Econ 122 Exam 2

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  • 1/39 Questions

    If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

    • 2 chairs
    • 3 chairs
    • 4 chairs
    • 38 chairs
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About This Quiz


In Economics, we believe that utility is the amount of satisfaction that a good or service brings. The quiz below tests and advances your knowledge on the different aspects of economics, which include price and utility.

Econ 122 Exam 2 - Quiz

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  • 2. 

    The table above lists the highest prices of the three consumers, tom, dick, and harriet, are willing to pay for a short sleeved polo shirt.  if the price of the shirts falls from $28 to $20

    • Consumer surplus increases from $14 to $35

    • Consumer surplus will increase from $70 to $95

    • Tom will buy two shirts; dick and harriet will each buy one shirt

    • Harriet will receive more consumer surplus than tom or dick

    Correct Answer
    A. Consumer surplus increases from $14 to $35
    Explanation
    When the price of the shirts falls from $28 to $20, the consumer surplus increases from $14 to $35. This means that consumers are able to purchase the shirts at a lower price than they were willing to pay, resulting in a larger surplus. The increase in consumer surplus indicates that consumers are better off as they are able to obtain more value from their purchases.

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  • 3. 

    The marginal benefit is equal to the _____ benefit to a consumer receives from consuming one more unit of a good or service

    • Additional

    • Surplus

    • Total

    • Unintended

    Correct Answer
    A. Additional
    Explanation
    The correct answer is "additional." The marginal benefit refers to the additional benefit that a consumer receives from consuming one more unit of a good or service. It represents the change in total benefit resulting from the consumption of an additional unit.

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  • 4. 

    When the price of hoagies increases from $5.00 to $5.75, quanity demanded decreases from Q1 to Q0.  This change in quantity demanded is due to

    • The income and substitution effects

    • The price and output effects

    • The fact that marginal willingness to pay falls

    • The law of diminishing marginal utility

    Correct Answer
    A. The income and substitution effects
    Explanation
    When the price of hoagies increases, it affects the quantity demanded due to the income and substitution effects. The income effect refers to the change in purchasing power caused by the price increase, which may lead to a decrease in quantity demanded. The substitution effect refers to consumers switching to alternative goods or substitutes as the price of hoagies becomes relatively more expensive. Both effects contribute to the decrease in quantity demanded when the price of hoagies increases.

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  • 5. 

    Diminishing marginal returns sets in when the ____ worker is hired

    • 2nd

    • 3rd

    • 4th

    • None of the above

    Correct Answer
    A. 3rd
    Explanation
    Diminishing marginal returns occur when the addition of each additional unit of input leads to a smaller increase in output. In the context of hiring workers, the law of diminishing marginal returns suggests that as more workers are hired, the additional output produced by each new worker will start to decrease. Therefore, the correct answer is the 3rd worker, as it is at this point that the diminishing marginal returns begin to set in.

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  • 6. 

    If the market price of each camera is $8, what is the firm's total revenue?

    • $2,400

    • $3,200

    • $4,000

    • $4,800

    Correct Answer
    A. $3,200
    Explanation
    The firm's total revenue can be calculated by multiplying the market price of each camera by the number of cameras sold. Since the market price of each camera is $8, we need to determine the number of cameras sold. However, this information is not provided in the question. Therefore, an explanation cannot be generated.

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  • 7. 

    Arnolds marginal benefit from consuming the third burrito is

    • $1.25

    • $1.50

    • $2.50

    • $6.00

    Correct Answer
    A. $1.50
    Explanation
    Arnold's marginal benefit from consuming the third burrito is $1.50. This means that Arnold gains an additional benefit of $1.50 from consuming the third burrito compared to consuming only two burritos. This value represents the additional satisfaction or utility that Arnold derives from consuming an extra unit of the good, in this case, a burrito.

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  • 8. 

    In a city with rent controlled apartments, all of the following are true except?

    • It usually takes more time to find an apartment than it would without rent control

    • Landlords have an incentive to rent more apartments than they would without rent control

    • Apartments are often in shorter supply than they would be without rent control

    • Apartments usually rent for rates lower than the market rate

    Correct Answer
    A. Landlords have an incentive to rent more apartments than they would without rent control
    Explanation
    In a city with rent controlled apartments, landlords do not have an incentive to rent more apartments than they would without rent control. Rent control often limits the amount of rent landlords can charge, which reduces their potential profit. Therefore, landlords may have less incentive to rent out more apartments or invest in property maintenance.

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  • 9. 

    If the market price is $20, what is the amount of the firms profit?

