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    ECO365 FINAL EXAM 2015 ECO365 FINAL EXAM 2015 Question 1. The law of diminishing marginal productivity implies that the marginal product of a variable input: Is constant Never declines Eventually declines Always declines 2. Suppose foreign shrimp prices drop by 32 percent and importers gain a 90 percent market share. From this information, what would economists strongly suspect about this industry? Foreign sellers probably are colluding on price to maximize profits. The large sales of foreigners indicate they are better strategic business bargainers than Americans are. Foreigners have a comparative advantage in shrimping. Americans have a comparative advantage in shrimping. 3. Suppose people freely choose to spend 40 percent of their income on health care, but then the government decides to tax 40 percent of that person’s income to provide the same level of coverage as before. What can be said about deadweight loss in each case? Taxing income results in deadweight loss, and purchasing health care on one’s own doesn’t result in deadweight loss. There is no difference because the total spending remains the same and the health care purchased remains the same. Taxing income results in less deadweight loss because government knows better what health care coverage is good for society. There is no difference between goods that are purchased in the market in either case. 4. In 1997, the federal government reinstated a 10 percent excise tax on airline tickets. The industry tried to pass on the full 10 percent ticket tax to consumers but was able to boost fares by only 4 percent. From this you can conclude that the: Demand for airline tickets is perfectly inelastic. Supply elasticity of airline tickets is less than infinity. Demand elasticity for airline tickets is greater than zero in absolute value. Supply of airline tickets is perfectly inelastic. 5. There are many restaurants in the city of Raleigh, each one offering food and services that differ from those of its competitors. There is also free entry of sellers into the market, and each seller serves a very small fraction of the total number of meals served each day. The restaurant industry in Raleigh is best characterized as: Monopolistically competitive. Perfectly competitive. An oligopoly. A pure monopoly. 6. Cartels are organizations that: Use predatory pricing to monopolize industries. Coordinate the output and pricing decisions of a group of firms. Keep markets contestable. Encourage price wars. 7. Alex is playing his music at full volume in his dorm room. The other people living on his floor found this to be a nuisance, but Alex doesn’t care. Alex’s music playing is an example of: Positive externality Pareto externality Negative externality Normative externality 8. Many call centers that provide telephone customer services for U.S. companies have been established in India, but few or none have been established in China. Why? China lacks the political infrastructure to support call centers. Chinese labor lacks the specific language skills needed to make call centers profitable in China. Indian labor costs are equal to Chinese labor costs. China is at a more advanced stage of economic development than India. 9. Mr. Woodward’s cabinet shop is experiencing rapid growth in sales. As sales have increased, Mr. Woodward has found it necessary to hire more workers. However, he has observed that doubling the number of workers has less than doubled his output. What is the likely explanation? The law of demand The law of supply The law of diminishing marginal productivity The law of diminishing marginal utility 10. Which of the following statements is true about a downward-sloping demand curve that is a straight line? The slope and elasticity are the same at all points. The slope and the elasticity fall as you move down the demand curve. The slope remains the same, but elasticity rises as you move down the demand curve. The slope r

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    ECO365 FINAL EXAM 2015 ECO365 FINAL EXAM 2015 Question 1. The law of diminishing marginal productivity implies that the marginal product of a variable input: Is constant Never declines Eventually declines Always declines 2. Suppose foreign shrimp prices drop by 32 percent and importers gain a 90 percent market share. From this information, what would economists strongly suspect about this industry? Foreign sellers probably are colluding on price to maximize profits. The large sales of foreigners indicate they are better strategic business bargainers than Americans are. Foreigners have a comparative advantage in shrimping. Americans have a comparative advantage in shrimping. 3. Suppose people freely choose to spend 40 percent of their income on health care, but then the government decides to tax 40 percent of that person’s income to provide the same level of coverage as before. What can be said about deadweight loss in each case? Taxing income results in deadweight loss, and purchasing health care on one’s own doesn’t result in deadweight loss. There is no difference because the total spending remains the same and the health care purchased remains the same. Taxing income results in less deadweight loss because government knows better what health care coverage is good for society. There is no difference between goods that are purchased in the market in either case. 4. In 1997, the federal government reinstated a 10 percent excise tax on airline tickets. The industry tried to pass on the full 10 percent ticket tax to consumers but was able to boost fares by only 4 percent. From this you can conclude that the: Demand for airline tickets is perfectly inelastic. Supply elasticity of airline tickets is less than infinity. Demand elasticity for airline tickets is greater than zero in absolute value. Supply of airline tickets is perfectly inelastic. 5. There are many restaurants in the city of Raleigh, each one offering food and services that differ from those of its competitors. There is also free entry of sellers into the market, and each seller serves a very small fraction of the total number of meals served each day. The restaurant industry in Raleigh is best characterized as: Monopolistically competitive. Perfectly competitive. An oligopoly. A pure monopoly. 