ECON 312 Week 4 Midterm Exam - 3

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ECON 312 Week 4 Midterm (Version 1)

1.
(TCO 1) As a consequence of the
condition of scarcity
2.
(TCO 1) The opportunity cost of
constructing a new public highway is the
3.
(TCO 1) A nation can increase its
production possibilities by

4.
(TCO 1) Which expression is another way
of saying "marginal benefit"?
5.
(TCO 1) The individual who brings
together economic resources and assumes
the risk of business ventures in a capitalist
economy is called the
6.
(TCO 1) The Soviet Union economy of the
1980s would best be classified as
7.
(TCO 1) The simple circular-flow model
shows that workers, entrepreneurs, and the
owners of land and capital offer their services
through
8.
(TCO 1) Consumers express self-interest
when they
9.
(TCO 1) Which is not one of the five
fundamental questions that an economy must
deal with?
10. (TCO 1) The major "success indicator" for
business managers in command economies
like the Soviet Union and China in the past
was

11. (TCO 2) An increase in demand means

that
12. (TCO 2) At the point where the demand
and supply curves intersect
13. (TCO 2) Black markets are associated
with
14. (TCO 2) An increase in demand for oil
along with a simultaneous increase in supply
of oil will
15. (TCO 2) If Product Y is an inferior good, a
decrease in consumer incomes will
16. (TCO 2) If the price elasticity of demand
for a product is equal to 0.5, then a 10
percent decrease in price will increase
quantity demanded by
17. (TCO 2) Total revenue falls as the price of
a good is raised, if the demand for the good is
18. (TCO 2) You are the sales manager for a
software company and have been informed
that the price elasticity of demand for your

most popular software is less than 1. To

increase total revenues, you should:
19. (TCO 2) A state government wants to
increase the taxes on cigarettes to increase
tax revenue. This tax would only be effective
in raising new tax revenues if the price
elasticity of demand is
20. (TCO 2) When universities announce a
large tuition increase and follow it with an
announcement that more financial aid will be
available, they are assuming that students
who pay full tuition
21. (TCO 3) Suppose that you could prepare
your own tax return in 15 hours, or you could
hire a tax specialist to prepare it for you in
two hours. You value your time at $11 an
hour. The tax specialist will charge you $55
an hour. The opportunity cost of preparing
your own tax return is
22. (TCO 3) Economic profits are equal to

23. (TCO 3) The main difference between the

short run and the long run is that
24. (TCO 3) The law of diminishing returns
only applies in cases where
25. (TCO 3) Marginal cost can be defined as
the
26. (TCO 3) If the price of a fixed factor of
production increases by 50 percent, what
effect would this have on the marginal-cost
schedule facing a firm?
ECON 312 Week 4 Midterm (Version 2)
1.
(TCO 3) Mutual interdependence would
tend to limit control over price in which
market model?
2.
(TCO 3) Under which market model are
the conditions of entry into the market
easiest?
3.
(TCO 3) The production of agricultural
products such as wheat or corn would best be
described by which market model?

4.
(TCO 3) The demand curve faced by a
purely competitive firm
5.
(TCO 3) A profit-maximizing firm in the
short run will expand output
6.
(TCO 3) A firm should increase the
quantity of output as long as its
7.
(TCO 3) The short-run supply curve for a
competitive firm is the
8.
(TCO 3) The classic example of a private,
unregulated monopoly is
9.
(TCO 3) Barriers to entry
10. (TCO 3) The demand curve confronting a
nondiscriminating, pure monopolist is
11. (TCO 3) Which is the best example of
price discrimination?
12. (TCO 3) In which industry is monopolistic
competition most likely to be found?
13. (TCO 3) Assume that in a monopolistically
competitive industry, firms are earning
economic profit. This situation will

14. (TCO 3) A unique feature of an

oligopolistic industry is
15. (TCO 3) A low concentration ratio means
that
16. (TCO 3) In which set of market models are
there the most significant barriers to entry?
17. (TCO 1) The four factors of production are
18. (TCO 1) Refer to the diagram below which
is based on the Circular Flow Model in Chapter
2. Arrows (1) and (2) represent
19. (TCO 2) Refer to the diagram. An increase
in quantity demanded is depicted by a
20. (TCO 2) Refer to the information and
assume the stadium capacity is 5,000. The
supply of seats for the game
21. (TCO 2) Which type of goods is most
adversely affected by recessions?
22. (TCO 3) The following cost data are for a
firm in the short run:
23. (TCO 1) Refer to the diagram. Points A, B,
C, D, and E show

24. (TCO 3) Assume that the owners of the

only gambling casino in Wisconsin spend large
sums of money lobbying state government
officials to protect their gambling monopoly.
Economists refer to these expenditures as
25. (TCO 3) a.) A pure monopolist determines
that at the current level of output the
marginal cost of production is $2, average
variable costs are $2.75, and average total
costs are $2.95. The marginal revenue is
$2.75. What would you recommend that the
monopolist do to maximize profits? b.) Why
might a business owner keep their business
open but let it deteriorate, rather than shut it
down? Will this profitability last?
26. (TCO 2) Evaluate how the following
situations will affect the demand curve for
iPods.
ECON 312 Week 4 Midterm (Version 3)

