devry econ 312 week 4 midterm answers

devry econ 312 week 4 midterm

(TCO 1) As a consequence of the condition of scarcity

 

there is never enough of anything.

production has to be centrally planned.

things which are plentiful have relatively high prices.

individuals and communities have to make choices from among alternatives.

 

 

Question 2. Question :

(TCO 1) The opportunity cost of constructing a new public highway is the

 

money cost of hiring contractors and construction workers for the new highway.

value of other goods and services that must be sacrificed to construct the new highway.

expected cost of constructing the new highway in a future year.

value of shorter driving times and distances when the new highway is completed.

 

 

 

Question 3. Question :

(TCO 1) A nation can increase its production possibilities by

 

shifting resources from investment good production to consumer good production.

shifting resources from private goods to public goods.

improving labor productivity.

eliminating discrimination.

 

:

 

Question 4. Question :

(TCO 1) Which expression is another way of saying “marginal benefit”?

devry econ 312 week 4 midterm

Benefits given up

Unintended gain

Employment benefits

Extra benefit

 

devry econ 312 week 4 midterm

 

Question 5. Question :

(TCO 1) The individual who brings together economic resources and assumes the risk of business ventures in a capitalist economy is called the

 

manager.

entrepreneur.

stockbroker.

banker.

 

 

 

Question 6. Question :

(TCO 1) The Soviet Union economy of the 1980s would best be classified as

 

a market system.

pure capitalism.

laissez-faire capitalism.

a command system.

 

Question 7. Question : The simple circular-flow model shows that workers, entrepreneurs, and the owners of land and capital offer their services through

 

product markets.

resource markets.

employment agencies.

business firms.

 

 

 

Question 8. Question :

(TCO 1) Consumers express self-interest when they

 

seek the lowest price for a product.

reduce business losses.

collect economic profits.

search for jobs with the highest wages.

 

Question 9. Question :

(TCO 1) Which is not one of the five fundamental questions that an economy must deal with?

 

How will the goods and services be produced?

Why should the goods and services be produced?

Who is to receive the goods and services produced in the economy?

In what ways will progress be promoted?

 

 

Question 10. Question :

(TCO 1) The major “success indicator” for business managers in command economies like the Soviet Union and China in the past was

 

the quantity of output.

product quality.

the amount of profits.

worker morale.

 

 

Question 11. Question :

(TCO 2) An increase in demand means that

 

given supply, the price of the product will decline.

the demand curve has shifted to the right.

price has declined and consumers therefore want to purchase more of the product.

the demand curve has shifted to the left.

 

 

 

Question 12. Question :

(TCO 2) At the point where the demand and supply curves intersect

 

the buying and selling decisions of consumers and producers are inconsistent with one another.

the market is in disequilibrium.

there is neither a surplus nor a shortage of the product.

quantity demanded exceeds quantity supplied.

 

Question 13. Question :

(TCO 2) Black markets are associated with

 

price floors and the resulting product surpluses.

price floors and the resulting product shortages.

price ceilings and the resulting product shortages.

price ceilings and the resulting product surpluses.

 

:

 

Question 14. Question :

(TCO 2) An increase in demand for oil along with a simultaneous increase in supply of oil will

 

decrease price and increase quantity.

increase price and decrease quantity.

increase quantity, but whether it increases price depends on how much each curve shifts.

increase price, but whether it increases quantity depends on how much each curve shifts.

 

 

Question 15. Question :

(TCO 2) If Product Y is an inferior good, a decrease in consumer incomes will

 

make buyers want to buy less of Product Y.

not affect the sales of Product Y.

shift the demand curve for Product Y to the left.

shift the demand curve for Product Y to the right.

devry econ 312 week 4 midterm

devry econ 312 week 4 midterm

Question 16. Question :

(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

 

20 percent.

0.5 percent.

5 percent.

 

Question 17. Question :

(TCO 2) Total revenue falls as the price of a good is raised, if the demand for the good is

 

elastic.

inelastic.

unitary elastic.

perfectly elastic.

 

 

Question 18. Question :

(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:

 

increase the price of the software.

decrease the price of the software.

hold the price of the software constant.

increase the supply of the software.

 

 

 

Question 19. Question :

(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

 

unity.

elastic.

inelastic.

perfectly elastic.

