10/12/2021, 18:52 Sample Final Examination Econ 100B Spring 2002

Sample Final Examination Econ 100B Spring 2002

 
1)   If the
demand for oranges is written as Q = 100 - 5p, then the inverse demand
function
is
A) Q = 5p - 100.
B) Q = 20 - .2p.
C) p = 20 - 5Q.
D) p = 20 - .2Q.
 
2)   If
pizza and tacos are substitutes, a decrease in the price of tacos would lead to
a
A) decrease in the
demand curve for pizza.
B) decrease in the
quantity demanded of pizza.
C) decrease in the
price of pizza.
D) All of the above.
 
3)   After
tickets for a King’s game are purchased at the official box office price, a
market often develops whereby these tickets sell at prices well above the
official
box office price. Which of the following scenarios would NOT be able
to explain
this result?
A) The official price
was below equilibrium from the moment the tickets were
available.
B) Increased publicity
causes the demand curve for the event to shift rightward.
C) The event was not a sellout.
D) Not everyone who
wanted a ticket was able to buy one at the box office.
 
4)   Restricting
imports tends to
A) shift the demand
curve for the product to the left.
B) shift the demand
curve for the product to the right.
C) change the shape of the supply curve.
D) increase the
quantity supplied of a product.
 
5)   The
change in price that results from a leftward shift of the supply curve will be
greater if
A) the demand curve is relatively steep than if the
demand curve is relatively flat.
B) the demand curve is
relatively flat than if the demand curve is relatively steep.
C) the demand curve is
horizontal than if the demand curve is vertical.
D) the demand curve is
horizontal than if the demand curve is downward sloping.
 
6)   Suppose
the demand curve for a good is expressed as Q = 100 - 4p. If the good
currently
sells for $10, then the price elasticity of demand equals
A)
-1.5.
B) -0.67.
C)
-4.
D)
-2.5.
 
Note:  what answer emerges if you use the
formula:  p/intercept – P?
 

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10/12/2021, 18:52 Sample Final Examination Econ 100B Spring 2002

7)   If the
demand curve for comic books is expressed as Q = 10,000/p, then demand
has a
unitary elasticity
A) only when p=10000.
B) only when p=100.
C) always.
D) never.
 
8)   The
cross price elasticity of demand between two goods will be positive if
A) the two goods are
complements.
B) the two goods are substitutes.
C) the two goods are
luxuries.
D) one of the goods is
a luxury and the other is a necessity.
 
9)   Measuring
"y" on the vertical axis and "x" on the horizontal axis,
convexity of
indifference curves implies that the MRS of "y" for
"x"
A) is decreasing as "x" increases.
B) is increasing as
"x" increases
C) is constant as
"x" increases.
D) cannot be
calculated for large levels of "x".
 
10) Joe's
income is $500, the price of food (F) is $2 per unit, and the price of shelter
(S) is $100. Which of the following represents his marginal rate of
transformation
of food for shelter?
A) -5
B) -50
C) -.02
D) None of the above
 
11) The
marginal rate of transformation of y for x represents
A) the slope of the
budget constraint.
B) the rate at which
the consumer must give up y to get one more x.
C) - Px/Py.
D) All of the above.
 
 
 
 
 12)      If the consumer's income increases while
the prices of both goods remain
unchanged, what will happen to the budget line?
A) The budget line
rotates inward from the intercept on the horizontal axis.
B) The budget line
rotates outward from the intercept on the vertical axis.
C) The budget line
shifts inward without a change in slope.
D) The budget line shifts outward without a change in
slope.
 
 
13) If a
consumer's budget line for food (F) and shelter (S) is represented as F = 250 -
5S, we know that

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10/12/2021, 18:52 Sample Final Examination Econ 100B Spring 2002

A) the consumer's
income is 250.
B) the price of
shelter is 5.
C) the price of shelter is 5 times the price of food.
D) All of the above.
 
14) The
consumer is in equilibrium when
A) MRT = MRS.
B) Px/Py
= MUx/MUy.
C) the budget line is
tangent to the indifference curve at the bundle chosen.
D) All of the above.
 
15) With
respect to consuming food and shelter, two consumers face the same prices
and
both claim to be in equilibrium. We therefore know that
A) they both have the
same marginal utility for food.
B) they both have the
same marginal utility for shelter.
C) they both have the same MRS of food for shelter.
D) All of the above.
16) Suppose
the quantity of x is measured on the horizontal axis. If the price
consumption
curve is vertical when the price of x changes, then the demand for x is
A)
perfectly elastic.
B) perfectly inelastic.
C)
unit elastic.
D)
There is not enough information to determine the price elasticity of demand for
x.
 
17) When
the price of a good changes, the substitution effect can be found by
comparing
the equilibrium quantities purchased
A)
on the old budget line and the new budget line.
B) on the original indifference curve
when faced with the original prices and when
faced with the new prices.
C)
on the new budget line and a hypothetical budget line that is a parallel shift
back
to the original indifference curve. 
D)
on the new indifference curve.
 
