Micro/Midterm II Name Practice Choose the best answer.
Good Luck!

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1. If the quantity demanded for Big Macs falls from 2.0 million to 1.6 million, as the price of Whoppers falls from $2.50 to $.90, the cross price elasticity of demand for Big Macs is:
A. -2.5.
B. -4.24.
C. 0.24.
D. 0.4.

 
2. The long-run income elasticity of demand for motion pictures is 3.41. That means that the proportional change in price will exceed the proportional change in quantity.
A. True
B. False

 
3. If consumers increase their consumption of a good by 25% when its price declines by 5%, we can conclude that the price elasticity of demand for that good is:
A. 10.
B. 5.
C. 2.
D. 1/5.

 
4. Price elasticity of demand is a measure of the:
A. shift in demand caused by a change in consumer taste.
B. slope of the demand curve.
C. responsiveness of price to changes in quantity demanded.
D. responsiveness of quantity demanded to price changes.

 
5. Most likely, the elasticity of demand for Levi Jeans is greater than the elasticity of demand for Levi 501 jeans.
A. True
B. False

 
6. George Davis and Michael Wohlgenant estimate that for every 1 percent increase in the price of Christmas trees, quantity demanded falls by 0.6%. If the price of Christmas trees rose, the proportionate decline in Christmas trees demanded would be _________ the proportionate rise in price.
A. less than
B. the same as
C. greater than
D. not related to

 
7.
R-1 Figure 21-12

Refer to the above graph. Which point has an elasticity less than one?
A. B
B. C
C. D
D. E


 
8.
R-2 Figure 21-2

Refer to the graph above. If price is currently at C and rises, total revenue will rise.
A. True
B. False


 
9. Suppose the equilibrium price of textbooks is $40 a textbook. At that price, quantity of textbooks demanded and supplied is 25,000. If a $6 tax per textbook paid by demanders increases equilibrium price to $44 a textbook and reduces equilibrium quantity sold to 18,000, using arc elasticity,
A. Elasticity of demand is 3.42 and elasticity of supply is 6.35. Demanders pay a larger portion of the tax.
B. Elasticity of demand is 0.29 and elasticity of supply is .16. Demanders pay a smaller portion of the tax.
C. Elasticity of demand is 1.4 and elasticity of supply is 2.16. Suppliers pay a larger portion of the tax.
D. Elasticity of demand is 0.7 and elasticity of supply is 46. Suppliers pay a smaller portion of the tax.

 
10. Suppose rent control was being considered at two location: A and B. The price ceiling proposed is an equal percentage below market price. In location A, there are more substitutes to rental housing than in location B. If rent control is established in both locations,
A. there will be a greater shortage of apartments in location B.
B. there will be a greater shortage of apartments in location A.
C. the shortage will be the same in both location since the price control is the same.
D. the relative shortages cannot be determined with the information given. 

 
11. Donuts and coffee tend to be complements. Their cross-price elasticity is most likely positive.
A. True
B. False

 
12. As the price of tomatoes imported from Mexico fell from $2.5 to $2, their quantity supplied fell from 800 tons to 450 tons. Using the arc convention, the elasticity of supply of tomatoes imported from Mexico is:
A. 0.25.
B. 2.52
C. 3.0
D. 5.

 
13. The price elasticity of demand for pediatric visits is much smaller than the price elasticity of demand for dental care. This is an example of how the price elasticity of demand _________ the more the good is a _________.
A. falls; luxury
B. rises; luxury
C. falls; necessity
D. rises; necessity

 
14.
R-3 Figure 21-14

Refer to the above graph. Which of the following curves demonstrates a demand curve where the percentage rise in price equals the percentage decline in quantity?
A. A.
B. B.
C. C.
D. None of the curves.


 
15. The more responsive supply and the demand are to price changes, the ________ a price ceiling will create.
A. smaller shortage
B. greater shortage
C. smaller surplus
D. greater surplus

 
16. For which of the following goods is the demand curve likely to be most inelastic?
A. salt.
B. movie tickets.
C. Honda Civic car.
D. a holiday trip to the Bahamas.

 
17.
R-4 Figure 21-20

Refer to the graph above. Demand it unit elastic at a quantity of:
A. 4
B. 12
C. 16
D. 28


 
18. A firm that faces an elastic demand for its product should definitely lower its price.
A. True
B. False

 
19. Inelastic demands limit the incentives for suppliers to collectively limit the quantity supplied.
A. True
B. False

 
20. If the proportionate change in quantity demanded is less than the proportionate change in price, and supply shifts in:
A. neither price nor quantity will rise much.
B. price will hardly rise at all; quantity will decline significantly.
C. price will likely rise significantly as will quantity.
D. price will rise significantly; quantity will hardly change at all.

