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DeVry ECON 312 Final Exam
DeVry ECON 312 Final Exam
6. Question : (TCO 1) The Soviet Union economy of the 1980s would best be
classified as
Student Answer: a market system.
pure capitalism.
laissez-faire capitalism.
a command system.
7. Question : (TCO 1) Markets in which firms sell their output of goods and services
are called
Student Answer: resource markets.
product markets.
command markets.
mixed markets.
8. Question : (TCO 1) Consumers express self-interest when they
Student Answer: seek the lowest price for a product.
reduce business losses.
collect economic profits.
search for jobs with the highest wages.
9. Question : (TCO 1) Which is not one of the five fundamental questions that an
economy must deal with?
Student Answer: How will the goods and services be produced?
Why should the goods and services be produced?
Who is to receive the goods and services produced in the economy?
In what ways will progress be promoted?
10. Question : (TCO 1) The major success indicator for business managers in
command economies like the Soviet Union and China in the past was
Student Answer: the quantity of output.
product quality.
the amount of profits.
worker morale.
11. Question : (TCO 2) An increase in demand means that
Student Answer: given supply, the price of the product will decline.
the demand curve has shifted to the right.
price has declined and consumers therefore want to purchase more of the product.
the demand curve has shifted to the left.
12. Question : (TCO 2) A surplus of a product will arise when price is
Student Answer: above equilibrium with the result that quantity demanded exceeds
quantity supplied.
above equilibrium with the result that quantity supplied exceeds quantity
demanded.
below equilibrium with the result that quantity demanded exceeds quantity
supplied.
below equilibrium with the result that quantity supplied exceeds quantity
demanded.
perfectly elastic.
20. Question : (TCO 2) Movie theaters charge lower prices to see a movie in the
afternoon than in the evening because there is an
Student Answer: inelastic supply of movies in the evening.
elastic demand to see movies in the evening.
elastic demand to see movies in the afternoon.
inelastic demand to see movies in the afternoon.
21. Question : (TCO 3) Which would be an implicit cost for a firm? The cost
Student Answer: of worker wages and salaries for the firm.
paid for leasing a building for the firm.
paid for production supplies for the firm.
of wages foregone by the owner of the firm.
22. Question : (TCO 3) Suppose that a firm produces 200,000 units a year and sells
them all for $10 each. The explicit costs of production are $1,500,000 and the
implicit costs of production are $300,000. The firm earns an accounting profit of
Student Answer: $500,000 and an economic profit of $200,000.
$400,000 and an economic profit of $200,000.
$300,000 and an economic profit of $400,000.
$200,000 and an economic profit of $500,000.
23. Question : (TCO 3) The long run is a period of time, or a time frame, in which
Student Answer: all resources are fixed.
the level of output is fixed.
the amount of all resources can be varied.
the capacity of the production plant is fixed.
24. Question : (TCO 3) The law of diminishing returns only applies in cases where
Student Answer: there is increasing scarcity of factors of production.
the price of extra units of a factor is increasing.
there is at least one fixed factor of production.
capital is a variable input.
25. Question : (TCO 3) The phrase dont cry over spilt milk could be rephrased in
economic terms by saying
Student Answer: sunk costs are irrelevant to a decision.
real resources have opportunity costs.
there are economies and diseconomies of scale.
the law of diminishing returns applies to everything.
26. Question : (TCO 3) A fast-food company spends millions of dollars to develop
and promote a new hamburger on its menu only to find that consumers wont buy it
because they dont like the taste. From an economic perspective, the company
should
Student Answer: keep the hamburger on the menu because theyve spent so much
money and time developing and promoting the product.
spend more money to develop a more efficient way to cook the hamburger so it
cooks in a shorter time.
pull the hamburger off the menu and treat the development and promotion
expenditures as a sunk cost.
keep trying to sell the hamburger so that people who developed and promote it
have a job with the company.
1. Question : (TCO 3) Mutual interdependence would tend to limit control over price
in which market model?
Student Answer: Monopolistic competition
Pure competition
Pure monopoly
Oligopoly
2. Question : (TCO 3) Local electric or gas utility companies mostly operate in which
market model?