 

 

Question 20. Question :

(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

 

: have elastic demand and students who use financial aid have inelastic demand.

have inelastic demand and students who use financial aid have elastic demand.

view a college education as an inferior good and students who use financial aid view it as a normal good.

view a college education as a normal good and students who use financial aid view it as an inferior good.

 

 

Question 21. Question :

(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

 

$40.

$55.

$110.

$165.

 

Question 22. Question :

(TCO 3) Economic profits are equal to

 

total revenues minus fixed costs.

total revenues minus the costs of raw materials.

total revenues minus the opportunity costs of all inputs.

gross profit minus selling and operating expenses.

 

 

Question 23. Question :

(TCO 3) The main difference between the short run and the long run is that

 

firms earn zero profits in the long run.

the long run always refers to a time period of one year or longer.

in the short run, some inputs are fixed.

in the long run, all inputs are fixed.

 

 

 

Question 24. Question :

(TCO 3) The law of diminishing returns only applies in cases where

 

there is increasing scarcity of factors of production.

the price of extra units of a factor is increasing.

there is at least one fixed factor of production.

capital is a variable input.

 

devry econ 312 week 4 midterm

Question 25. Question :

(TCO 3) Marginal cost can be defined as the

 

change in total fixed cost resulting from one more unit of production.

change in total variable cost resulting from one more unit of production.

change in average total cost resulting from one more unit of production.

change in average variable cost resulting from one more unit of production.

 

 

Question 26. Question :

(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?

 

None, because fixed costs do not affect marginal cost.

Marginal cost would increase by 50 percent.

Marginal cost would increase by less than 50 percent.

Marginal cost would increase by more than 50 percent.

devry econ 312 week 4 midterm

:
(TCO 3) Mutual interdependence would tend to limit control over price in which market model?

 

Monopolistic competition

Pure competition

Pure monopoly

Oligopoly

 

 

 

Question 2. Question :

(TCO 3) Under which market model are the conditions of entry into the market easiest?

 

Pure competition

Pure monopoly

Monopolistic competition

Oligopoly

 

Question 3. Question :

(TCO 3) The production of agricultural products such as wheat or corn would best be described by which market model?

 

Monopolistic competition

Pure competition

Pure monopoly

Oligopoly

 

 

 

Question 4. Question :

(TCO 3) The demand curve faced by a purely competitive firm

 

= has unitary elasticity.

yields constant total revenues even when price changes.

is identical to the market demand curve.

is the same as its marginal revenue curve.

 

 

 

Question 5. Question :

(TCO 3) A profit-maximizing firm in the short run will expand output

 

until marginal cost begins to rise.

until total revenue equals total cost.

until marginal cost equals average variable cost.

as long as marginal revenue is greater than marginal cost.

 

 

 

Question 6. Question :

(TCO 3) A firm should increase the quantity of output as long as its

 

marginal revenue is greater than its marginal cost.

marginal cost is greater than its marginal revenue.

average revenue is greater than its average total cost.

average revenue is greater than its average variable cost.

 

 

Question 7. Question :

(TCO 3) The short-run supply curve for a competitive firm is the

 

entire MC curve.

segment of the MC curve lying below the AVC curve.

segment of the MC curve lying above the AVC curve.

segment of the AVC curve lying to the right of the MC curve.

 

 

 

Question 8. Question :

(TCO 3) The classic example of a private, unregulated monopoly is

 

Xerox.

De Beers.

General Motors.

General Electric.

 

:

 

Question 9. Question :

(TCO 3) Barriers to entry

 

usually result in pure competition.

can result from government regulation.

exist in economic theory but not in the real world.

are typically the result of wrongdoing on the part of a firm.

 

 

 

Question 10. Question :

(TCO 3) The demand curve confronting a nondiscriminating, pure monopolist is

 

: horizontal.

the same as the industry’s demand curve.

more elastic than the demand curve confronting a competitive firm.

derived by vertically summing the individual demand curves for the buyers.

 

:

 

Question 11. Question :

(TCO 3) Which is the best example of price discrimination?

 

An airline company charging lower fares per pound for air freight than for passengers.

A telephone company charging lower rates to weekend users than weekday users.

A supermarket charging lower prices in its inner city store than its out-of-town store.

A private doctor charging higher fees to patients receiving special services than patients receiving regular services.

 

 

 

Question 12. Question :

(TCO 3) In which industry is monopolistic competition most likely to be found?