 
21. If the proportionate change in quantity supplied exceeds the proportionate change in price, and demand shifts in:
A. price will fall significantly; quantity hardly changes at all.
B. price will hardly change at all; quantity will fall significantly.
C. price will fall significantly as will quantity.
D. price and quantity will hardly change at all.

 
22. It has been estimated that the price elasticity of demand for attending baseball games is .23. If price were the only factor to change, a decline in attendance of 5%, one could conclude that price of baseball tickets:
A. fell 21.74%
B. rose 21.74%
C. fell 1.23%
D. rose 1.23%

 
23.
R-5 Figure 21-6

Refer to the graph above. Using the arc convention and a 2-unit quantity arc the approximate elasticity of point A is:
A. 1/9
B. 4
C. 1
D. 2


 
24.
R-6 Figure 21-11

Refer to the above graph. At which point is elasticity zero?
A. A.
B. B.
C. C.
D. D.


 
25. Which of the following is an example of price discrimination?
A. Many athletes earn an income far higher than their next-best alternative.
B. When farmers collectively reduce output, their revenue will rise.
C. When price of land rises, landowners do not increase the quantity of land supplied. 
D. Peak-fare prices that are higher than non-peak-fare prices.

 
26. In 1997, the Federal government reinstated a 10% excise tax on airline tickets. The industry bid to pass on the full 10% ticket tax but were only able to boost fares by 4%. From this you can conclude that:
A. the demand for airline tickets is not responsive to price at all.
B. the supply of airline tickets is not responsive to price at all.
C. the demand elasticity for airline tickets is greater than zero.
D. the demand for airline tickets is fixed regardless of price.

 
27.
R-7 Figure 21-15

Refer to the above graph. When price rises by 20%, quantity supplied rises by 40%. Which curve best demonstrates elasticity in this example?
A. A.
B. B.
C. C.
D. None of the curves.


 
28. A sporting goods store observes that as they reduce the price of squash balls from $8 to $4, their quantity demanded rises from 200 to 220. Using the arc convention they correctly calculate elasticity of demand of squash balls to be:
A. 0.14.
B. 0.3.
C. 3.3.
D. 5.

 
29. When the average product curve is at its maximum, average variable cost will:
A. be at its maximum.
B. be increasing.
C. be decreasing.
D. be at its minimum.

 
30.
Units ofTotal
OutputCost
010
122
232
340
446
550
652
756
862
970
1080
R-8 Table 23-5

Refer to the table above. At what output does diminishing marginal productivity start?
A. 4.
B. 5.
C. 6.
D. 7.


 
31.
Number ofTotal
workersOutput
12
25
39
414
518
621
723
824
924
1022
R-9 Table 23-1

Refer to the table above. When the fifth worker is hired:
A. diminishing total productivity occurs.
B. diminishing marginal productivity occurs.
C. increasing total productivity occurs.
D. increasing marginal productivity occurs.


 
32. Total cost is:
A. AFC + MC.
B. AVC ´ Q. 
C. TVC + TFC.
D. AFC + AVC.

 
33. The __________ cost curve has a U shape.
A. marginal.
B. fixed.
C. total.
D. average fixed.

 
34.
R-10 Figure 23-5

Refer to the graph above. Curve I represents which type of curve?
A. Average fixed cost curve.
B. Average variable cost curve.
C. Average total cost curve
D. Marginal cost curve.


 
35. The additional cost of producing one more unit of output is called:
A. variable cost.
B. total cost.
C. average cost.
D. marginal cost.

 
36. At output level 20, fixed costs are $100 and variable costs are $400. At output level 21 fixed costs are $100 and variable costs are $425. The marginal cost of output level 21 is:
A. 525.
B. 50.
C. 26.19.
D. 25.

 
37.
Number ofAverage
workersproduct of workers
14
210
318
428
532
634
736
836
934
1030
R-11 Table 23-3

Refer to the table above. If employment is 3 then total output is:
A. 18.
B. 36.
C. 54.
D. 72.


 
38.
OutputTotal Cost
(Bicycles(Dollars)
per week)
1100
2200
3310
4440
5580
6730
7900
81200
R-12 Table 23-4

Refer to the table above. If the output of bicycles is 6 per week, then the marginal cost of producing another bicycle is:
A. 110.
B. 120.
C. 140.
D. 170.


 
39. The marginal cost curve intersects the average total cost curve at its minimum point.
A. True
B. False

 
40.
R-13 Figure 23-10

Refer to the graph above. The line segment FE represents the:
A. average variable cost at output level Q*.
B. average fixed cost at output level Q*.
C. average total cost at output level Q*.
D. marginal cost of producing the Qth output.


