
ECON 2302 FINAL EXAM with Answers
ECON 2302 ECON/2302 ECON2302 FINAL EXAM
The study of microeconomics and macroeconomics differ in that
a. |
microeconomics is concerned with the domestic economy, while macroeconomics is concerned only with the international economy |
b. |
microeconomics examines the individual units of the economy, while macroeconomics studies the whole economy |
c. |
microeconomics studies the actions of households, while macroeconomics studies the actions of business firms |
d. |
microeconomics studies the economy in terms of private individuals and firms, while macroeconomics includes the effect of government |
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2. Which of the following correctly matches the income payment with the resource?
a. |
rent-land; wages-labor; interest-capital; profits-entrepreneurship |
b. |
profits-land; wages-labor; rent-capital; interest-entrepreneurship |
c. |
taxes-land; interest-labor; rent-capital; profits-entrepreneurship |
d. |
Interest-land; taxes-labor; interest-capital; rent-entrepreneurship |
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3. A shortage of a good means
a. |
an excess supply of the good |
b. |
an excess demand of the good |
c. |
Quantity demanded is less than the quantity supplied |
d. |
the quantity supplied exceeds the quantity demanded |
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4. "John buys more of good X as his income increases, ceteris paribus," means
a. |
there is no cause-and-effect relationship between John's income and the quantity of good X he purchases if ceteris paribus applies |
b. |
John's demand for good X depends exclusively on income |
c. |
John's income and purchases of this good are being held constant |
d. |
the change in John's income is the only factor being considered in explaining the change in his purchase of good X |
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5. A normal good is a good for which demand increases as the
a. |
income of demanders increases |
b. |
Price of the good increases |
c. |
Price of close substitutes decreases |
d. |
total number of consumers decreases |
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6.Exhibit B-3 shows an economy's production possibilities table. The first unit of capital goods production will cost ______ units of consumption goods
a. |
1 |
b. |
25 |
c. |
23 |
d. |
2 |
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7. Exhibit B-3 shows an economy's production possibilities table. The second unit of capital goods production will cost ______ units of consumption goods
a. |
4 |
b. |
25 |
c. |
23 |
d. |
1 |
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8. Farmers can produce wheat and/or rice. What will happen in the wheat market if there is an increase in demand for rice?
a. |
Wheat supply will increase. |
b. |
Wheat supply will decrease. |
c. |
Wheat demand will increase. |
d. |
Wheat demand will decrease. |
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9. Farmers can produce wheat and/or rice. What will happen in the wheat market if there is an increase in the price of fertilizers?
a. |
Wheat supply will increase. |
b. |
Wheat prices will rise. |
c. |
Wheat demand will increase. |
d. |
Wheat demand will decrease. |
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10. What will happen in the oil market if suppliers become more optimistic of the future?
a. |
Oil supply will increase. |
b. |
Oil prices will rise. |
c. |
Oil supply will decrease. |
d. |
Oil demand will decrease. |
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11. What will happen in the gasoline market if oil prices rise?
a. |
Gas supply will increase. |
b. |
Gas prices will fall. |
c. |
Gas demand will decrease. |
d. |
Gas prices will rise. |
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12. What will happen in the syrup market if honey prices rise?
a. |
Prices will fall. |
b. |
Demand will increase. |
c. |
Supply will decrease. |
d. |
Indeterminable. |
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13. What will happen in the tomato market if a freeze destroys a significant share of market supply?
a. |
Prices will fall. |
b. |
Demand will increase. |
c. |
Supply will decrease. |
d. |
Indeterminable. |
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14. What will happen in the cell phone market as technology improvements bring costs down?
a. |
Prices will rise. |
b. |
Demand will increase. |
c. |
Supply will decrease. |
d. |
Quantity-demanded will increase. |
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15. If Weiskamp T-shirt Co. lowers its price from $6 to $5 and finds that students increase their quantity demanded from 400 to 600 T-shirts, demand is
a. |
price inelastic |
b. |
price elastic |
c. |
unit elastic |
d. |
cross elastic |
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16. In Exhibit D-1, price elasticity of demand within the price range $8 and $6 is
a. |
4.27 |
b. |
1.5 |
c. |
1.6 |
d. |
0.9 |
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17. In Exhibit D-1, price elasticity of demand within the price range $10 and $8 is
a. |
1.0 |
b. |
0.7 |
c. |
1.5 |
d. |
2.0 |
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18. The cross elasticity of demand for substitute goods must
a. |
be greater than one |
b. |
be less than one |
c. |
be zero |
d. |
exceed zero |
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19. The cross elasticity of demand for complementary goods must
a. |
be less than one |
b. |
be greater than one |
c. |
exceed zero |
d. |
be negative |
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20. If Herbert the hair stylist raises the price of his cuts from $13 to $15 and the quantity demanded for his cuts falls from 300 to 260, demand is
a. |
price inelastic |
b. |
price elastic |
c. |
unit elastic |
d. |
cross elastic |
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21. Refer to Exhibit E-2. Each dessert is priced at $1. If you had $10 to spend on desserts, which of the following combinations of goods would you buy?