1.
(TCO 1) As a student of economics, when
you speak of scarcity, you are referring to the
ability of society to
2.
(TCO 1) The idea in economics that "there
is no free lunch" means that
3.
(TCO 1) (TCO 1) The law of increasing
opportunity costs indicates that
4.
(TCO 1) A tradeoff exists between two
economic goals, X and Y. This tradeoff means
that
5.
(TCO 1) Which would not be considered
as a capital resource of a business by an
economist?
6.
(TCO 1) The economy of Germany would
best be classified as:
7.
(TCO 1) Markets in which firms sell their
output of goods and services are called
8.
(TCO 1) Laissez-faire capitalism is
characterized by

9.
(TCO 1) Which is not one of the five
fundamental questions that an economy must
deal with?
10. (TCO 1) The major "success indicator" for
business managers in command economies
like the Soviet Union and China in the past
was
11. (TCO 2) An increase in demand means
that
12. (TCO 2) At the point where the demand
and supply curves intersect
13. (TCO 2) Black markets are associated
with
14. (TCO 2) A headline reads "Lumber Prices
Up Sharply." In a competitive market, this
situation would lead to a(n)
15. (TCO 2) For most products, purchases
tend to fall with decreases in buyers'
incomes. Such products are known as
16. (TCO 2) When the price of a product is
increased 10 percent, the quantity demanded

decreases 15 percent. In this range of prices,

demand for this product is
17. (TCO 2) Total revenue falls as the price of
a good is raised, if the demand for the good is
18. (TCO 2) The demand for Cheerios cereal
is more price-elastic than the demand for
cereals as a whole. This is best explained by
the fact that
19. (TCO 2) To economists the main
differences between "the short run" and "the
long run" are that
20. (TCO 2) Airlines charge business travelers
more than leisure travelers because there is a
more
21. (TCO 3) Suppose that you could prepare
your own tax return in 15 hours, or you could
hire a tax specialist to prepare it for you in
two hours. You value your time at $11 an
hour. The tax specialist will charge you $55
an hour. The opportunity cost of preparing
your own tax return is

22. (TCO 3) Economic profits are equal to

23. (TCO 3) The main difference between the
short run and the long run is that
24. (TCO 3) Fixed costs are those costs which
are
25. (TCO 3) At an output of 20,000 units per
year, a firm's variable costs are $80,000 and
its average fixed costs are $3. The total costs
per year for the firm are:
26. (TCO 3) If the price of a fixed factor of
production increases by 50 percent, what
effect would this have on the marginal-cost
schedule facing a firm?
27. (TCO 3) Which market model assumes
the least number of firms in an industry?
28. (TCO 3) Local electric or gas utility
companies mostly operate in which market
model?
29. (TCO 3) The fast-food restaurants would
be an example of which market model?

30. (TCO 3) Sam owns a firm that produces

tomatoes in a purely competitive market. The
firm's demand curve is
31. (TCO 3) T-Shirt Enterprises is selling in a
purely competitive market. It is producing
3,000 units, selling them for $2 each. At this
level of output, the average total cost is $2.50
and the average variable cost is $2.20. Based
on these data, the firm should
32. (TCO 3) A firm should always continue to
operate at a loss in the short run if
33. (TCO 3) The short-run supply curve for a
competitive firm is the
34. (TCO 3) One feature of pure monopoly is
that the monopolist is
35. (TCO 3) Barriers to entry
36. (TCO 3) The demand curve confronting a
nondiscriminating, pure monopolist is
37. (TCO 3) Which is the best example of
price discrimination?

38. (TCO 3) Monopolistic competition is

characterized by firms
39. (TCO 3) Assume that in a monopolistically
competitive industry, firms are earning
economic profit. This situation will
40. (TCO 3) A unique feature of an
oligopolistic industry is
41. (TCO 3) You are told that the four-firm
concentration ratio in an industry is 20.
Based on this information you can conclude
that
42. (TCO 3) A major reason that firms form a
cartel is to
43. (TCO 1) Money is not an economic
resource because
44. (TCO 1) Refer to the diagram which is
based on the Circular Flow Model in Chapter
2. Arrows (3) and (4) represent
45. (TCO 2) Refer to the diagram. A decrease
in demand is depicted by a

46. (TCO 2) Refer to the information and

assume the stadium capacity is 5,000. If the
Mudhens' management charges $7 per ticket
47. (TCO 2) Which type of goods is most
adversely affected by recessions?
48. (TCO 3) The following cost data are for a
firm in the short run:.....What is the .....?
49. (TCO 1) Refer to the diagram. Points A, B,
C, D, and E show
50. (TCO 3) Any activity designed to transfer
income or wealth to a particular individual or
firm at society's expense is called
51. (TCO 3) a.) Do you agree or disagree with
the statement that: "A monopolist always
charges the highest possible price."?
Explain. b.) Why can't an individual firm raise
its price by reducing output or lower its price
to increase sales volume in a purely
competitive market?
52. (TCO 2) What effect should each of the
following have on the demand for gasoline in

a competitive market? State what happens to

demand. Explain your reasoning in each case
and relate it to a demand determinant.
1.