 
41. In the short-run, a firm has most control over which variable:
A. production technology.
B. plant size.
C. quantity supplied.
D. quantity demanded.

 
42. The production techniques available to real-world firms remain the same in the long run.
A. True
B. False

 
43. The law of diminishing marginal productivity applies to the short run because:
A. all inputs are variable in the short run.
B. technology always changes.
C. some inputs are fixed in the short run.
D. all inputs are fixed in the short run.

 
44. Which of the following is not an explanation for diseconomies of scale?
A. Less team spirit.
B. Increased specialization.
C. Lower output per unit of input.
D. Increased monitoring costs.

 
45. If total revenue covers explicit costs but not opportunity costs, then:
A. both economic profit and accounting profit are positive.
B. economic profit is positive, but accounting profit is negative.
C. accounting profit is positive, but economic profit is negative.
D. neither accounting profit nor economic profit is positive.

 
46. The equation for accounting profit is:
A. total revenue minus implicit immeasurable costs.
B. total revenue minus explicit measurable costs.
C. total revenue minus implicit and explicit costs.
D. implicit and explicit revenues minus implicit costs.

 
47. A firm buys a machine for $4,000 to last 4 years. After being used for one year, its value rises to $5,000. An accountant would say the machine:
A. has a cost of $1,000 in the first year.
B. has a cost of $4,000 in the first year.
C. has a cost of $2,000 in the first year.
D. has no cost in the first year.

 
48. In order to manufacture 100 pairs of shoes in a day, a firm can use 100 workers and 5 machines or 20 workers and 10 machines. Which method is technically efficient?
A. 100 workers and 5 machines.
B. 20 workers and 10 machines.
C. both could be technically efficient.
D. neither is technically efficient.

 
49. Diseconomies of scale exist because production relationships are more than pure technical relationships.
A. True
B. False

 
50. A firm buys a machine for $4,000 to last 4 years. After being used for one year, its value rises to $5,000. An economist would say the machine:
A. has a cost of $1,000 in the first year.
B. has a cost of $4,000 in the first year.
C. has a cost of $2,000 in the first year.
D. has no cost in the first year.

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Micro/Midterm II Name Practice Choose the best answer.
Good Luck!

                homepage                                                    previous page
 
1. If the quantity demanded for Big Macs falls from 2.0 million to 1.6 million, as the price of Whoppers falls from $2.50 to $.90, the cross price elasticity of demand for Big Macs is:
A. -2.5.
B. -4.24.
C. 0.24.
D. 0.4.

 
2. The long-run income elasticity of demand for motion pictures is 3.41. That means that the proportional change in price will exceed the proportional change in quantity.
A. True
B. False

 
3. If consumers increase their consumption of a good by 25% when its price declines by 5%, we can conclude that the price elasticity of demand for that good is:
A. 10.
B. 5.
C. 2.
D. 1/5.

 
4. Price elasticity of demand is a measure of the:
A. shift in demand caused by a change in consumer taste.
B. slope of the demand curve.
C. responsiveness of price to changes in quantity demanded.
D. responsiveness of quantity demanded to price changes.

 
5. Most likely, the elasticity of demand for Levi Jeans is greater than the elasticity of demand for Levi 501 jeans.
A. True
B. False

 
6. George Davis and Michael Wohlgenant estimate that for every 1 percent increase in the price of Christmas trees, quantity demanded falls by 0.6%. If the price of Christmas trees rose, the proportionate decline in Christmas trees demanded would be _________ the proportionate rise in price.
A. less than
B. the same as
C. greater than
D. not related to

 
7.
R-1 Figure 21-12

Refer to the above graph. Which point has an elasticity less than one?
A. B
B. C
C. D
D. E


 
8.
R-2 Figure 21-2

Refer to the graph above. If price is currently at C and rises, total revenue will rise.
A. True
B. False


 
9. Suppose the equilibrium price of textbooks is $40 a textbook. At that price, quantity of textbooks demanded and supplied is 25,000. If a $6 tax per textbook paid by demanders increases equilibrium price to $44 a textbook and reduces equilibrium quantity sold to 18,000, using arc elasticity,
A. Elasticity of demand is 3.42 and elasticity of supply is 6.35. Demanders pay a larger portion of the tax.
B. Elasticity of demand is 0.29 and elasticity of supply is .16. Demanders pay a smaller portion of the tax.
C. Elasticity of demand is 1.4 and elasticity of supply is 2.16. Suppliers pay a larger portion of the tax.
D. Elasticity of demand is 0.7 and elasticity of supply is 46. Suppliers pay a smaller portion of the tax.