6. Cartels are organizations that: Use predatory pricing to monopolize industries. Coordinate the output and pricing decisions of a group of firms. Keep markets contestable. Encourage price wars. 7. Alex is playing his music at full volume in his dorm room. The other people living on his floor found this to be a nuisance, but Alex doesn’t care. Alex’s music playing is an example of: Positive externality Pareto externality Negative externality Normative externality 8. Many call centers that provide telephone customer services for U.S. companies have been established in India, but few or none have been established in China. Why? China lacks the political infrastructure to support call centers. Chinese labor lacks the specific language skills needed to make call centers profitable in China. Indian labor costs are equal to Chinese labor costs. China is at a more advanced stage of economic development than India. 9. Mr. Woodward’s cabinet shop is experiencing rapid growth in sales. As sales have increased, Mr. Woodward has found it necessary to hire more workers. However, he has observed that doubling the number of workers has less than doubled his output. What is the likely explanation? The law of demand The law of supply The law of diminishing marginal productivity The law of diminishing marginal utility 10. Which of the following statements is true about a downward-sloping demand curve that is a straight line? The slope and elasticity are the same at all points. The slope and the elasticity fall as you move down the demand curve. The slope remains the same, but elasticity rises as you move down the demand curve. The slope r

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    Eco365 Final Exam 2015

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    teacher.theacestud
    ECO365 FINAL EXAM 2015 ECO365 FINAL EXAM 2015 Question 1. The law of diminishing marginal productivity implies that the marginal product of a variable input: Is constant Never declines Eventually declines Always declines 2. Suppose foreign shrimp prices drop by 32 percent and importers gain a 90 percent market share. From this information, what would economists strongly suspect about this industry? Foreign sellers probably are colluding on price to maximize profits. The large sales of foreigners indicate they are better strategic business bargainers than Americans are. Foreigners have a comparative advantage in shrimping. Americans have a comparative advantage in shrimping. 3. Suppose people freely choose to spend 40 percent of their income on health care, but then the government decides to tax 40 percent of that person’s income to provide the same level of coverage as before. What can be said about deadweight loss in each case? Taxing income results in deadweight loss, and purchasing health care on one’s own doesn’t result in deadweight loss. There is no difference because the total spending remains the same and the health care purchased remains the same. Taxing income results in less deadweight loss because government knows better what health care coverage is good for society. There is no difference between goods that are purchased in the market in either case. 4. In 1997, the federal government reinstated a 10 percent excise tax on airline tickets. The industry tried to pass on the full 10 percent ticket tax to consumers but was able to boost fares by only 4 percent. From this you can conclude that the: Demand for airline tickets is perfectly inelastic. Supply elasticity of airline tickets is less than infinity. Demand elasticity for airline tickets is greater than zero in absolute value. Supply of airline tickets is perfectly inelastic. 5. There are many restaurants in the city of Raleigh, each one offering food and services that differ from those of its competitors. There is also free entry of sellers into the market, and each seller serves a very small fraction of the total number of meals served each day. The restaurant industry in Raleigh is best characterized as: Monopolistically competitive. Perfectly competitive. An oligopoly. A pure monopoly. 6. Cartels are organizations that: Use predatory pricing to monopolize industries. Coordinate the output and pricing decisions of a group of firms. Keep markets contestable. Encourage price wars. 7. Alex is playing his music at full volume in his dorm room. The other people living on his floor found this to be a nuisance, but Alex doesn’t care. Alex’s music playing is an example of: Positive externality Pareto externality Negative externality Normative externality 8. Many call centers that provide telephone customer services for U.S. companies have been established in India, but few or none have been established in China. Why? China lacks the political infrastructure to support call centers. Chinese labor lacks the specific language skills needed to make call centers profitable in China. Indian labor costs are equal to Chinese labor costs. China is at a more advanced stage of economic development than India. 9. Mr. Woodward’s cabinet shop is experiencing rapid growth in sales. As sales have increased, Mr. Woodward has found it necessary to hire more workers. However, he has observed that doubling the number of workers has less than doubled his output. What is the likely explanation? The law of demand The law of supply The law of diminishing marginal productivity The law of diminishing marginal utility 10. Which of the following statements is true about a downward-sloping demand curve that is a straight line? The slope and elasticity are the same at all points. The slope and the elasticity fall as you move down the demand curve. The slope remains the same, but elasticity rises as you move down the demand curve. The slope r

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    © All Rights Reserved
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    10/30/2015

    TheAceStudent:ECO365FINALEXAM2015

    ECO365FINALEXAM2015
    ECO365FINALEXAM2015
    Question
    1.Thelawofdiminishingmarginalproductivityimpliesthatthemarginalproductofavariableinput:
    Isconstant
    Neverdeclines
    Eventuallydeclines
    Alwaysdeclines
    2.Supposeforeignshrimppricesdropby32percentandimportersgaina90percentmarketshare.
