ECON 203 Final Exam with Answers

Final Exam ECON 203 OL1-US1 Fall 2013Name___________________________________I. MULTIPLE CHOICE (40 questions, 2 points each). Choose the one alternative that best completes thestatement or answers the question.1) The opportunity cost of going to college: 1) _______A) includes wages you lose by going to school instead of working.B) is equal to the cost of tuition, room and board, and other expenses.C) is zero if your parents pay your tuition.D) is the same for all students at a particular school who pay full tuition.2) If a consumer can buy four DVDs for $44 and five DVDs for $50, then the marginal cost of the fifth DVD is: 2)_______A) $50. B) $6. C) $10. D) $11.3) Judy demands more peanuts as her income increases. From this, we can conclude that, for Judy: 3) _______A) peanuts are a complementary good. B) peanuts are a normal good.C) peanuts are a substitute good. D) peanuts are an inferior good.4) When Mary’s income increases, she purchases fewer hamburgers. We can conclude that for Mary, hamburger is a(n)________ good. 4) _______A) normal B) complementary C) substitute D) inferior5) Flour is used to produce bread. If the price of flour increases: 5) _______A) the supply of bread decreases. B) the demand for bread decreases.C) the demand for bread increases. D) the supply of bread increases.6) If the price of crude oil (an input to the production of gasoline) increases, then we will expect to see: 6) _______A) a movement along the supply curve for gasoline downwards.B) a shift in the supply of gasoline to the left.C) a shift in the supply of gasoline to the right.D) a movement along the supply curve for gasoline upwards.7) A decrease in the tuition (i.e., price) that a public university charges would result in: 7) _______A) a shift in the supply of college classes to the right.B) an downward movement along the supply curve for college classes.C) a shift in the supply of college classes to the left.D) an upward movement along the supply curve for college classes.8) A telephone company wants to increase the consumption of telephone by 12%. The price elasticity of demand fortelephone is 0.6. The telephone company should: 8) _______A) raise the price of telephone by 0.4%. B) lower the price of telephone by 25.0%.C) lower the price of telephone by 2.0%. D) lower the price of telephone by 20.0%.9) One of the main differences between the long run and the short run is that: 9) _______A) there are no diminishing returns in the long run.B) the firm can earn a profit.C) the firm can operate at a loss.D) there are no diminishing returns in the short run.10) A firm will choose to operate rather than shut down as long as: 10) ______A) total revenue is greater than or equal to variable cost.B) average fixed cost is greater than average variable cost.C) it earns a positive profit.D) total revenue is greater than or equal to fixed cost.11) The price elasticity of demand for strawberries is 1.2 during the summer. If a drought causes the price of strawberriesto increase 15%, farmers can expect quantity demanded to: 11) ______A) decrease by 18%. B) decrease by 12.5%.C) increase by 18%. D) increase by 12.5%.12) If a firm spends $200 to produce 20 units of output and spends $440 to produce 40 units of output, then the marginalcost of increasing output is: 12) ______A) $20. B) $22. C) $12. D) $10.13) Refer to Figure 10.3. If this firm is producing the profit-maximizing quantity and selling it at the profit-maximizingprice, the firm’s profit will be: 13) ______A) $80. B) $132. C) $84. D) $88.14) Refer to Figure 10.3. The profit-maximizing level of output for this monopolist is ________ units of output. 14)______A) 20 B) 26 C) 24 D) 2215) Refer to Figure 11.2. In the long run the monopolistic competitor would generate total revenue equal to the area:15) ______A) 0BGD. B) 0AFD. C) AHE0. D) AFGB.16) Refer to Figure 17.2. If the equilibrium wage $12 and a new minimum wage is set at $15, then ________ hours of laborwill be employed. 