Student Answer: Monopolistic competition
Pure competition
Pure monopoly
Oligopoly
3. Question : (TCO 3) The steel and automobile industries would be examples of
which market model?
Student Answer: Monopolistic competition
Pure competition
Pure monopoly
Oligopoly
4. Question : (TCO 3) In pure competition, the demand for the product of a single
firm is perfectly
Student Answer: elastic because the firm produces a unique product.
inelastic because the firm produces a unique product.
elastic because many other firms produce the same product.
inelastic because many other firms produce the same product.
5. Question : (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 t
he average variable cost is $2.20. Based on these data, the firm should
Student Answer: shut down in the short run.
decrease output to 2,500 units.
ontinue to produce 3,000 units.
increase output to 3,500 units.
6. Question : (TCO 3) A firm should always continue to operate at a loss in the short
run if
Student Answer: the firm will show a profit.
the owner enjoys helping her customers.
it can cover its variable costs and some of its fixed costs.
the firm cannot produce any other products more profitably.
7. Question : (TCO 3) The short-run supply curve for a competitive firm is the
many sellers.
15. Question : (TCO 3) A high concentration ratio indicates that
Student Answer: the industry is highly profitable.
the industry is highly competitive.
many firms produce most of the output in an industry.
few firms produce most of the output in an industry.
16. Question : (TCO 3) In which set of market models are there the most significant
barriers to entry?
Student Answer: Monopolistic competition and pure competition
Monopolistic competition and pure monopoly
Oligopoly and monopolistic competition
Oligopoly and pure monopoly
17. Question : (TCO 1) The four factors of production are
Student Answer: land, labor, capital, and money.
land, labor, capital, and entrepreneurial ability.
labor, capital, technology, and entrepreneurial ability.
labor, capital, entrepreneurial ability, and money.
18. Question : (TCO 1) Refer to the diagram below which is based on the Circular
Flow Model in Chapter 2. Arrows (1) and (2) represent
Graph Description
Student Answer: goods and resources, respectively.
money incomes and output, respectively.
output and money incomes, respectively.
resources and goods, respectively.
19. Question : (TCO 2) Refer to the diagram. A decrease in quantity demanded is
depicted by a
Graph Description
Student Answer: move from Point x to Point y.
shift from D1 to D2.
shift from D2 to D1.
move from Point y to Point x.
20. Question : (TCO 2) Refer to the information and assume the stadium capacity is
5,000. If the Mudhens management charges $7 per ticket
Price per Ticket Quantity Demanded
$13 1,000
11 2,000
9 3,000
7 4,000
5 5,000
3 6,000
Student Answer: some fans who want to see the game will find that tickets are not
available.
21. Question : (TCO 2) Which of the following goods (with their respective incomeelasticity coefficients in parentheses) will most likely suffer a decline in demand
during a recession?
Student Answer: Dinner at a nice restaurant (+1.8)
Chicken purchased at the grocery store for preparation at home (+0.25)
Facial tissue (+0.6)
Plasma-screen and LCD TVs (+4.2)
22. Question : (TCO 3) In the figure, Curves 1, 2, 3, and 4 represent the
Graph Description
Student Answer: ATC, MC, AFC, and AVC curves, respectively.
MC, AFC, AVC, and ATC curves, respectively.
MC, ATC, AVC, and AFC curves, respectively.
ATC, AVC, AFC, and MC curves, respectively.
23. Question : (TCO 1) Refer to the diagram. If society is producing nine units of
bicycles and four units of computers and it now decides to increase computer
output to six, the cost
Graph Description
Student Answer: will be four units of bicycles.
will be two units of bicycles.
will be zero because unemployed resources are available.
of doing so cannot be determined from the information given.
24. Question : (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
Student Answer: rent-seeking.
price discrimination.
X-efficiency.
network effects.
25. Question : (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. Question : (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.
(a) an increase in the number of cars
(b) the economy moves into a recession
(c) an increase in the price of car insurance, taxes, maintenance
(d) consumer expectations of substantial price increases in gasoline