 

Utilities

Agriculture

Retail trade

Mining

 

devry econ 312 week 4 midterm

 

Question 13. Question :

(TCO 3) Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will

 

reduce the excess capacity in the industry as firms expand production.

attract other firms to enter the industry, causing the firm’s profits to shrink.

cause firms to standardize their product to limit the degree of competition.

make the industry allocatively efficient as each firm seeks to maintain its profits.

 

 

 

Question 14. Question :

(TCO 3) A unique feature of an oligopolistic industry is

 

low barriers to entry.

standardized products.

diminishing marginal returns.

mutual interdependence.

 

 

 

Question 15. Question :

(TCO 3) A low concentration ratio means that

 

there is a low probability of entering the industry.

there is a low probability of success in the industry.

each firm accounts for a small market share of the industry.

each firm accounts for a large market share of the industry.

 

 

 

Question 16. Question :

(TCO 3) In which set of market models are there the most significant barriers to entry?

 

/: Monopolistic competition and pure competition

Monopolistic competition and pure monopoly

Oligopoly and monopolistic competition

Oligopoly and pure monopoly

 

 

 

Question 17. Question :

(TCO 1) The four factors of production are

 

land, labor, capital, and money.

land, labor, capital, and entrepreneurial ability.

labor, capital, technology, and entrepreneurial ability.

labor, capital, entrepreneurial ability, and money.

 

 

 

Question 18. Question :

(TCO 1) Refer to the diagram below which is based on the Circular Flow Model in Chapter 2. Arrows (1) and (2) represent

 

diagram1

 

Graph Description

 

goods and resources, respectively.

money incomes and output, respectively.

output and money incomes, respectively.

resources and goods, respectively.

 

Question 19. Question :

(TCO 2) Refer to the diagram. An increase in quantity demanded is depicted by a

diagram2

 

Graph Description

 

move from Point x to Point y.

shift from D1 to D2.

shift from D2 to D1.

move from Point y to Point x.

 

 

 

Question 20. Question :

(TCO 2) Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game

 

Price per Ticket

 

Quantity Demanded

 

$13

 

1,000

 

11

 

2,000

 

9

 

3,000

 

7

devry econ 312 week 4 midterm

4,000

 

5

 

5,000

 

3

 

6,000

 

varies inversely with ticket prices.

varies directly with ticket prices.

is perfectly inelastic.

is perfectly elastic.

 

devry econ 312 week 4 midterm

devry econ 312 week 4 midterm

 

Question 21. Question :

(TCO 2) Which type of goods is most adversely affected by recessions?

 

: Goods for which the income-elasticity coefficient is relatively low or negative.

Goods for which the income-elasticity coefficient is relatively high and positive.

Goods for which the cross-elasticity coefficient is positive.

Goods for which the cross-elasticity coefficient is negative.

 

 

 

Question 22. Question :

(TCO 3) The following cost data are for a firm in the short run:

 

Output Total Cost

0 $400

1 500

2 550

3 600

4 650

5 700

 

 

 

 

 

 

 

 

 

 

What is the firm’s average variable cost at an output of 5 units?

Student Answer: $30

$60

$120

$140

Question 23. Question :

(TCO 1) Refer to the diagram. Points A, B, C, D, and E show

points diagram1

 

Graph Description

 

that the opportunity cost of bicycles increases, while that of computers is constant.

combinations of bicycles and computers that society can produce by using its resources efficiently.

that the opportunity cost of computers increases, while that of bicycles is constant.

that society’s demand for computers is greater than its demand for bicycles.

 

 

 

Question 24. Question :

(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

 

rent-seeking.

price discrimination.

X-efficiency.

network effects.

 

 

devry econ 312 week 4 midterm

Question 25. Question :

(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?

 

Student Answer:

 

Question 26. Question :

(TCO 2) Evaluate how the following situations will affect the demand curve for iPods.

 

 

(a) Income statistics show that income of 18–25-year-olds have increased by 10 percent over the last year.

 

(b) Efforts of music artists wanting greater protection of their music result in more stringent enforcement of copyrights and the shutdown of numerous illegal downloading sites.

 

(c) Believing that it has significant control of the market for portable digital music players, Apple decides to raise the price of iPods with the goal of increasing profits.

 

(d) The price of milk decreases.