    • $5400

    • $6750

    • $8100

    • $16200

    Correct Answer
    A. $6750
    Explanation
    If the market price is $20, the amount of the firm's profit can be calculated by multiplying the market price by the quantity of goods sold. However, the question does not provide information about the quantity of goods sold, so it is impossible to determine the firm's profit. Therefore, the explanation for the given correct answer is not available.

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  • 10. 

    The law of diminishing marginal returns

    • Causes average total costs to rise at a decreasing rate as output increases

    • Explains why the average total cost and marginal cost curves are u-shaped in the short run

    • Explains why the average total cost, average fixed cost and the marginal cost curves are u-shaped in the short run

    • Causes the difference between average total cost and average variable cost to get smaller as output increases

    Correct Answer
    A. Explains why the average total cost and marginal cost curves are u-shaped in the short run
    Explanation
    The law of diminishing marginal returns explains why the average total cost and marginal cost curves are u-shaped in the short run. As output increases, the law states that each additional unit of input will yield a smaller increase in output. This means that initially, as more units of input are added, the average total cost decreases. However, after a certain point, the law of diminishing returns sets in, and the additional units of input start to have a smaller impact on output. This causes the average total cost and marginal cost to increase, resulting in a u-shaped curve.

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  • 11. 

    If the market price is $1.00, what is the consumer surplus on the third burrito?

    • $ 0.50

    • $ 1.00

    • $1.50

    • $7.50

    Correct Answer
    A. $ 0.50
    Explanation
    The consumer surplus on the third burrito is $0.50. Consumer surplus is the difference between the maximum price a consumer is willing to pay for a product and the actual price they pay. In this case, if the market price is $1.00, and the consumer is willing to pay $1.50 for the burrito, then the consumer surplus is $1.50 - $1.00 = $0.50.

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  • 12. 

    Identify the curves in the diagram

    • E= marginal cost curve; F= average total cost curve; G= average variable cost curve; H= average fixed cost curve

    • E= marginal cost curve; F= total cost curve; G= variable cost curve, H= average fixed cost curve

    • E= average fixed cost curve; F= average total cost curve; G= average variable cost curve, H= marginal cost curve

    • E= average fixed cost curve; F= variable cost curve; G= total cost curve, H= marginal cost curve

    Correct Answer
    A. E= marginal cost curve; F= average total cost curve; G= average variable cost curve; H= average fixed cost curve
    Explanation
    The correct answer is E= marginal cost curve; F= average total cost curve; G= average variable cost curve; H= average fixed cost curve. This is because the marginal cost curve represents the additional cost incurred for producing one more unit of output. The average total cost curve represents the total cost per unit of output, which includes both fixed and variable costs. The average variable cost curve represents the variable cost per unit of output, which includes costs that vary with the level of production. The average fixed cost curve represents the fixed cost per unit of output, which remains constant regardless of the level of production.

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  • 13. 

    If the market price of each camera case is $8, what is the profit-maximizing quantity?

    • 300 units

    • 400 units

    • 500 units

    • 600 units

    Correct Answer
    A. 400 units
  • 14. 

    What is the value of the deadweight loss at a price of $18?

    • $100

    • $180

    • $1040

    • $660

    Correct Answer
    A. $100
    Explanation
    The value of the deadweight loss at a price of $18 is $100. Deadweight loss refers to the loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved. In this case, the deadweight loss represents the difference between the social benefit and the social cost of producing and consuming the good at the given price.

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  • 15. 

    What is the average product of labor when the farm hires 5 workers?

    • 4 pounds

    • 10.8 bushels

    • 38.2 pounds

    • 54 pounds

    Correct Answer
    A. 10.8 bushels
    Explanation
    The average product of labor refers to the amount of output produced per unit of labor input. In this case, the question asks for the average product of labor when 5 workers are hired. The correct answer, 10.8 bushels, implies that when 5 workers are hired, the farm produces an average of 10.8 bushels of output per worker.

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  • 16. 

    The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

    • The substitution effect

    • The income effect

    • Consumer surplus

    • Producer surplus

    Correct Answer
    A. Consumer surplus
    Explanation
    Consumer surplus is the correct answer because it refers to the difference between the maximum price a consumer is willing to pay for a good and the actual price they pay. It represents the benefit or surplus that consumers receive when they are able to purchase a good at a price lower than what they are willing to pay. The substitution effect and income effect are related to changes in consumer behavior due to changes in price or income, while producer surplus refers to the difference between the price producers receive and the minimum price they are willing to accept.

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  • 17. 

    What is the value of consumer surplus after the impostion of the ceiling?