a. |
5 units of brownies, 4 units of ice cream, and 1 unit of pie |
b. |
4 units of brownies, 5 units of ice cream, and 1 unit of pie |
c. |
4 units of brownies, 4 units of ice cream, and 2 units of pie |
d. |
4 units of brownies, 3 units of ice cream, and 3 units of pie |
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22. Refer to Exhibit E-3. Clothes and amusements are priced at $10 each. If you had a budget of $50, which of the following combinations of goods would you buy?
a. |
4 units of clothes and 1 unit of amusement |
b. |
3 units of clothes and 3 units of amusement |
c. |
2 units of clothes and 3 units of amusement |
d. |
1 unit of clothes and 4 units of amusement |
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23. When demand is inelastic, a decrease in price will cause
a. |
no change in total revenue. |
b. |
an increase in total revenue. |
c. |
a decrease in total revenue. |
d. |
There is insufficient information to answer this question. |
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24. When demand is elastic, an increase in price will cause
a. |
no change in total revenue. |
b. |
an increase in total revenue. |
c. |
a decrease in total revenue. |
d. |
There is insufficient information to answer this question. |
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25. Average total cost equals
a. |
(fixed costs + variable costs)/quantity produced. |
b. |
(fixed costs + variable costs)/change in quantity produced. |
c. |
change in total costs/quantity produced. |
d. |
change in total costs/change in quantity produced. |
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26. At P = $20, AVC = $10, AFC = $10, & Q = 20, the result is
a. |
loss of $10 |
b. |
profit of $10 |
c. |
loss of $20 |
d. |
Normal economic profit |
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27. At P = $20, AVC = $10, AFC = $8 & Q = 20, the result is
a. |
loss of $10 |
b. |
Normal economic profit |
c. |
profit of $20 |
d. |
profit of $40 |
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28. At P = $24, Q = 200, MC = MR, AFC = $6, AVC = $25, the firm should
a. |
Increase output. |
b. |
Decrease output. |
c. |
Shut down operations. |
d. |
Stay at the current output level, although profit = -$1,400. |
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29. Economic profit is defined as
a. |
price minus the sum of average fixed and marginal cost |
b. |
total revenue minus total implicit cost |
c. |
total revenue minus the average total cost |
d. |
total revenue minus the sum of implicit and explicit costs |
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30. What should a profit-maximizing monopolist do if she is currently producing where MC < MR?
a. |
increase output until MC = MR |
b. |
decrease output until MC = MR |
c. |
shut down in the long run |
d. |
keep producing at this level |
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31. Which of the following statements is true?
a. |
Accounting profit usually is greater than economic profit. |
b. |
Accountants ignore explicit costs in calculating profit. |
c. |
Explicit costs fall as output increases. |
d. |
Economic profit always increases as output increases. |
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32. The price searcher's marginal revenue curve lies below the demand curve because
a. |
the monopoly is not an efficient producer |
b. |
as the monopolist increases output, the price falls |
c. |
there is no account of implicit costs |
d. |
the monopolist's demand curve is the market demand |
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33. Monopolistically competitive firms sell goods that are
a. |
close substitutes |
b. |
perfect substitutes |
c. |
not substitutes |
d. |
not differentiated products |
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34. If there is an economic profit in monopolistic competition, there is
a. |
an incentive for new firms to enter |
b. |
an incentive for existing firms to increase prices |
c. |
at least one firm engaged in advertising |
d. |
an incentive for existing firms to decrease prices |
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35. One reason why firms in monopolistically competitive markets earn zero profit in the long run is because
a. |
product differentiation disappears |
b. |
barriers to entry become prohibitive |
c. |
the price elasticity of demand for each firm falls to zero |
d. |
so many firms enter the market that each firm's demand curve eventually becomes tangent to the firm's ATC curve |
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36. The demand curve that a monopolist firm faces is
a. |
the same as the demand curve facing a perfectly competitive firm except the monopolist is a price maker and the competitive firm is a price taker |
b. |
the same as the demand curve facing a perfectly competitive firm except the monopolist is a price taker and the competitive firm is a price maker |
c. |
horizontal, because there are no close substitutes for its product |
d. |
the same as its industry demand curve |
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37. The monopolist, unlike the perfectly competitive firm, continues to earn an economic profit in the long run because
a. |
it can charge a higher price than its competitors and not lose market share |
b. |
it can innovate, using its profit as research investment |
c. |
it can out-compete its competitors |
e. |
barriers to entry |
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38. A concentration ratio refers to the
a. |
ranking of firms by profitability |
b. |
percentage of sales accounted for by the leading firms in an industry |
c. |
percentage of sales accounted for by the largest firm in an industry |
d. |
ability of a firm to control market price |
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39. Mutual interdependence means that
a. |
all other firms in a monopolistically competitive industry rely on one firm to take leadership in setting price |
b. |
monopolistically competitive firms will "follower the leader" allowing the monopoly firm to determine price |
c. |
each firm within an oligopoly is affected by what the other firms in the industry do |
d. |
all firms in the industry are independent of each other |
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40. Marginal physical product of labor measures the
a. |
quantity of output produced by hiring workers |
b. |
change in output generated by hiring an additional worker |
c. |
change in revenue generated by hiring an additional worker |
d. |
change in cost generated by hiring one additional worker |