 
Figure 5.4

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10/12/2021, 18:52 Sample Final Examination Econ 100B Spring 2002

 
18) Figure
5.4 shows Bobby's indifference map for soda and juice. B1 indicates his
original
budget line. B2 indicates his budget line resulting from a decrease in the
price of soda. What change in quantity best represents his substitution effect?
A) 3
B)
10
C)
15
D)
7
 
19) Figure
5.4 shows Bobby's indifference map for soda and juice. B1 indicates his
original budget line. B2 indicates his budget line resulting from a decrease in
the
price of soda. What change in quantity best represents his income effect?
A)
3
B)
10
C)
15
D) 7
 
20) If
a good is an inferior good, then its
A)
demand curve will be upward sloping.
B)
income effect reinforces the substitution effect.
C) income elasticity is negative.
D)
Engel curve cannot be drawn.
 
21) Suppose
that the interest rate paid to savers increases.  As a result, Tom wishes to
save more. This suggests that, for
Tom, 
A) the substitution effect is greater
than the income effect.
B)
the income effect is greater than the substitution effect.
C)
utility maximization is not occurring.
D)
future consumption is a luxury.
 
22) Under
which of the following conditions will there be no substitution bias in the
CPI?

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10/12/2021, 18:52 Sample Final Examination Econ 100B Spring 2002

A)
Lower-priced goods increase in price by a greater percentage than do
higher-
priced goods.
B)
Higher-price goods increase in price by a greater percentage than do
lower-
priced goods.
C)
All goods change in price by the same amount.
D) All goods change in price by the
same percentage.
 
23) If
a person supplies less hours of labor in response to a wage increase, then
A)
the substitution effect is greater than the income effect.
B) the income effect is greater than
the substitution effect.
C)
the income effect equals the substitution effect.
D)
the person is not maximizing utility.
 
 
Figure
6.2

 
24) At
Joey's Lawncutting Service, a lawn mower cannot cut grass without a laborer. A
laborer cannot cut grass without a lawn mower. Which graph in Figure 6.2 best
represents the isoquants for Joey's Lawncutting Service when capital per day is
on
the vertical axis and labor per day is on the horizontal axis?
A) Graph A
B) Graph B
C) Graph C
D) Graph D
 
25) Lectures
in microeconomics can be delivered either by an instructor (labor) or a
movie
(capital) or any combination of both. Each minute of the instructor's time
delivers the same amount of information as a minute of the movie. Which graph
in
Figure 6.2 best represents the isoquants for lectures in microeconomics when
capital per day is on the vertical axis and labor per day is on the horizontal
axis?
A) Graph A
B) Graph B

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10/12/2021, 18:52 Sample Final Examination Econ 100B Spring 2002

C) Graph C
D) Graph D
 
26) Which graph in Figure 6.2 represents the
isoquants where, as the amount of labor
used increases and the
amount of capital used decreases, the marginal product of
labor rises when
capital per day is on the vertical axis and labor per day is on the
horizontal
axis?
A)    Graph
A
B)     Graph
B
C)    Graph
C
D)   
Graph D
 
27) To say
that isoquants are convex is to say that
A) the marginal rate of technical substitution falls as
labor increases.
B) capital and labor
are perfect substitutes.
C) labor, but not
capital, is subject to the law of diminishing marginal returns.
D) there are constant
returns to scale.
 
 
28) One way
to explain the convexity of isoquants is to say that
A) as labor increases
and capital decreases, MPL rises while MPK  falls.
B) as labor increases and capital decreases, MPL
falls while MPK rises.
C) as labor increases
and capital decreases, MPL and MPK both fall.
D)    as
labor increases and capital decreases, MPL and MPK both
rise.
 
29) Suppose
the short-run production function is q = 10 * L. If the wage rate is $10 per
unit of labor, then AVC =
A)
q.
B)
q/10.
C)
10/q.
D) 1.
 
30) When a firm produces one unit, the variable
cost is $3.  When the firm produces
two
units, the variable cost is $6.  What is
the marginal cost associated with two
units of production?
A)    $2
B)     $0.5
C)    $6
D)   
$3
31) When the isocost line is tangent to the
isoquant, then
A) MPL = MPK.
B) the
firm is producing that level of output at minimum cost.
C) the firm has achieved the right economies of scale.
D) All of the above.
 
Figure 7.1

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10/12/2021, 18:52 Sample Final Examination Econ 100B Spring 2002

32) Figure
7.1 shows the long-run expansion path. The long-run average cost curve
will be
A)
horizontal.
B) downward sloping.
C)
upward sloping.
D)
vertical.
 
33) If
a production function is represented as q = 
La
Kb,
the long-run average cost
curve will be horizontal as long as
A)
a + b = 0.
B) a + b = 1.
C)
q > 0.
E)     L
= K.
 
