SAINT ECO202 FINAL EXAM FEB 2015 WITH ALL CORRECT ANSWER

Gasoline prices in the United States decreased significantly between 2008 and 2009. A decrease in the price of gasoline, holding other things constant, will cause which of the following to occur?

Increase the demand for gasoline.

Decrease the demand for gasoline.

Increase the quantity of gasoline demanded.

Decrease the quantity of gasoline demanded.

Question 2. Question :

Which of the following will cause an outward (rightward) shift in the supply curve?

A reduction in the price of the good

An increase in the price of labor input

An increase in the number of consumers

Technological progress

Question 3. Question :

Refer to the figure below. In a free market, the market price and quantity in the below figure will adjust to equilibrium values of __________.

Graph showing dollars per gallon and millions of gallons per day

$1 per gallon and 50 million gallons

$4 per gallon and 10 million gallons

$2 per gallon and 60 million gallons

$2 per gallon and 30 million gallons

Question 4. Question :

Suppose new research shows that soy milk and other products derived from soybeans provide more health benefits than previously thought. At the same time, drought conditions result in extensive damage to the soybean crop. What will be the combined impact of these two factors on the equilibrium price and quantity of soybeans?

Price will decrease, but the effect on quantity is indeterminate.

Price will increase, but the effect on quantity is indeterminate.

Quantity will decrease, but the effect on price is indeterminate.

Quantity will increase, but the effect on price is indeterminate.

Question 5. Question :

Rationing through the price system __________.

leads to an inefficient use of available resources

leads to high prices

works only with government interference

leads to an efficient use of available resources

Question 6. Question :

A price floor set above a market equilibrium price causes __________.

a surplus

a shortage

producers to receive lower prices

consumers to pay lower prices

Question 7. Question :

When a good causes positive external benefits to accrue to third parties, an unfettered market will __________.

under-allocate resources to the good causing the benefit

over-allocate resources to the good causing the benefit

cause the equilibrium quantity, established before the benefit is taken into account, to be produced more efficiently

eliminate such goods

Question 8. Question :

One characteristic of a public good is that it __________.

is available for consumption by only a few individuals at any particular time

always eliminates the free-rider problem

can be consumed simultaneously by many individuals

can be easily subdivided into small units

Question 9. Question :

In the absence of government, __________.

public goods are likely to be overprovided

market failure is less likely to occur

public goods are likely to be underprovided

the free-rider problem is more likely to occur

Question 10. Question :

If a seller lowers the price of a product when demand is price inelastic, then the seller can expect revenues to __________.

rise

fall

stay the same

either rise or fall, but it is impossible to determine which

Question 11. Question :

When two goods are substitutes, __________.

the demands for both goods will be inelastic

cross price elasticity of demand will be 0

cross price elasticity of demand will be negative

cross price elasticity of demand will be positive

Question 12. Question :

Suppose that the income elasticity of demand for peanut butter is 0.75. Which of the following is true?

Peanut butter is a normal good because income elasticity is positive.

Peanut butter is an inferior good because income elasticity is positive.

Peanut butter is a normal good because income elasticity is less than 1.

Peanut butter is an inferior good because income elasticity is less than 1.

Question 13. Question :

Olga buys a bag of potato chips every day after her economics class. The first potato chip always tastes wonderful. The second does not taste quite as good as the first. The third does not taste quite as good as the second. Olga is experiencing __________.

irrational behavior

the law of diminishing marginal utility

the income effect

the substitution effect

Question 14. Question :

Dr. Rodriguez is consuming beer and wine. At his current level of consumption, the marginal utility per dollar is 30 units for beer and 15 units for wine. Dr. Rodriguez should __________.

consume twice as much beer as wine

consume twice as much wine as beer

increase his consumption of beer relative to wine

increase his consumption of wine relative to beer

Question 15. Question :

The price of a large pepperoni pizza used to be $14, but this week the price rose to $18. With a budget of just $30, you can't afford as many pizzas at the higher price. This change in consumer behavior reflects the __________.

real income effect

substitution effect

nominal income effect

concept of diminishing marginal utility

Question 16. Question :

Economists generally define the short run as being __________.

that period of time in which at least one of the firm's inputs, usually plant size, is fixed

that period of time in which all inputs are variable

any period of time less than one year

any period of time less than six months

Question 17. Question :

