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21. Indifference curves that are convex to the origin reflect:

An increasing marginal rate of substitution.
A decreasing marginal rate of substitution.
A constant marginal rate of substitution.
A marginal rate of substitution that first decreases, then increases.

22. The endpoints (horizontal and vertical intercepts) of the budget line:
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Measure its slope.
Measure the rate at which one good can be substituted for another.
Measure the rate at which a consumer is willing to trade one good for another.
Represent the quantity of each good that could be purchased if all of the budget were allocated to that good.

23. Consider the following statements when answering this question: I. "In the long run equilibrium of a perfectly competitive market, a firm's producer surplus equals the sum of the economic rents earned on its inputs to production." II. "In the long run equilibrium of a perfectly competitive market, the amount of economic profit earned can differ across firms, but not the amount of producer surplus."

I and II are true.
I is true, and II is false.
I is false, and II is true.
I and II are false.

24. Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis:

The budget line will become steeper.
The budget line will become flatter.
The slope of the budget line will not change.
The slope of the budget line will change, but in an indeterminate way.

25. A country's government would like to raise the price of one its most important agricultural crops, coffee beans. Which of the following government programs will result in higher prices for coffee beans?

Select correct option:
An import quota on coffee beans.
An acreage limitation program which provides coffee bean farmers financial incentives to leave some of their acreage idle.
An import tariff on coffee beans.
All of the given options.

26. Which of the following is NOT a generally accepted measure of the riskiness of an investment?
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Select correct option:
Standard deviation.
Expected value.
Variance.
None of the given options.

27. Which of the following is a positive statement?

Select correct option:
When the price of a good goes up, consumers buy less of it.
When the price of a good goes up, firms produce more of it.
When the Federal government sells bonds, interest rates rise and private investment is reduced.
All of the given options.

28. Rabia knows average total cost and average variable cost for a given level of output. Which of the following costs can she not determine given this information?

Select correct option:
Average fixed cost
Fixed cost
Variable cost
Rabia can determine all of the above costs given the information provided.

29. Which of the following is NOT true about price floors?

Select correct option:
Consumer surplus is always lower than it would be in the competitive equilibrium.
Producer surplus could be lower, higher, or the same as it would be in competitive equilibrium.
Producer surplus could be negative as the result of a price floor.
Producers will often respond to a price floor by cutting production to the point at which price equals marginal cost.
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30. A production function in which the inputs are perfectly substitutable would have isoquants that are:

Select correct option:
Convex to the origin.
L shaped.
Linear.
Concave to the origin.

31. For an inferior good:

Select correct option:
The price elasticity of demand is negative; the income elasticity of demand is negative.
The price elasticity of demand is positive; the income elasticity of demand is negative.
The price elasticity of demand is negative; the income elasticity of demand is positive.
The price elasticity of demand is positive; the income elasticity of demand is positive.

32. The short run is:

Select correct option:
Less than a year.
Three years.
However long it takes to produce the planned output.
A time period in which at least one input is fixed.

33. Any combination of products inside the production possibility frontier is:

Select correct option:
Allocatively inefficient
Consumer inefficient
Productively inefficient
None of the given option.

34. Which of the following is NOT an assumption regarding people's preferences in the theory of consumer behavior?

Select correct option:
Preferences are complete.
Preferences are transitive.
Consumers prefer more of a good to less.
None of the given options.
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35. In 1970s the federal government imposed price controls on natural gas. Which of the following statements is true?

Select correct option:
These price controls caused a chronic excess supply of natural gas.
Consumers gained from the price controls, because consumer surplus was larger than it would have been under free market equilibrium.
Producers gained from the price controls because producer surplus was larger than it would have been under free market equilibrium.
This episode of price controls was unusual, because it resulted in no deadweight loss to society.

36. A production function defines the output that can be produced:

Select correct option:
At the lowest cost, given the inputs available.
With the fewest amount of inputs.
If the firm is technically efficient.
In a given time period if no additional inputs are hired.

37. A firm never operates:

Select correct option:
At the minimum of its ATC curve.
At the minimum of its AVC curve.
On the downward-sloping portion of its ATC curve.
On the downward-sloping portion of its AVC curve.

38. Two firms, each producing different goods, can achieve a greater output than one firm producing both goods with the same inputs. We can conclude that the production process involves:
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Select correct option:
Diseconomies of scope.
Economies of scale.
Decreasing returns to scale.
Increasing returns to scale.

39. In long-run competitive equilibrium, a firm that owns factors of production will have an:

Select correct option:
Economic profit = $0 and accounting profit > $0.
Economic and accounting profit = $0.
Economic and accounting profit > $0.
Economic and accounting profit can take any value.

40. When a product transformation curve is bowed outward, there are _______________ in production.

Economies of scope
Economies of scale
Diseconomies of scope
Diseconomies of scale

41. The marginal rate of technical substitution is equal to the:

Slope of the total product curve.
Change in output minus the change in labor.
Change in output divided by the change in labor.
Ratio of the marginal products of the inputs.

42. Consider two goods X and Y available for consumption. Assume that the price of X changes while the price of Y remains fixed. For these two goods, the price-consumption curve illustrates the:

Relationship between the price of X and consumption of Y.
Utility-maximizing combinations of X and Y for each price of X.
Relationship between the price of Y and the consumption of X.
Utility-maximizing combinations of X and Y for each quantity of X.
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43. Assume that two investment opportunities have identical expected values of $100,000. Investment A has a variance of 25,000, while investment B's variance is 10,000. We would expect most investors (who dislike risk) to prefer investment opportunity:

A because it has less risk.
A because it provides higher potential earnings.
B because it has less risk.
B because of its higher potential earnings.

44. The law of diminishing returns refers to diminishing:

: Total returns.
Marginal returns.
Average returns.
All of the given option

45. : If the isoquants are straight lines, then:

: Inputs have fixed costs at all use rates.
The marginal rate of technical substitution of inputs is constant.
Only one combination of inputs is possible.
There are constant returns to scale.
H99s1: 4th

46. : The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q. What is the variable cost?

: 200
5Q
5
5 + (200/Q)

47. The demand curve facing a perfectly competitive firm is:

The same as the market demand curve.
Downward-sloping and less flat than the market demand curve.
Perfectly horizontal.
Perfectly vertical.

48. : The cost-output elasticity is used to measure:

Economies of scope.
Economies of scale.
The curvature in the fixed cost curve.
Steepness of the production function.
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:
49. The budget line in portfolio analysis shows that:

The expected return on a portfolio increases as the standard deviation of that return increases.
The expected return on a portfolio increases as the standard deviation of that return decreases.
The expected return on a portfolio is constant.
The standard deviation of a portfolio is constant.

50. A Rolling Stones song goes: “You can’t always get what you want.” This echoes an important theme from microeconomics. Which of the following statements is the best example of this theme?

Consumers must make the best purchasing decisions they can, given their limited incomes.
Workers do not have as much leisure as they would like, given their wages and working conditions.
Workers in planned economies, such as North Korea, do not have much choice over jobs.
Firms in market economies have limited financial resources.
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