ECO402 Final Term Solved Quiz Part 4

81. Deadweight loss refers to:
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Select correct option:
Losses in consumer surplus associated with excess government regulations.
Situations where market prices fail to capture all of the costs and benefits of a policy.
Net losses in total surplus.
Losses due to the policies of labor unions.

82. the marginal product of an input is:

Select correct option:
Total product divided by the amount of the input used to produce this amount of output.
The addition to total output that adds nothing to profit.
The addition to total output due to the addition of one unit of all other inputs.
The addition to total output due to the addition of the last unit of an input, holding all other inputs constant.

83. If the isoquants are straight lines, then:

Select correct option:
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.

84. 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."

Select correct option:
I and II are true.
I is true, and II is false.
I is false, and II is true.
I and II are false.

85. The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because:

Select correct option:
The market price is determined (through regulation) by the government.
The firm supplies a different good than its rivals.
The firm's output is a small fraction of the entire industry's output.
The short run market price is determined solely by the firm's technology.http://virtualstudysolutions.blogspot.com 18

86. Producer surplus is measured as the:

Select correct option:
Area under the demand curve above market price.
Entire area under the supply curve.
Area under the demand curve above the supply curve.
Area above the supply curve up to the market price.

87. price ceilings:

Select correct option:
Always increase consumer surplus.
May decrease consumer surplus if demand is sufficiently elastic.
May decrease consumer surplus if demand is sufficiently inelastic.
Always decrease consumer surplus.

88. An individual consumes only two goods, X and Y. Which of the following expressions represents the utility maximizing market basket?

Select correct option:
MRSxy is at a maximum.
Px/Py = money income.
MRSxy = money income.
MRSxy = Px/Py.

89. In the long run, a firm’s producer surplus is equal to the:

Select correct option:
Economic rent it enjoys from its scarce inputs.
Revenue it earns in the long run.
Positive economic profit it earns in the long run.
Difference between total revenue and total variable costs.
90. The marginal product of an input is:

Select correct option:
Total product divided by the amount of the input used to produce this amount of output.
The addition to total output that adds nothing to profit.
The addition to total output due to the addition of one unit of all other inputs.
The addition to total output due to the addition of the last unit of an input, holding all other inputs constant.
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91. 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:

Select correct option:
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.

92. The price elasticity of demand for a demand curve that has a zero slope is:

Select correct option:
Zero.
One.
Negative but approaches zero as consumption increases.
Infinity.

93. A firm's producer surplus equals its economic profit when:

Select correct option:
Average variable costs are minimized.
Marginal costs equal marginal revenue.
Fixed costs are zero.
Total revenues equal total variable costs.

94. The long run supply curve in a constant-cost industry is linear and:

Select correct option:
Upward-sloping.
Downward-sloping.
Horizontal.
Vertical.
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95. Prospective sunk costs:

Select correct option:
Are relevant to economic decision-making.
Are considered as investment decisions.
Rise as output rises.
Do not occur when output equals zero. 4th

96. An isoquant:

Select correct option:
Must be linear.
Cannot have a negative slope.
Is a curve that shows all the combinations of inputs that yield the same total output.
Is a curve that shows the maximum total output as a function of the level of labor input.
3rd

97. Which of the following would cause a shift to the right of the supply curve for gasoline? I. A large increase in the price of public transportation. II. A large decrease in the price of automobiles. III. A large reduction in the costs of producing gasoline.

Select correct option:
I only.
II only.
III only.
II and III only.
2nd

98. If price is between AVC and ATC, the best and most practical thing for a perfectly competitive firm to do is:

Select correct option:
Raise prices.
Lower prices to gain revenue from extra volume.
Shut down immediately, but not liquidate the business.
Continue operating, but plan to go out of business.
1st

99. The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because:
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Select correct option:
The market price is determined (through regulation) by the government.
The firm supplies a different good than its rivals.
The firm's output is a small fraction of the entire industry's output.
The short run market price is determined solely by the firm's technology.
1st

100. The law of diminishing returns applies to:

Select correct option:
The short run only.
The long run only.
Both the short and the long run.
Neither the short nor the long run.
3rd

101. In an unregulated, competitive market consumer surplus exists because some:

Select correct option:
Sellers are willing to take a lower price than the equilibrium price.
Consumers are willing to pay more than the equilibrium price.
Sellers will only sell at prices above equilibrium price (or actual price).
Consumers are willing to make purchases only if the price is below the actual price.

102. Which of the following is a positive statement?

Select correct option:
The minimum wage should not be increased, because to do so would increase unemployment.
Smoking should be restricted on all airline flights.
All automobile passengers should be required to wear seatbelts in order to protect them against injury.
None of the given options.

103. Which of the following is true concerning the income effect of a decrease in price?

Select correct option:
It will lead to an increase in consumption only for a normal good.
It always will lead to an increase in consumption.
It will lead to an increase in consumption only for an inferior good.
It will lead to an increase in consumption only for a Giffen good.

104. Generally, long-run elasticities of supply are:

Select correct option: http://virtualstudysolutions.blogspot.com 22
Greater than short-run elasticities, because existing inventories can be exploited during shortages.
Greater than short-run elasticities, because consumers have time to find substitutes for the good.
Greater than short-run elasticities, because firms can make alterations to plant size and input combinations to be more flexible in production.
Smaller than short-run elasticities, because the firm has made long-term commitments it cannot easily modify.
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