Fall 2021_ABM 1041_Exam 2_ver 2

.pdf

School

University of Missouri, Columbia *

*We aren’t endorsed by this school

Course

1041

Subject

Economics

Date

Feb 20, 2024

Type

pdf

Pages

Uploaded by LieutenantBear2029

1 ABM 1041 Applied Microeconomics Fall 2021 Exam #2 Version 2 INSTRUCTIONS: You must use a pencil! First, at the top of the Student Answer Sheet, write your name, instructors (Prof James & Prof Segovia), course number (ABM 1041) and section (1). Second, write your Last Name, First Name, and 8 digit MU student ID on the Student Answer Sheet, using one letter or number in each box, and then darken the corresponding circle below each box. Third, write a large 2 in the space above the words “Assessment Resource Center.” This identifies your exam. You may write on this exam, but you must record your answers on the back side of the Student Answer Sheet. Do not write in any other part of the Student Answer Sheet. Notice how the answers are numbered and organized on the Student Answer Sheet. You may keep this exam but you must turn in your Student Answer Sheet. You will not be graded on anything you write on the exam. Only answers recorded on the Student Answer Sheet will be graded. There are no exceptions to this policy! There are 50 questions, each worth 2 points, for a total of 100 points. The exam is closed book and closed notes, but open mind! Good luck, and do your best! 1. ____ As the length of time increases, the elasticity of demand for products tends to increase. A. True B. False 2. ____ The more responsive buyers are to a change in price, the greater the price elasticity of demand. A. True B. False 3. ____ Measuring elasticities in percentage terms allows us to compare the sensitivity of demand curves, compare characteristics of dissimilar products, and not worry about the magnitude of changes. A. True B. False 4. ____ A news report said that with an expected 30% increase in the price of bread, producers expect sales to be reduced by 10%. From this we can infer that the demand for bread is elastic. A. True B. False 5. ____ If a firm earns an additional $1,500 in revenue by selling 10 additional units of output, then its marginal revenue is $150. A. True B. False 6. ____ A firm producing a product that is not necessary and has many substitutes can increase revenues by decreasing prices. A. True B. False 7. ____ Total utility is the total satisfaction derived from the consumption of given quantity of a good. A. True B. False 8. ____ When choosing the amounts of two or more goods to purchase, maximization of total utility occurs when the marginal utility per dollar is equal for all of the goods. A. True B. False

2 9. ____ Suppose the price of DVDs increases. As a result, Mary increases the number of DVDs she purchases. This will lead to higher marginal utility from the last DVD purchased. A. True B. False 10. ____ An important difference between corporations and partnerships is that corporations have limited liability but partnerships have unlimited liability. A. True B. False 11. ____ A business owner will always prefer zero economic profit to zero accounting profit. A. True B. False 12. ____ At the current level of a perfectly competitive firm’s level of output, the market price is greater than marginal cost. The firm should increase its level of production. A. True B. False 13. ____ Some costs remain fixed even in the long run. A. True B. False 14. ____ In the long run, if firms are making a normal profit, then new entrants would be encouraged to move into the industry. A. True B. False 15. ____ If it takes a week to obtain a vendor’s license and buy a pushcart, then a week would be the long run for the hot dog stand business. A. True B. False For questions 16-18, match the type of cost at right with the statement that is most helpful is in assessing the requested information. 16. ____ Used to determine whether or not a firm should produce in the short run. 17. ____ Used to determine whether to increase or decrease output, assuming that the firm will produce in the short run. 18. ____ Used to determine how and why productive efficiency is affected by the scale of production. 19. ____ Home heating gas tends to have _____ demand because _____. A. elastic; it has many close substitutes B. elastic; it is a necessity C. inelastic; people spend a large share of their incomes on heat D. inelastic; people do not have time to adjust their consumption patterns 20. ____ Knowing a product’s price elasticity allows economists to A. respond quickly to tariff changes. B. predict how changes in consumer incomes will affect sales. C. predict the amount by which quantity supplied will change in response to a change in price. D. predict the amount by which quantity demanded changes in response to a change in price. A. Fixed cost B. Variable cost C. Total cost D. Marginal cost E. Average cost

3 21. ____ A product’s price changes from $2 to $6 and its quantity demanded changes from 6 to 4 units. This is an example of A. price elastic demand. B. price inelastic demand. C. unitary price elasticity of demand. D. price inelasticity of supply. 22. ____ Walmart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of demand is two, then the discount would be expected to increase sales by A. 2% B. 25% C. 50% D. 200% 23. ____ Which of the following is a clear example of the law of diminishing marginal utility? A. Young Joey wants his mother to read him the same story over and over again and he is equally thrilled every time she reads it. B. As the price of his favorite candy bar rises, Martin buys fewer and fewer candy bars. C. Marta develops an allergy to milk. She drinks less of it each month as the allergy gets worse. D. Julia eats three cookies. She takes 20 seconds to eat the first one, 1 minute to eat the second one, and 3 minutes to finish the third one. 24. ____ Suppose the marginal utility per dollar for bottled water is greater than the marginal utility per dollar for bags of chips. To maximize total utility, the consumer should buy A. more bags of chips and less bottled water. B. more bottled water and fewer bags of chips. C. more of both goods. D. less of both goods. E. None of the above 25. ____ Jeremy's level of satisfaction from consuming the first cookie was 25 utils. The second cookie increased the level of satisfaction by 20 utils. After eating three cookies, Jeremy's total level of satisfaction 60. What is the marginal utility for the third cookie? A. 15 B. 25 C. 45 D. 60 E. None of the above 26. ____ At an all-you-can eat buffet, a person will stop eating when A. total utility increases at a diminishing rate. B. marginal utility increases at a diminishing rate. C. marginal utility is equal to zero. D. total utility is equal to zero. E. None of the above 27. ____ Which is an example of a fixed cost of production? A. The cost of electricity B. The cost of raw materials C. Wages paid to workers D. Monthly rent on a year-long lease E. None of the above

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version