Economics 101Spring 2001Section 4 - HallamFinal Exam A - Blue1. Marginal cost measuresa. the change in cost required to produce one more unit of output.b. the change in output that can be obtained from one more dollar of expenditure.c. the level of output divided by the level of input.d. the change in revenue from the production of one more unit of output.e. the change in output that results from one more unit of an input.2. Marginal physical product measuresa. the change in cost required to produce one more unit of output.b. the change in output that can be obtained from one more dollar of expenditure.c. the change in output that results from one more unit of an input.d. the change in revenue from the production of one more unit of output.e. the level of output divided by the level of input.3. Marginal revenue measuresa. the change in an input required to produce one more unit of output.b. the change in output that can be obtained from one more dollar of expenditure.c. the change in cost from the production of one more unit of output.d. the change in output that results from one more unit of an input.e. the change in revenue from the production of one more unit of output.4. The cross price elasticity of demand measures a. the percentage change in the quantity demanded of a product when the price of a different product changes.b. the additional product produced from one more unit of an input.c. the amount of one good that must be given up to acquire more of another good while holding total utilityconstant.d. the percentage change in the quantity demanded of a product when its own price changes.e. the percentage change in output that occurs with an increase in expenditure.5. Average physical product measuresa. the change in cost required to produce one more unit of output.b. the change in output that can be obtained from one more dollar of expenditure.c. the change in output that results from one more unit of an input.d. the change in revenue from the production of one more unit of output.e. the level of output divided by the level of input.6. The marginal rate of substitution (in production) measuresa. the slope of an isoquant.b. the decrease in the quantity of input 1 (x1) that is needed to accompany a one unit increase in the quantityof input two (x2), in order to keep production the same.c. the slope of the isocost line.d. both a and b.e. a, b, and c.7. The marginal rate of substitution (in consumption) measuresa. the percentage change in the quantity demanded of a product when the price of a different product changes.b. the additional product produced from one more unit of an input.c. the additional utility from consuming one more unit of a product.d. the amount of one good that must be given up to acquire more of another good while holding total utilityconstant.e. the slope of the budget line.8. Which of the following is a reasonable method to construct the production possibility set, which is the set of alloutput combinations that are producible for a given set of inputs?a. Set a level for each of the outputs, and then find all levels of inputs that are able to produce this specificoutput combination.b. Set a level for all inputs, pick a level of one of the two outputs, find the maximum level of the other outputfor this level of the first output, and then repeat for other levels of the first output.c. Set a level for all inputs, pick a level of one of the two outputs, find all feasible levels of the other outputfor this level of the first output, and then repeat for other levels of the first output.d. Set a level for each of the outputs, choose the level of each of the input in such a way that the cost ofproducing the set output level is minimized.e. Set a level for each of the outputs and hold this fixed, pick a level of one of the two inputs and then findthe minimum level of the other input that is required to produce the chosen output combination given thefixed level of the first input, and then repeat for other levels of the first input.9. Which of the following is a reasonable method to construct the cost function?a. Set a level for each of the outputs, and then find all levels of inputs that are able to produce this specificoutput combination.b. Set a level for all inputs, pick a level of each of the outputs in such a way that the revenue to the firm ismaximized.c. Set a level for all inputs, pick a level of one of the two outputs, find all feasible levels of the other outputfor this level of the first output, and then repeat for other levels of the first output.d. Set a level for each of the outputs, choose the level of each of the inputs in such a way that the cost ofproducing the set output level is minimized.e. Set a level for each of the outputs and hold this fixed, pick a level of one of the two inputs and then findthe minimum level of the other input that is required to produce the chosen output combination given thefixed level of the first input, and then repeat for other levels of the first input.10. The production function givesa. all output levels attainable for a given level of input.b. the change in output that can be obtained from one more dollar of expenditure.c. the change in output that results from one more unit of an input.d. the maximum output attainable for a given combination of inputs.e. the level of output divided by the level of input.11. What is the shutdown rule for a firm in the short-run?a. In the short-run, the firm should continue to produce if marginal revenue (MR) is equal to marginal cost(MC); otherwise, it should shut down.b. In the short-run, if some fixed costs are not sunk, the firm should continue to produce if(TR - TVC) > (Avoidable fixed costs) > 0; otherwise, it should shut down.c. In the short-run, the firm should continue to produce if total revenue (TR) exceeds total costs (TC);otherwise, it should shut down.d. In the short run the firm should continue to produce as long as it covers all costs.e. Both b and c are reasonable rules.12. For a firm to minimize cost which of the following hold?a.MPPx2w2MPPx1w1b. MRSx1x2∆ x1∆ x2 w2w1 c. The slope of the isocost line and the slope of the isoquant curve are equal. w2w1d. both a and be. a, b, and c13. Opportunity cost is best described asa. the value of the time needed to make a choice.b. the value of the alternative opportunity given up when a choice is made.c. the most cost efficient way to produce an opportunity.d. the cost of discovering an
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