 
10. Suppose rent control was being considered at two location: A and B. The price ceiling proposed is an equal percentage below market price. In location A, there are more substitutes to rental housing than in location B. If rent control is established in both locations,
A. there will be a greater shortage of apartments in location B.
B. there will be a greater shortage of apartments in location A.
C. the shortage will be the same in both location since the price control is the same.
D. the relative shortages cannot be determined with the information given. 

 
11. Donuts and coffee tend to be complements. Their cross-price elasticity is most likely positive.
A. True
B. False

 
12. As the price of tomatoes imported from Mexico fell from $2.5 to $2, their quantity supplied fell from 800 tons to 450 tons. Using the arc convention, the elasticity of supply of tomatoes imported from Mexico is:
A. 0.25.
B. 2.52
C. 3.0
D. 5.

 
13. The price elasticity of demand for pediatric visits is much smaller than the price elasticity of demand for dental care. This is an example of how the price elasticity of demand _________ the more the good is a _________.
A. falls; luxury
B. rises; luxury
C. falls; necessity
D. rises; necessity

 
14.
R-3 Figure 21-14

Refer to the above graph. Which of the following curves demonstrates a demand curve where the percentage rise in price equals the percentage decline in quantity?
A. A.
B. B.
C. C.
D. None of the curves.


 
15. The more responsive supply and the demand are to price changes, the ________ a price ceiling will create.
A. smaller shortage
B. greater shortage
C. smaller surplus
D. greater surplus

 
16. For which of the following goods is the demand curve likely to be most inelastic?
A. salt.
B. movie tickets.
C. Honda Civic car.
D. a holiday trip to the Bahamas.

 
17.
R-4 Figure 21-20

Refer to the graph above. Demand it unit elastic at a quantity of:
A. 4
B. 12
C. 16
D. 28


 
18. A firm that faces an elastic demand for its product should definitely lower its price.
A. True
B. False

 
19. Inelastic demands limit the incentives for suppliers to collectively limit the quantity supplied.
A. True
B. False

 
20. If the proportionate change in quantity demanded is less than the proportionate change in price, and supply shifts in:
A. neither price nor quantity will rise much.
B. price will hardly rise at all; quantity will decline significantly.
C. price will likely rise significantly as will quantity.
D. price will rise significantly; quantity will hardly change at all.

 
21. If the proportionate change in quantity supplied exceeds the proportionate change in price, and demand shifts in:
A. price will fall significantly; quantity hardly changes at all.
B. price will hardly change at all; quantity will fall significantly.
C. price will fall significantly as will quantity.
D. price and quantity will hardly change at all.

 
22. It has been estimated that the price elasticity of demand for attending baseball games is .23. If price were the only factor to change, a decline in attendance of 5%, one could conclude that price of baseball tickets:
A. fell 21.74%
B. rose 21.74%
C. fell 1.23%
D. rose 1.23%

 
23.
R-5 Figure 21-6

Refer to the graph above. Using the arc convention and a 2-unit quantity arc the approximate elasticity of point A is:
A. 1/9
B. 4
C. 1
D. 2


 
24.
R-6 Figure 21-11

Refer to the above graph. At which point is elasticity zero?
A. A.
B. B.
C. C.
D. D.


 
25. Which of the following is an example of price discrimination?
A. Many athletes earn an income far higher than their next-best alternative.
B. When farmers collectively reduce output, their revenue will rise.
C. When price of land rises, landowners do not increase the quantity of land supplied. 
D. Peak-fare prices that are higher than non-peak-fare prices.

 
26. In 1997, the Federal government reinstated a 10% excise tax on airline tickets. The industry bid to pass on the full 10% ticket tax but were only able to boost fares by 4%. From this you can conclude that:
A. the demand for airline tickets is not responsive to price at all.
B. the supply of airline tickets is not responsive to price at all.
C. the demand elasticity for airline tickets is greater than zero.
D. the demand for airline tickets is fixed regardless of price.

 
27.
R-7 Figure 21-15

Refer to the above graph. When price rises by 20%, quantity supplied rises by 40%. Which curve best demonstrates elasticity in this example?
A. A.
B. B.
C. C.
D. None of the curves.


 
28. A sporting goods store observes that as they reduce the price of squash balls from $8 to $4, their quantity demanded rises from 200 to 220. Using the arc convention they correctly calculate elasticity of demand of squash balls to be:
A. 0.14.
B. 0.3.
C. 3.3.
D. 5.

 
29. When the average product curve is at its maximum, average variable cost will:
A. be at its maximum.
B. be increasing.
C. be decreasing.
D. be at its minimum.