34) If
a competitive firm maximizes short-run profits by producing some quantity of
output, which of the following must be true at that level of output?
A)
p = MC.
B)
MR = MC.
C)
p > AVC.
E)     All of the above.
 
 
 
 
 
35) General equilbrium analysis is the study of
A)    how
an equilibrium is determined in all markets simultaneously.
B)     how
an equilibrium is determined in all closely related markets.
C)    the
effects of a change in a market, and all spillover effects in all related
markets.
      D) All of the above.
 
 Figure 10.1

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10/12/2021, 18:52 Sample Final Examination Econ 100B Spring 2002

36) Figure
10.1 depicts the Edgeworth box for two individuals, Al and Bruce. The
contract
curve can found by connecting points
A)
a and b.
B)
a and c.
C)
b and d.
D) c and d.
 
37)  If only two people are trading their
endowments and no production is possible,
then 
the
equilibrium they reach will
A)   
be on
their contract curve.
B)     result
in unequal marginal rates of substitution for the two people.
C)    result
in one person being worse off than with his or her endowment.
D)    All
of the above.
 
38) Figure
10.1 depicts the Edgeworth box for two individuals, Al and Bruce. If the
endowment is at point a and trade is possible, which of the following points
are
possible equilibria?
A)
a and b
B)
a and c
C)
b and d
D) c and d
 
 
 
39) Figure
10.1 depicts the Edgeworth box for two individuals, Al and Bruce.
Considering
only the labeled points, point c is a possible equilibrium
A)
only if it was the endowment.
B)
only if point a is the endowment.
C) if either point a or b is the
endowment.
D)
only if point d is the endowment.
 

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40) Figure
10.1 depicts the Edgeworth box for two individuals, Al and Bruce. Point a
is
not Pareto efficient because 
A) Al's MRS exceeds Bruce's MRS.
B)
the point is not near the center of the box.
C)
Al's indifference curve is not far enough away from the origin.
D)
All of the above.
 
41) Any competitive equilibrium is Pareto efficient
because, with a competitive
equilibrium
A)   
the
marginal rates of substitution are equal for all consumers.
B)     the
price line is the contract curve.
C)    mutual
gains from trade exist.
D)    the
slope of the price line equals the ratio of the MRS for all consumers.
 
42) Humana
Hospital's average price/marginal cost ratio of 227% might best be
explained by
the fact that
A)
a patient cannot choose to which hospital they will go.
B)
insurance companies continually audit the billing practices of hospitals.
C) once admitted to a hospital, the
patient has little opportunity to shop for the best
prices.
E)     hospitals
are usually located very close to one another.
 
43) A
monopoly sets a price of $50 per unit for an item that has a marginal cost of
$10.
Assuming profit maximization, the implicit demand elasticity is
A)
-0.2.
B)
-0.8.
C) -1.25.
D)
-5.0.
 
 
44) Perfect
competition and monopolistic competition are similar in that both market
structures include
A)
price-taking behavior by firms.
B)
a homogeneous product.
C) no barriers to entry.
D)    very
few firms.
 
Figure 13.1

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10/12/2021, 18:52 Sample Final Examination Econ 100B Spring 2002

45) Figure
13.1 shows a payoff matrix for two firms, A and B, that must choose
between a
high-price strategy and a low-price strategy. For firm B,
A)
setting a high price is the dominant strategy.
B)
setting a low price is the dominant strategy.
C)
there is no dominant strategy.
D)
doing the opposite of firm A is always the best strategy.
 
 
46) Figure
13.1 shows a payoff matrix for two firms, A and B, that must choose
between a
high-price strategy and a low-price strategy. The Nash equilibrium in
this game
A)
does not exist.
B) occurs when both firms set a low
price.
C)
occurs when both firms set a high price.
E)     occurs
when firm A sets a high price and firm B sets a low price.
 
 
47) If
a firm is a price taker in both the labor market and the output market, it will
A)
earn zero economic profit in the short run.
B)
hire labor until the marginal product of labor equals zero.
C)
hire labor until the marginal revenue product equals the output price.
D)    hire labor until the marginal revenue
product equals the wage rate.
 
48) The demand for a monopoly's output is p = 100 -
Q. The firm's production function
is Q = 2L. Which of the following is the
firm's demand for labor?
A) w = 200 - 8L
B) w = 200 - 4L
C) w = 100 - L
D)    w
= 2L
 
 
 
 
 

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10/12/2021, 18:52 Sample Final Examination Econ 100B Spring 2002

49) Monopolization
of both the labor market and the output market results in 
A)
higher wages than when both are competitive.
B)
a higher output price than when both are competitive.
C)
a lower level of output than when both are competitive.
D)    All of the above.
 
50) A
monopoly's demand curve for labor 
A)
is below that of a competitive market.
B)
is the same as that of a competitive market.
C)
is above that of a competitive market.
D)
equals p * MPL.
 
 
 
 

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