    Fromthisinformation,whatwouldeconomistsstronglysuspectaboutthisindustry?
    Foreignsellersprobablyarecolludingonpricetomaximizeprofits.
    ThelargesalesofforeignersindicatetheyarebetterstrategicbusinessbargainersthanAmericans
    are.
    Foreignershaveacomparativeadvantageinshrimping.
    Americanshaveacomparativeadvantageinshrimping.
    3.Supposepeoplefreelychoosetospend40percentoftheirincomeonhealthcare,butthenthe
    governmentdecidestotax40percentofthatpersonsincometoprovidethesamelevelof
    coverageasbefore.Whatcanbesaidaboutdeadweightlossineachcase?
    Taxingincomeresultsindeadweightloss,andpurchasinghealthcareononesowndoesntresultin
    deadweightloss.
    Thereisnodifferencebecausethetotalspendingremainsthesameandthehealthcarepurchased
    remainsthesame.
    Taxingincomeresultsinlessdeadweightlossbecausegovernmentknowsbetterwhathealthcare
    coverageisgoodforsociety.
    Thereisnodifferencebetweengoodsthatarepurchasedinthemarketineithercase.
    4.In1997,thefederalgovernmentreinstateda10percentexcisetaxonairlinetickets.Theindustry
    triedtopassonthefull10percenttickettaxtoconsumersbutwasabletoboostfaresbyonly4
    percent.Fromthisyoucanconcludethatthe:
    Demandforairlineticketsisperfectlyinelastic.
    Supplyelasticityofairlineticketsislessthaninfinity.
    Demandelasticityforairlineticketsisgreaterthanzeroinabsolutevalue.
    Supplyofairlineticketsisperfectlyinelastic.
    5.TherearemanyrestaurantsinthecityofRaleigh,eachoneofferingfoodandservicesthatdiffer
    fromthoseofitscompetitors.Thereisalsofreeentryofsellersintothemarket,andeachseller
    servesaverysmallfractionofthetotalnumberofmealsservedeachday.Therestaurantindustry
    inRaleighisbestcharacterizedas:
    Monopolisticallycompetitive.
    Perfectlycompetitive.
    Anoligopoly.
    Apuremonopoly.
    6.Cartelsareorganizationsthat:
    Usepredatorypricingtomonopolizeindustries.
    Coordinatetheoutputandpricingdecisionsofagroupoffirms.
    Keepmarketscontestable.
    Encouragepricewars.
    7.Alexisplayinghismusicatfullvolumeinhisdormroom.Theotherpeoplelivingonhisfloor
    foundthistobeanuisance,butAlexdoesntcare.Alexsmusicplayingisanexampleof:
    Positiveexternality
    Paretoexternality
    Negativeexternality
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    Normativeexternality
    8.ManycallcentersthatprovidetelephonecustomerservicesforU.S.companieshavebeen
    establishedinIndia,butfewornonehavebeenestablishedinChina.Why?
    Chinalacksthepoliticalinfrastructuretosupportcallcenters.
    ChineselaborlacksthespecificlanguageskillsneededtomakecallcentersprofitableinChina.
    IndianlaborcostsareequaltoChineselaborcosts.
    ChinaisatamoreadvancedstageofeconomicdevelopmentthanIndia.
    9.Mr.Woodwardscabinetshopisexperiencingrapidgrowthinsales.Assaleshaveincreased,Mr.