 
30.
Units ofTotal
OutputCost
010
122
232
340
446
550
652
756
862
970
1080
R-8 Table 23-5

Refer to the table above. At what output does diminishing marginal productivity start?
A. 4.
B. 5.
C. 6.
D. 7.


 
31.
Number ofTotal
workersOutput
12
25
39
414
518
621
723
824
924
1022
R-9 Table 23-1

Refer to the table above. When the fifth worker is hired:
A. diminishing total productivity occurs.
B. diminishing marginal productivity occurs.
C. increasing total productivity occurs.
D. increasing marginal productivity occurs.


 
32. Total cost is:
A. AFC + MC.
B. AVC ´ Q. 
C. TVC + TFC.
D. AFC + AVC.

 
33. The __________ cost curve has a U shape.
A. marginal.
B. fixed.
C. total.
D. average fixed.

 
34.
R-10 Figure 23-5

Refer to the graph above. Curve I represents which type of curve?
A. Average fixed cost curve.
B. Average variable cost curve.
C. Average total cost curve
D. Marginal cost curve.


 
35. The additional cost of producing one more unit of output is called:
A. variable cost.
B. total cost.
C. average cost.
D. marginal cost.

 
36. At output level 20, fixed costs are $100 and variable costs are $400. At output level 21 fixed costs are $100 and variable costs are $425. The marginal cost of output level 21 is:
A. 525.
B. 50.
C. 26.19.
D. 25.

 
37.
Number ofAverage
workersproduct of workers
14
210
318
428
532
634
736
836
934
1030
R-11 Table 23-3

Refer to the table above. If employment is 3 then total output is:
A. 18.
B. 36.
C. 54.
D. 72.


 
38.
OutputTotal Cost
(Bicycles(Dollars)
per week)
1100
2200
3310
4440
5580
6730
7900
81200
R-12 Table 23-4

Refer to the table above. If the output of bicycles is 6 per week, then the marginal cost of producing another bicycle is:
A. 110.
B. 120.
C. 140.
D. 170.


 
39. The marginal cost curve intersects the average total cost curve at its minimum point.
A. True
B. False

 
40.
R-13 Figure 23-10

Refer to the graph above. The line segment FE represents the:
A. average variable cost at output level Q*.
B. average fixed cost at output level Q*.
C. average total cost at output level Q*.
D. marginal cost of producing the Qth output.


 
41. In the short-run, a firm has most control over which variable:
A. production technology.
B. plant size.
C. quantity supplied.
D. quantity demanded.

 
42. The production techniques available to real-world firms remain the same in the long run.
A. True
B. False

 
43. The law of diminishing marginal productivity applies to the short run because:
A. all inputs are variable in the short run.
B. technology always changes.
C. some inputs are fixed in the short run.
D. all inputs are fixed in the short run.

 
44. Which of the following is not an explanation for diseconomies of scale?
A. Less team spirit.
B. Increased specialization.
C. Lower output per unit of input.
D. Increased monitoring costs.

 
45. If total revenue covers explicit costs but not opportunity costs, then:
A. both economic profit and accounting profit are positive.
B. economic profit is positive, but accounting profit is negative.
C. accounting profit is positive, but economic profit is negative.
D. neither accounting profit nor economic profit is positive.

 
46. The equation for accounting profit is:
A. total revenue minus implicit immeasurable costs.
B. total revenue minus explicit measurable costs.
C. total revenue minus implicit and explicit costs.
D. implicit and explicit revenues minus implicit costs.

 
47. A firm buys a machine for $4,000 to last 4 years. After being used for one year, its value rises to $5,000. An accountant would say the machine:
A. has a cost of $1,000 in the first year.
B. has a cost of $4,000 in the first year.
C. has a cost of $2,000 in the first year.
D. has no cost in the first year.

 
48. In order to manufacture 100 pairs of shoes in a day, a firm can use 100 workers and 5 machines or 20 workers and 10 machines. Which method is technically efficient?
A. 100 workers and 5 machines.
B. 20 workers and 10 machines.
C. both could be technically efficient.
D. neither is technically efficient.

 
49. Diseconomies of scale exist because production relationships are more than pure technical relationships.
A. True
B. False

 
50. A firm buys a machine for $4,000 to last 4 years. After being used for one year, its value rises to $5,000. An economist would say the machine:
A. has a cost of $1,000 in the first year.
B. has a cost of $4,000 in the first year.
C. has a cost of $2,000 in the first year.
D. has no cost in the first year.

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This is the end of the test. When you have completed all the questions and reviewed your answers, press the button below to grade the test.