D. None of the above - ANSWERSIf the marginal product of labor is 2, the marginal product of capital is 4, the wage rate is $3, the rental price of capital is $6, and the price of output is $1.50, then the firm should
. Increase output by hiring more labor, more capital, or both.
b. Hold output...
ECON 528 Final Exam Questions &
Answers
D. None of the above - ANSWERSIf the marginal product of labor is 2, the marginal
product of capital is 4, the wage rate is $3, the rental price of capital is $6, and the price
of output is $1.50, then the firm should
. Increase output by hiring more labor, more capital, or both.
b. Hold output constant, but hire more labor and less capital.
c. Decrease output by reducing the quantity of capital, reducing the number of units of
labor, or both.
d. None of the above is correct.
diminishing marginal product. - ANSWERSWhen adding another unit of labor leads to
an increase in output that is smaller than the increases in output that resulted from
adding previous units of labor, the firm is experiencing
a. diminishing labor.
b. diminishing output.
c. diminishing marginal product.
d. negative marginal product
gains from specialization of inputs - ANSWERSWhich of the following explains why
long-run average cost at first decreases as output increases?
a. diseconomies of scale
b. less-efficient use of inputs
c. fixed costs becoming spread out over more units of output
d. gains from specialization of inputs.
constant returns to scale because average total cost is constant as output rises. -
ANSWERSIn the long run a company that produces and sells dog beds incurs total
costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A
exhibits
As the size of the firm increases it becomes more difficult to coordinate the operations
of its manufacturing plants. - ANSWERSWhich of the following is a reason why a firm
would experience diseconomies of scale?
A) To finance an increase in the size of its plant a firm must borrow more money or sell
more shares of stock.
B) As the size of the firm increases, it becomes more difficult to find markets where it
doesn't already have operations.
C) As the size of the firm increases it becomes more difficult to coordinate the
operations of its manufacturing plants.
D) As the size of the firm increases, it must operate in other countries where differences
in language, customs and laws increase its average costs.
,an increase in supply and an increase in demand greater than the increase in supply -
ANSWERSWhich of the following would cause an increase in the equilibrium price and
an increase in the equilibrium quantity of watermelons?
A) an increase in demand and an increase in supply
B) an increase in supply
C) an increase in supply and an increase in demand greater than the increase in supply
D) a decrease in demand and an increase in supply
Entry barriers into the industry are low. - ANSWERSWhich of the following
characteristics is common to monopolistic competition and perfect competition?
A) Firms produce identical products.
B) Entry barriers into the industry are low.
C) Each firm faces a downward -sloping demand curve.
D) Firms take market prices as given.
will earn zero economic profit in the long run because of free entry, but competition will
lead restaurants to offer different versions of the same product. - ANSWERSIn a
monopolistically competitive market, a successful new restaurant
A) can earn economic profits in the long run if it uses barriers to restrict entry by new
restaurants.
B) will earn zero economic profit in the long run because of free entry, but competition
will lead restaurants to offer different versions of the same product.
C) will face high entry barriers because of health and safety regulations to which all
restaurants are subject.
D) must obtain a trademark to ensure that it will break even in the long run.
agree to a low cartel production level and then produce more than its quota. -
ANSWERSA member of a cartel like OPEC has an incentive to
A) argue for larger production quotas for each member of the cartel.
B) agree to a low cartel production level and then produce more than its quota.
C) abide by its individual production quota.
D) support equal production quotas for each member.
Firms could increase profits by jointly reducing output. - ANSWERSIf firms are in
Cournot equilibrium:
oligopoly. - ANSWERSAn industry has a 4-firm concentration ratio of 85. We would call
this industry a:
A $95 ticket to the Magic Kingdom gives you entrance to the park and free access to all
the rides. - ANSWERS15) Which of the following is an example of bundling?
A)A shoe store doesn't sell shoes for just one foot; it sells shoes for the left foot and
right foot packaged together.
B)An automobile manufacturer includes Michelin tires on its new cars.
, C)A $95 ticket to the Magic Kingdom gives you entrance to the park and free access to
all the rides.
D)HP includes a toner cartridge with the purchase of a new laser printer.
third-degree price discrimination - ANSWERSSelling tickets in the orchestra region of
the Metropolitan Opera for $55 and selling tickets in the upper balcony for $28 to listen
to Luciano Pavoratti describes which type of price discrimination
Mr. Fudd to pay Mr. Leghorn between $500 and $900 to continue hunting. -
ANSWERSMr. Leghorn lives next door to Mr. Fudd. During hunting season, Mr. Fudd
likes to shoot rabbits in his backyard, which activity he values at $900. The noise from
the shooting disturbs Mr. Leghorn and prevents him from taking afternoon naps, which
he values at $500. If Mr. Leghorn has the legal right to stop Mr. Fudd from hunting, the
socially optimal outcome is for:
I - ANSWERSWhich of the following statements is (are) TRUE?
I. Public goods tend to be underprovided.
II. One person's consumption of a public good diminishes its use to another person.
III. The marginal cost of providing a public good to another consumer is infinite.
incomplete property rights or inability to enforce property rights - ANSWERSWhich of
the following is a source of market failure?
A) unforeseen circumstances which leads to the bankruptcy of many firms
B) a lack of government intervention in a market
C) incomplete property rights or inability to enforce property rights
D) an inequitable income distribution
keeping a junked car parked on your front lawn - ANSWERSWhich of the following
activities create a negative externality?
A) cleaning up the sidewalk on your block
B) graduating from college
C) repainting the house you live in to improve its appearance
D) keeping a junked car parked on your front lawn
one who waits for others to produce a good and then enjoys its benefits without paying
for it. - ANSWERSIn economics, the term "free rider" refers to
I and II - ANSWERSWhich of the following statements is (are) TRUE?
I.In the face of a positive externality, a perfectly competitive market produces less than
the socially optimal quantity of output.
II.If vaccinations generate an external marginal benefit, their marginal social benefit will
always exceed their private marginal benefit.
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