16) ______A) 25,000 B) 36,000 C) 30,000 D) none of theseFigure 2.217) Figure 2.2 presents a production possibilities curve for a country that can either produce highways or provide peoplewith medical care in a given year. The opportunity cost of the second new highway built in a year is: 17) ______A) 40,000 people provided with medical care.B) 50,000 people provided with medical care.C) 500,000 people provided with medical care.D) 30,000 people provided with medical care.Figure 2.418) Joe runs a business and needs to decide how many hours to stay open. Figure 2.4 illustrates his marginal benefit ofstaying open for each additional hour. Suppose that Joe’s marginal cost of staying open per hour is $32. How many hoursshould Joe stay open? 18) ______A) 5 hours B) 6 hours C) 4 hours D) 7 hoursFigure 4.119) Refer to Figure 4.1 that shows Mary and Tom’s individual demand curves for meals per week at Fratelli’s ItalianRestaurant. Assuming Mary and Tom are the only consumers in the market, what is the market quantity demanded at aprice of $10? 19) ______A) 6 B) 8 C) 2 D) 4Figure 4.320) Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $30, there is: 20)______A) excess demand of 50 pairs of blue jeans. B) excess supply of 50 pairs of blue jeans.C) excess demand of 40 pairs of blue jeans. D) excess supply of 40 pairs of blue jeans.Figure 4.421) Figure 4.4 illustrates the demand for guitars. An increase in the demand for guitars is represented by the movementfrom: 21) ______A) D1 to D2. B) point B to point C.C) point B to point A. D) D1 to D0.22) Figure 4.4 illustrates the demand for guitars. A decrease in price of guitars would bring about a movement from:22) ______A) D1 to D2. B) point B to point A.C) point B to point C. D) D1 to D0.23) Figure 4.4 illustrates the demand for guitars. Assume guitars are an inferior good. An increase in income would bringabout a movement from: 23) ______A) D1 to D2. B) D1 to D0.C) point B to point A. D) point B to point C.24) Refer to Figure 5.1. Using the initial-value method, if the price of a hamburger is decreased from $10 to $8, the priceelasticity of demand equals: 24) ______A) 1.0. B) 1.5. C) 5.0. D) 2.0.25) Refer to Figure 6.1. If the price of a donut is $ .75, consumer surplus is: 25) ______A) $1.50. B) $1.75. C) $ .75. D) $ .50.26) Refer to Figure 6.3. If the price of one hour of tutoring is $20, then producer surplus is: 26) ______A) $20. B) $10. C) $30. D) $40.27) Refer to Figure 6.6. If the government will not allow landlords to charge more than $400 for an apartment, thedeadweight loss will be equal to: 27) ______A) 200. B) 750. C) 250. D) 500.28) Figure 6.8 shows the market for taxicab services in a small town. If the government limits taxicab services to 20 perday, then the deadweight loss is equal to: 28) ______A) $20. B) $7.50. C) $3.75. D) $15.29) Refer to Figure 7.3. The total utility from consuming 4 slices of pie is:. 29) ______A) 8. B) 15. C) 17. D) 2.30) Refer to Figure 8.7. If six microwave ovens are produced, Micro Oven’s average total costs are: 30) ______A) $1200. B) $200.00. C) $116.67. D) $700.31) Refer to Figure 9.3. This farmer’s profit-maximizing level of output is ________ units of output. 31) ______A) 1,400. B) 700 C) 1,000 D) 20032) Refer to Figure 9.5. If this farmer is maximizing profits, his total revenue will be: 32) ______A) $135. B) $90. C) $240. D) $180.33) Refer to Figure 9.5. This farmer’s fixed costs are: 33) ______A) $24.B) $0.C) $45.D) indeterminate unless we know the level of output the firm is producing.34) Refer to Figure 9.5. If this farmer is maximizing his profits, his total variable cost is: 34) ______A) $24. B) $255. C) $42. D) $108.35) Refer to Figure 9.5. If this farmer is maximizing profits, his total costs will be: 35) ______A) $66. B) $132. C) $11. D) $90.36) Refer to Figure 9.5. For this farmer to maximize profits he should produce ________ bushels of wheat. 36) ______A) 16 B) 12 C) 6 D) 9Table 2.137) A group of people has formed a house cleaning and yard maintenance business. The number of houses or yards thatthey can clean or maintain in any given day is depicted in Table 2.1. The opportunity cost of cleaning the second house ina day is: 37) ______A) 2 yards maintained. B) 3 yards maintained.C) 1 yard maintained. D) 18 yards maintained.Table 2.238) Julianne runs a business and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs ofstaying open for each additional hour. Suppose that Julianne’s marginal benefit of staying open per hour is $16. If she isfollowing the marginal principle, how many hours should Julianne stay open? 38) ______A) 5 hours B) 3 hours C) 7 hours D) 4 hoursTable 3.139) Table 3.1 illustrates Willy and Blythe’s hourly production for apples and carrots. Based on the table, Willy’sopportunity cost of 1 apple is: 39) ______A) 4 carrots. B) 1 carrot. C) 2/3 carrot. D) 6 carrots.Table 7.140) Refer to Table 7.1. The marginal utility of the third donut per day is: 40) ______A) 60. B) 75. C) 20. D) 15.