ECON 312 Week 4 Midterm Exam 3

Versions

ECON 312 Week 4 Midterm Exam 3 Versions

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 firms

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 firms 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 societys 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 cant 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.