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# Exam 2 Microeconomics

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Total unity is best defined by which of the following
The total satisfaction received from consuming a particular amount of a product
Which best express the law of diminishing marginal unity?
The less of a product is consumed, the greater is the marginal utility of the product
Refer to the above table. What is the marginal utility of the fourth unit? 80
If the total utility is increasing, then marginal utility: May either be increasing or decreasing, but it must be greater than zero
Assume that a consumer purchases a combination of products A and product B such that the MUa/Pa=8 and MUb/Pb=6. To maximize utility without spending more money, the consumer should: Purchase more of product A and less of product B
Refer to the above table. If the consumer buys both products X and product Y, how much will the consumers buy of each to maximize utility? 3X and 4Y
A consumer is in equilibrium and is spending income in such a way that the marginal utility of product X is 40 and T is 16. The unit price of X is \$5. The price of Y is: \$2 per unit
The price of diamond is substantially greater than the price of water because: The marginal utility of the last unit of a diamond is significantly greater than the marginal utility of the last unit of a gallon of water consumed be a typical person
The substitution effect:

Measures the change in the quantity demanded of a good from a change in its relative price
The goal of a rational consumer is to maximize:
Total utility from all goods consumed
Economic profits are:
Equal to the difference between accounting profits and implicit cost
Which is most likely to be a long-run adjustment for a firm that manufactures cars on an assembly line basis? A change in production to a redesigned and retooled facility
the law of diminishing returns in a manufacturing plant of a fixed capacity implies that, eventually, employing one: More workers will decrease the average amount of output per worker
The range of diminishing marginal productivity begins when: Marginal product reaches its maximum

Refer to the above graph showing the marginal product (MPL) and the average product of labor (APL). At which quantity of labor employed is marginal product equal to average product? C
With fixed cost of \$400, a firm has average total cost of \$3 and average variable cost of \$2.50. Its output quantity must be: 800
Suppose that TC=\$550, TVC=\$500, and MC=\$100. If the firm produces the 10 units of output, then: MC>AVC
Which statement is true given the total cost function: Total cost = 10Q + 5Q2+100? Average cost at Q=10 is 70
Refer to the above table. What is the long-run average cost of producing 30 units of output? \$7
Refer to the above graphs, Minimum efficient scale occurs at Q2
Under which market model are the conditions of entry into the market easiest? Pure competition
In a purely competitive industry, each firm:
Can easily enter or exit the industry
In the standard model of pure competition, a profit-maximizing entrepreneur will shut down in the short run if: Total revenue is less than total variable cost
Refer to the above graph for a purely competitive firm in the short run. B
Refer to the above table. If the firm shits down in the short run, the total cost will be: \$2500
Refer to the above graph. To maximize profits, the firm should produce the quantity: 0C
Consider the purely competitive firm pictured above at its short â€“run equilibrium point, the firm is earning: Zero economic profit
A purely competitive firm will be willing to produce even at a loss in the short run, as long as: The loss is smaller than its total fixed cost
If the market demand for the product increases, in the short run a purely competitive firm: Will earn higher profits or experience smaller losses as a result of the change in the market 30 The resource cost falls in a purely competitive industry. This change will result in an: Decrease in a marginal cost for firms in the industry and an increase in the industry supply curve

Marginal utility can be
Positive, negative or zero
Marginal utility is the
Change in total utility obtained by consuming one more unit of a good
The total utility of a product is calculated by:
Summing the marginal utilities for each successive unit of the product that is consumed
Which is a dimension or assumption of the marginal-utility theory of consumed behavior? Goods and services carry a price tag

A consumer with a fixed income will maximize utility when each good is purchased in amounts such that the: Marginal utility per dollar spent is the same for all goods 6 A downward sloping demand curve can be derived for a normal product by decreasing its price in the normal product by decreasing its price in the consumer-behavior model and noting: The increase in the utility-maximizing quantity of that product demanded
A consumerâ€™s demands curve for a product is downsloping because: Marginal utility diminishes as more of a product is consumed
A product has utility if it:

Satisfies consumer wants
Suppose that Steve heads to the local hamburger show with \$3, expecting to spend \$2 for his favorite burger and \$1 for French fries. When he gets there he discovers that his favorite burger is on sale for \$1, so he buys two burgers and one order of French fries. Steveâ€™s consumption behavior is best explained by: The income effect

The price ratio of the twp products is the
Slope of the budget line
Cost to an economist
May or may not involve monetary outlays
Implicit costs are
â€śPaymentsâ€ť fir self-employed resources
Cash expenditures a firm makes to pay for resources are called: Explicit cost
In the short run, output:
Can vary as the result of using a fixed amount of plant and equipment more or less intensively
The main difference between the short run and the long
run is that: In the short run, one or more inputs is fixed

Which of the following is most likely to be a fixed cost? Property insurance premiums
If you know that when a firm produces 10 units of output, total cost are \$1,030 and average fixed cost are \$10, then total fixed cist are: \$100
Economies and diseconomies of scale explain
Why the firmâ€™s long-run average total cost curve is U-shaped 19 When diseconomies of shale occur
The long run average total average total cost curve rises Â when a firm doubled its inputs and finds that its output has more than doubled, this is known as Economies of shale
For a purely competitive seller, price equals
All of these (average revenue, marginal revenue, total revenue divided by outputs) 22 For a purely competitive firm total revenue:
Has all of these characteristics
In the standard model of pure competitions, a profit-maximizing entrepreneur will shut down in the short run if Average fixed cost is greater than average revenue
In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curve would be: A break-even point
The wedge rate increases in a purely competitive industry. This change will result in an Increase in the marginal cost curve for a firm in the industry In the short run a purely competitive firm that seeks to maximize profit will produce Where total revenue exceeds total cost by the maximum amount A firm reaches a break even point (normal profit position) where Total revenue and total cost are equal

In the short run the individual competitive firmâ€™s supply curve is that segment of the Marginal cost curve lying above the average variable cost curve
A purely competitive firmâ€™s short-run supply curve isÂ Up slopping and equal to the portion of the marginal cost curve that lies above the average variable cost curve
Resource cost increases in a purely competitive industry. This change will result in a Decrease in theÂ short-run supply curve for a firm in the industry

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