The marginal product of labor may increase rapidly initially as more __________.

workers are able to specialize

total product is decreasing

the amount of other inputs is held constant

workers will get crowded in a fixed factory

Question 18. Question :

A decrease in long-run average costs resulting from increases in output is __________.

attributed to economies of scale

attributed to diseconomies of scale

attributed to constant returns to scale

attributed to the law of diminishing marginal product

Question 19. Question :

Perfect competition is characterized by __________.

many buyers and sellers

a small number of firms

differentiated products of firms in the industry

high barriers to entry

Question 20. Question :

For a perfectly competitive firm, profit maximization occurs when __________.

marginal revenue equals average total cost

marginal revenue equals marginal cost

marginal cost is equal to average total cost

average total cost is at its minimum

Question 21. Question :

In the long run, the price for a perfectly competitive firm __________.

will be determined by the firm's supply and demand curves

will allow for positive economic profits

will equal marginal cost where marginal cost is at a minimum

will equal the minimum average total cost

Question 22. Question :

A monopolist's marginal revenue curve is __________.

the same as a perfectly competitive firm's marginal revenue curve

higher than the monopolist's demand curve

below the firm's demand curve

a horizontal line at the market price

Question 23. Question :

Refer to the figure below. The profit-maximizing price and quantity established by the unregulated monopolist are __________.

image

Q1 units of output and a price of P5

Q3 units of output and a price of P3

Q1 units of output and a price of P1

Q4 units of output and a price of P4

Question 24. Question :

Other things being equal, a price-discriminating firm will charge less to the customers who __________.

have the lowest incomes

have the least elastic demand for its product

have the most elastic demand for the product

are the most rational in making their decisions

Question 25. Question :

A monopolistically competitive firm differs from a perfectly competitive firm in the long run in that __________.

the demand curve faced by a monopolistically competitive firm is downward sloping, while the demand curve faced by a perfectly competitive firm is horizontal

profits are positive for a monopolistically competitive firm and zero for a perfectly competitive firm

profits are zero for a monopolistically competitive firm and positive for a perfectly competitive firm

marginal cost equals the market price for a monopolistically competitive firm but not for a perfectly competitive firm

Question 26. Question :

The monopolistically competitive firm's economic profits tend toward zero in the long run. Why is this so?

Monopolistically competitive firms are rarely able to maintain the corporate discipline necessary to sustain profits in the long run.

If a monopolistically competitive firm is profitable for more than 2 years, the Justice Department orders a corporate restructuring to pull the company back to a normal rate of return.

In the long run, other firms will successfully offer substitutes for the profitable firm's product, and competition will eliminate economic profits.

Even though the monopolistically competitive firm can successfully maintain barriers to entry, keeping competition at bay becomes very expensive.

Question 27. Question :

The goal of advertising is to __________.

increase the price elasticity of demand for the firm's product

reduce the price elasticity of demand for the firm's product

increase the standardization of the industry

encourage firms to enter into the industry

Question 28. Question :

Which of the following is a characteristic of oligopoly?

Easy entry and exit

Many firms

Strategic dependence

None of the above

Question 29. Question :

Refer to the payoff matrix below for the profits (in $ millions) of two firms (A and B) and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation?

image

Both firm A and firm B choose the high price.

Both firm A and firm B choose the low price.

Firm A chooses the low price while firm B chooses the high price.

Firm A chooses the high price while firm B chooses the low price.

Question 30. Question :

A cartel is likely to last longer if __________.

more new firms enter the market

the profits of participating members are relatively stable

market prices vary more over time

there are more firms in the industry

Question 31. Question :

When MFC > MRP, a firm in a competitive market will __________.

stop hiring

hire more workers

earn additional profits

layoff workers

Question 32. Question :

When the demand curve for an input is a derived demand this means that __________.

the demand curve is derived from the demand for the final product being produced

the demand curve depends upon the MFC

the law of diminishing marginal product does not hold

the demand curve slopes upward

Question 33. Question :

When hiring additional workers, a firm operating in a perfectly competitive labor market will __________.

have to offer higher wages to hire additional workers, but the old workers do not get the higher wage

have to offer higher wages to hire additional workers, and the old workers will also receive the new, higher wage

be able to hire additional workers without offering higher wages

be able to hire additional workers at lower wages because the new workers have been unemployed