    • $120,000

    • $230,000

    • $270,000

    • $430,000

    Correct Answer
    A. $230,000
    Explanation
    The value of consumer surplus after the imposition of the ceiling is $230,000. Consumer surplus is the difference between the maximum price consumers are willing to pay for a product and the actual price they pay. In this case, the ceiling imposes a maximum price that consumers can pay. The value of consumer surplus is the area between the demand curve and the price line up to the quantity demanded at the ceiling price. Based on the information given, the value of consumer surplus is $230,000.

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  • 18. 

    The marginal product of the 3rd worker is

    • 57

    • 19

    • 15

    • 11

    Correct Answer
    A. 15
    Explanation
    The marginal product of the 3rd worker is 15. This means that when the 3rd worker is added to the production process, the output increases by 15 units. The marginal product represents the additional output generated by each additional unit of input. In this case, the 3rd worker contributes 15 units to the total output.

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  • 19. 

    What area represents producer surplus at a price of P2?

    • A+B+C+D+E

    • A+B

    • A+B+C

    • B+D

    Correct Answer
    A. A+B+C
    Explanation
    The area represented by A+B+C represents producer surplus at a price of P2. Producer surplus is the difference between the price at which producers are willing to sell a good and the actual price they receive. In this case, A represents the cost of production for producers, B represents the additional profit they make due to selling the good at a higher price than their cost, and C represents the additional profit they make due to selling more units at the higher price. Therefore, the sum of A+B+C represents the total producer surplus at a price of P2.

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  • 20. 

    If the market price is $30, the firms profit maximizing output level is

    • 0

    • 130

    • 180

    • 240

    Correct Answer
    A. 180
    Explanation
    The firm's profit-maximizing output level is 180. This can be determined by analyzing the firm's marginal cost and marginal revenue. At the profit-maximizing level, the firm produces where marginal cost equals marginal revenue. In this case, if the market price is $30, the firm will produce until the marginal cost reaches $30. At an output level of 180, the marginal cost will be equal to $30, maximizing the firm's profit.

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  • 21. 

    Paul goes to sportsmart to buy a new tennis racquet.  He is willing to pay $200 for a new racquet, but buys one on sale for $125.  Pauls consumer surplus from the purchase is

    • $325

    • $200

    • $125

    • $75

    Correct Answer
    A. $75
    Explanation
    Paul's consumer surplus from the purchase is $75. Consumer surplus is the difference between the price a consumer is willing to pay for a product and the actual price they pay. In this case, Paul was willing to pay $200 for a new racquet but bought one on sale for $125. Therefore, his consumer surplus is $200 - $125 = $75.

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  • 22. 

    If the market is price is $20, what is t he firms profit maximizing output?

    • 750 units

    • 1100 units

    • 1350 units

    • 1800 units

    Correct Answer
    A. 1350 units
    Explanation
    The firm's profit-maximizing output is 1350 units because at this level of output, the firm is able to maximize its profits by producing the quantity where marginal cost equals marginal revenue. Producing more or less than 1350 units would result in lower profits.

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  • 23. 

    What area represents the increase in producer surplus when the market prices rises from P1 to P2?

    • C+E

    • B+D

    • A+B

    • A+C+E

    Correct Answer
    A. A+B
    Explanation
    The increase in producer surplus occurs when the market price rises from P1 to P2. This increase in producer surplus is represented by the combined area of regions A and B. Region A represents the additional profit gained by existing producers as they can now sell their goods at a higher price. Region B represents the additional profit gained by new producers entering the market due to the higher price. Therefore, the correct answer is A+B.

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  • 24. 

    Economic costs of production differ from accounting costs in that

    • Accounting costs include expenditures for hired resources wile economic costs do not

    • Economic costs add the opportunity costs of a firm using its own resources while accounting costs do not

    • Accounting cost are always larger than economic cost

    • Economic costs include expenditures for hired resources while accounting costs do not

    Correct Answer
    A. Economic costs add the opportunity costs of a firm using its own resources while accounting costs do not
    Explanation
    The correct answer is economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. Economic costs take into account not only the explicit costs of production, such as wages and materials, but also the implicit costs, such as the opportunity cost of using the firm's own resources. On the other hand, accounting costs only consider the explicit costs and do not include the opportunity costs. This difference between economic and accounting costs allows for a more comprehensive analysis of the true cost of production.

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  • 25. 

    The figure above represents the market for pecans.  Assume that this is a competitive market.  If the price of pecans is $3, what changes in the market would result in an economically efficient output?

