. The firm has an accounting profit of: A) $00,000 and an economic profit of $00,000. B) $00,000 and an economic profit of $00,000. C) $00,000 and an economic profit of $00,000. D) $00,000 and an economic profit of $00,000. ) $800,000 and an economic profit of $600,000 Page 0

21 . Suppose that a 0 percent increase in the price of normal good Y causes a 0 percent increase in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is: A) negative and therefore these goods are substitutes. B) negative and therefore these goods are complements. C) positive and therefore these goods are substitutes. D) positive and therefore these goods are complements. ) unity and therefore these two products are unrelated. 6. Assume that a percent increase in income in the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is: A) negative and therefore X is an inferior good. B) negative and therefore X is a normal good. C) positive and therefore X is an inferior good. D) positive and therefore X is a normal good. ) zero and therefore X is a normal good. Page

22 7. Refer to the data below. Average Average fixed variable Output cost cost $0.00 $ The marginal cost curve would intersect the average variable cost curve at about: Page

23 A) B) C) D) ) units of output. units of output. units of output. 6 units of output. 7 units of output Page

24 Answer Key C C C D B C C C B B C D D A C D C B B A A C D B Page