    Woodwardhasfounditnecessarytohiremoreworkers.However,hehasobservedthatdoublingthe
    numberofworkershaslessthandoubledhisoutput.Whatisthelikelyexplanation?
    Thelawofdemand
    Thelawofsupply
    Thelawofdiminishingmarginalproductivity
    Thelawofdiminishingmarginalutility
    10.Whichofthefollowingstatementsistrueaboutadownwardslopingdemandcurvethatisa
    straightline?
    Theslopeandelasticityarethesameatallpoints.
    Theslopeandtheelasticityfallasyoumovedownthedemandcurve.
    Thesloperemainsthesame,butelasticityrisesasyoumovedownthedemandcurve.
    Thesloperemainsthesame,butelasticityfallsasyoumovedownthedemandcurve.
    11.Microeconomicsisthestudyof:
    unemployment
    afirmspricingpolicies
    businesscycles
    inflation
    12.Foramonopolist,thepriceofaproduct:
    Islessthanthemarginalrevenue.
    Equalsthemarginalrevenue.
    Exceedsthemarginalrevenue.
    Equalsthemarginalcost.
    13.Otherthingsheldconstantinacompetitivelabormarket,ifworkersnegotiateacontractin
    whichtheemployeragreestopayanhourlyof$17.85whilethemarketequilibriumhourrateis
    $16.50,the:
    Supplyoflaborwilldecreaseuntiltheequilibriumwagerateis$17.85.
    Quantityofworkersdemandedwillexceedthequantityofworkerssupplied.
    Demandforlaborwillincreaseuntiltheequilibriumwagerateis$17.85.
    Quantityofworkerssuppliedwillexceedthequantityofworkersdemanded.
    14.WhenRossPerotranforpresidentasathirdpartycandidatein1992,hearguedthatfreetrade
    withMexicowouldresultinmassivejoblossesintheUnitedStatesbecauseMexicanwageswere
    solow.WhichofthefollowingisthebestexplanationofwhyfeweconomistsagreedwithPerot?
    EconomistsdidnotbelieveanyjobswouldbelostintheUnitedStates.
    AlthougheconomistsbelievedthatinsomeareastheUnitedStateswouldlosejobs,theyexpected
    theUnitedStateswouldgainjobsinotherareas.
    Althougheconomicspredictedthatunemploymentwouldrise,theincreasedprofitsofcorporations
    wouldraisestockpricesenoughtocompensateforthelostjobs.
    EconomicsbelievedthattheU.S.unemploymentwouldrise.
    15.Amonopolyfirmisdifferentfromaperfectlycompetitivefirminthat:
    Amonopolistsdemandcurveisperfectlyinelasticwhereasaperfectlycompetitivefirmsdemand
    curveisperfectlyelastic.
    Therearemanysubstitutesforamonopolistsproductwhereastherearenosubstitutesfora
    competitivefirmsproduct.
    Amonopolistcaninfluencemarketpricewhereasaperfectlycompetitivefirmcannot.
    Acompetitivefirmhasaushapedaveragecostcurvewhereasamonopolistdoesnot.
    16.Microeconomicsandmacroeconomicsare:
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    Virtuallyidentical,thoughoneismuchmoredifficultthantheother.
    Notrelatedbecausetheyaretaughtseparately.
    Interrelatedbecausebothareoftentaughtbythesameinstructors.
    Interrelatedbecausewhathappensintheeconomyasawholeisbasedonindividualdecisions.
    17.Strategicdecisionmakingismostimportantin:
    Competitivemarkets.
    Monopolisticmarkets.
    Oligopolisticmarkets.
    Monopolisticallycompetitivemarkets.
    18.Areductioninthesupplyoflaborwillcausewagesto:
    Increaseandemploymenttoincrease.
    Decreaseandemploymenttoincrease.
    Decreaseandemploymenttodecrease.
    Increaseandemploymenttodecrease.
    19.Thebestexampleofpositiveexternalityis:
    Pollution
    Rollercoasterrides
    Alcoholicbeverages
    Education
    20.Priceelasticityofdemandisthe:
    Percentagechangeinpriceofthatgooddividedbythepercentagechangeinthequantityofthat
    gooddemanded.
    Changeinthequantityofagooddemandeddividedbythechangeinthepriceofthatgood.
    Changeinthepriceofagooddividedbythechangeinthequantityofthatgooddemanded.
    Percentagechangeinquantityofagooddemandeddividedbythepercentagechangeinthepriceof
    thatgood.