    • The quantity supplied would increase, the quantity demanded would decrease and the equilibrium price would increase

    • The price would increase, the quantity demanded would decrease and the quanity supplied would increase

    • The price would increase, the quantity supplied would decrease, and the quantity demanded would increase

    • The price would increase, the demand would decrease and the supply would increase

    Correct Answer
    A. The price would increase, the quantity demanded would decrease and the quanity supplied would increase
    Explanation
    In a competitive market, an economically efficient output is achieved when the quantity supplied equals the quantity demanded at the equilibrium price. If the price of pecans is $3, an increase in price would lead to a decrease in quantity demanded (as consumers would be less willing to purchase at a higher price) and an increase in quantity supplied (as producers would be incentivized to supply more at a higher price). This would result in a new equilibrium where the price is higher, the quantity demanded is lower, and the quantity supplied is higher.

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  • 26. 

    What is the amount of the firms fixed cost of production?

    • $5400

    • $6750

    • $8100

    • It cannot be determined

    Correct Answer
    A. $5400
    Explanation
    The amount of the firm's fixed cost of production is $5400.

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  • 27. 

    What is the value of producer surplus after the imposition of the ceiling?

    • $40,000

    • $100,000

    • $300,000

    • $430,000

    Correct Answer
    A. $40,000
    Explanation
    The value of producer surplus after the imposition of the ceiling is $40,000. This means that producers are able to sell their goods at a price higher than the equilibrium price, resulting in a surplus. However, the surplus is limited to $40,000 due to the imposition of the ceiling, which sets a maximum price that can be charged for the goods.

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  • 28. 

    Suppose the firm is currently producing Q2 units. what happens if it expands output to Q3 units?

    • It will be moving toward its profit maximizing output

    • It incurs a loss

    • It makes less profit

    • Its profit increases by the size of the vertical distance df

    Correct Answer
    A. It makes less profit
    Explanation
    If the firm is currently producing Q2 units and expands output to Q3 units, it makes less profit. This suggests that increasing production beyond Q2 is not beneficial for the firm's profit maximization. It could be due to various factors such as diminishing returns to scale, increased production costs, or a decrease in demand for the additional units produced. Therefore, the firm should aim to produce at the level where it maximizes its profits, which is below Q3 units.

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  • 29. 

    What is the value of producer surplus at a price of $18?

    • $300

    • $720

    • $340

    • $240

    Correct Answer
    A. $240
    Explanation
    The value of producer surplus at a price of $18 is $240. Producer surplus is the difference between the price at which producers are willing to sell a product and the actual price they receive. In this case, the producer surplus is calculated by finding the area above the supply curve and below the price of $18. The area represents the additional revenue that producers receive above their minimum acceptable price. Therefore, the correct answer is $240.

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  • 30. 

    If keegan can drink all the bubble tea he wants for free, how many glasses will he consume?

    • 4 glasses

    • 5 glasses

    • 6 glasses

    • 7 glasses

    Correct Answer
    A. 6 glasses
  • 31. 

    If keira maximizes her utility, how many units of each good should she buy?

    • 1 cup of soup and 5 sandwiches

    • 4 cups of soup and 3.5 sandwiches

    • 6 cups of soup and 2 sandwiches

    • 3 cups of soup and 4 sandwiches

    Correct Answer
    A. 6 cups of soup and 2 sandwiches
    Explanation
    If Keira wants to maximize her utility, she should buy 6 cups of soup and 2 sandwiches. This combination provides the highest level of satisfaction for Keira, as it maximizes her overall utility.

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  • 32. 

    What is the amount of profit if the firm produces Q2 units?

    • It is equal to the vertical distance c to g

    • It is equal to the vertical distance c to g multiplied by Q2 units

    • It is equal to the vertical distance g to Q2

    • It is equal to the vertical distance of c to Q2

    Correct Answer
    A. It is equal to the vertical distance c to g
    Explanation
    The correct answer is "it is equal to the vertical distance c to g." This means that the amount of profit if the firm produces Q2 units is equal to the vertical distance between points C and G on a graph. This indicates that the profit is determined by the difference between the total revenue and total cost at the production level of Q2 units.

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  • 33. 

    The table above lists the highest prices three consumers, Tom, Dick and Harriet, are willing to pay for a short-sleeved polo shirt.  If the price of one of the shirts is $28 dollars

    • Harriet will receive $25 of consumer surplus since she will buy no shirts

    • Tom and dick receive a total of $70 of consumer surplus from buying one shirt each. Harriet will buy no shirts

    • Tom will buy two shirts, dick will buy one shirt and harriet will buy no shirts

    • Tom will receive $12 of consumer surplus from buying one shirt

    Correct Answer
    A. Tom will receive $12 of consumer surplus from buying one shirt
    Explanation
    Tom will receive $12 of consumer surplus from buying one shirt because the price of the shirt is $28 and Tom is willing to pay $40 for a shirt. Consumer surplus is calculated by subtracting the price paid from the maximum price a consumer is willing to pay. In this case, $40 - $28 = $12, which represents the extra value or benefit that Tom receives from purchasing the shirt at a price lower than what he is willing to pay.