    21.Graphically,achangeinpricecauses:
    bothsupplyanddemandtoshift.
    thesupplycurvetoshift.
    amovementalongagivensupplycurve,notashift.
    thedemandcurvetoshift.
    22.SupposeOPECannouncesitwillincreaseproduction.Usingsupplyanddemandanalysisto
    predicttheeffectofincreasedproductiononequilibriumpriceandquantity,thefirststepistoshow
    the:
    supplycurveshiftingtotheleft.
    supplycurveshiftingtotheright.
    demandcurveshiftingtotheright.
    demandcurveshiftingtotheleft.
    23.TheDeBeerscompanyisaprofitmaximizingmonopolistthatexercisesmonopolypowerinthe
    distributionofdiamonds.Ifthecompanyearnspositiveeconomicprofitsthisyear,thepriceof
    diamondswill:
    Beequaltothemarginalcostofdiamonds.
    Exceedthemarginalcostofdiamondsbutequaltotheaveragetotalcostofdiamonds.
    Exceedboththemarginalcostandtheaveragetotalcostofdiamonds.
    Beequaltotheaveragetotalcostofdiamonds.
    24.Thetheorythatquantitysuppliedandpricearepositivelyrelated,otherthingsconstant,is
    referredtoasthelawof:
    opportunitycost
    demand
    supply
    profitmaximization
    25.Oligopolyisprobablythebestmarketfortechnologicalchangebecause:
    Researchanddevelopmentoccursonlyifgovernmentsubsidizessuch?activity,andgovernment
    tendstosubsidizeoligopolies.
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    Thetypicaloligopolykeepspriceveryclosetoaveragetotalcostbecauseitfearstheentryofnew
    rivalsifitsprofitsareexcessivelyhigh.
    Thetypicaloligopolylacksthefundstocarryoutresearchanddevelopmentandthereforewilluse
    basicresearchfromuniversities.
    Thetypicaloligopolyhasthefundstocarryoutresearchanddevelopmentandbelievethatits
    competitorsareinnovating,whichmotivatesittoconductresearchanddevelopment.
    26.In2011,theDepartmentofJusticesuedAT&Ttoblockitsmergerwiththecellphoneservice
    providerTMobile.Todefenditselfagainstthecharge,AT&Targuedthatthe:
    Mergerwouldimproveandexpandcellularservicetoconsumers.
    Governmenthadnoauthoritytoblockmergersinthetelephoneindustry.
    Combinedcompanycouldraiseprices,allowingittosurviveinarapidlychangingmarket.
    Governmenthadguaranteeditexclusivecontrolofcellphoneservice.
    27.Supposethatcollegetuitionishigherthisyearthanlastandthatmorestudentsareenrolledin
    collegethisyearthanlastyear.Basedonthisinformation,wecanbestconcludethat:
    thelawofdemandisinvalid.
    thedemandforacollegeeducationispositivelysloped.
    thissituationhasnothingtodowiththelawofdemand.
    despitetheincreaseinprice,quantitydemandedroseduetosomeotherfactorschanging.
    28.Atonetime,sealionsweredepletingthestockofsteelheadtrout.Oneideatoscaresealions
    awayfromtheWashingtoncoastwastolaunchfakekillerwhales,whicharepredatorsofsealions.
    Thecostofmakingthefirstwhaleis$16,000($5,000formaterialsand$11,000forthemold).The
    moldcanbereusedtomakeadditionalwhales,andsoadditionalwhalescost$5,000each.Based
    onthesenumbers,theproductionoffakekillerwhalesexhibits:
    Decreasingreturnstoscale
    Increasingreturnstoscale
    Diminishingmarginalproduct
    Constantreturnstoscale
    29.Aperfectlycompetitivefirmfacingapriceof$50decidestoproduce500widgets.Itsmarginal
    costofproducingthelastwidgetis$50.Ifthefirmsgoalistomaximizeprofit,itshould:
    Shutdown
    Continueproducing500widgets
    Producemorewidgets
    Producefewerwidgets
    30.Using100workersand10machines,afirmcanproduce10,000unitsofoutputusing250
    workersand25machines,thefirmproduces21,000unitsofoutput.Thesefactsarebestexplained
    by:
    Economiesofscale
    Diseconomiesofscale
    Economiesofscope
    Diminishingmarginalproductivity
    ECO365FINALEXAM2015

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