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  • 34. 

    What is keegan's optimal consumption bundle?

    • 3 pita wraps and 3 bubble teas

    • 5 pita wraps and 0 bubble teas

    • 4 pita wraps and 2 bubble teas

    • 3 pita wraps 4 bubble teas

    Correct Answer
    A. 3 pita wraps 4 bubble teas
    Explanation
    Keegan's optimal consumption bundle is 3 pita wraps and 4 bubble teas. This is determined as the correct answer because it maximizes Keegan's utility or satisfaction. Since there are no other factors or constraints mentioned in the question, we can assume that Keegan prefers to have more bubble teas and is willing to sacrifice one pita wrap for an additional bubble tea. Therefore, the optimal consumption bundle for Keegan is 3 pita wraps and 4 bubble teas.

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  • 35. 

    Suppose keira's income increases from $18 to $23 but prices have not changed.  What is her utility maximizing bundle now?

    • 5 cups of soup and 4 sandwiches

    • 6 cups of soup and 5 sandwiches

    • 4 cups of soup and 5 sandwiches

    • 5 cups of soup and 5 sandwiches

    Correct Answer
    A. 4 cups of soup and 5 sandwiches
    Explanation
    When Keira's income increases from $18 to $23, she has more purchasing power. Since the prices have not changed, she can afford to buy more of both goods. The utility maximizing bundle is the combination of goods that provides her with the highest level of satisfaction. In this case, the answer of 4 cups of soup and 5 sandwiches is the utility maximizing bundle because it allows her to allocate her increased income in a way that maximizes her overall satisfaction.

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  • 36. 

    The marginal product of the 7th worker is

    • 66

    • 9.43

    • 2

    • -2

    Correct Answer
    A. -2
    Explanation
    The negative value for the marginal product of the 7th worker suggests that the addition of this worker has resulted in a decrease in output. This could be due to various reasons, such as overcrowding or inefficiency in the production process. The negative value implies that the 7th worker is actually reducing the overall productivity of the workers, leading to a decrease in output.

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  • 37. 

    Which of the following statements is true?

    • Quanity Q0 could be a utility-maximizing choice if the price is $5.75, but quanity Q1 may not be because we have no information on the marginal utility per dollar when price changes.

    • Quanities of Q0 and Q1 may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumers budget or the price of other goods

    • Quantities Q0 to Q1 are derived independently of the utility-maximizing model

    • Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies

    Correct Answer
    A. Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies
    Explanation
    The statement "quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies" is true because it suggests that both Q0 and Q1 can be utility-maximizing choices at different prices. The explanation highlights that the other statements lack information on factors such as marginal utility per dollar, consumer budget, or the price of other goods, which are necessary to determine the utility-maximizing quantities.

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  • 38. 

    Which of the following is an example of positive technological change?

    • A firm conducts a new advertising campaign. As a result, the demand for the firms surf boards increases

    • A firm buys a an additional machine that it uses to make surf boards. As a result, the firm is able to increase its weekly production of surf boards

    • A firm offers workers a higher wage to work on weekends and night. As a result, the firm is able to increase its weekly production of surf boards.

    • A firms workers participate in a training program designed to increase the number of surf boards they can produce per day.

    Correct Answer
    A. A firms workers participate in a training program designed to increase the number of surf boards they can produce per day.
    Explanation
    The correct answer is a firm's workers participate in a training program designed to increase the number of surfboards they can produce per day. This is an example of positive technological change because it involves improving the skills and knowledge of the workers, which leads to increased productivity and efficiency in surfboard production. This change is likely to have long-term benefits for the firm, as it allows them to produce more surfboards in a shorter amount of time, potentially leading to higher profits and market competitiveness.

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  • 39. 

    If the market price is $30 and if the firm is producing output, what is the amount of its total variable cost?

    • $7200

    • $6480

    • $5400

    • $3960

    Correct Answer
    A. $3960
    Explanation
    If the market price is $30 and the firm is producing output, the amount of its total variable cost can be calculated by multiplying the market price by the quantity of output produced. Since the total variable cost is the product of the market price and the quantity of output, the correct answer is $3960.

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  • Aug 16, 2024
    Quiz Edited by
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  • Nov 03, 2013
    Quiz Created by
    Tclea3

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