Version 1 Page 1 Name: __________________________ Date: _____________ Microeconomics 2010 final, sec. 300. Fall 2009 (Version 1) The exam has 123 questions. Make sure you have all 123 questions (28 pages) 1. If the price of tacos increases from $1 to $2, and customers decrease their consumption from 10 tacos to 8 tacos, what is the price elasticity of demand, using the midpoint method? A) 1/2 B) 3/2 C) 1 D) 1/3 2. A cost that does not depend on the quantity of output produced is called a: A) fixed cost. B) variable cost. C) average cost. D) marginal cost. Use the following to answer question 3: Figure: Marginal Product of LaborVersion 1 Page 2 3. (Figure: Marginal Product of Labor) Using the marginal product of labor curve in the figure, the total product of labor for three workers is: A) 45 bushels. B) 15 bushels. C) 51 bushels. D) 39 bushels. 4. An external benefit is a(n): A) benefit that individuals or firms confer on others without receiving compensation. B) example of a negative externality. C) benefit that accrues to domestic firms due to the actions of foreign (external) firms. D) benefit that accrues to foreign (external) firms due to the actions of domestic firms. 5. To produce 10 deep-fried cats one must choose an input combination on the isoquant for 10 deep-fried cats. A) True B) False 6. Consider the total quantity of goods produced. Consider bundles A and B, where B contains all that is in A, plus some more goods. Bundle A is necessarily less efficient than bundle B A) True B) False 7. Total revenue is a firm's: A) total output times the price at which it sells that output. B) change in revenue resulting from a unit change in output. C) ratio of revenue to quantity. D) difference between revenue and cost. 8. Average total cost is: A) total cost divided by output. B) total cost times output. C) the change in cost divided by the change in output. D) the change in output divided by the change in costs.Version 1 Page 3 9. The presence of an external negative effect implies the market is failing. A) True B) False Use the following to answer question 10: 10. (Table: Labor and Output) Referring to the table, the average product when four workers are employed is: A) 36. B) 10. C) 6. D) 9. Use the following to answer question 11: Figure: MSB and MSC of PollutionVersion 1 Page 4 11. (Figure: MSB and MSC of Pollution) The accompanying graph shows the marginal social cost and marginal social benefit of pollution. If the current level of pollution is at Q1: A) the socially optimal amount of pollution is being emitted, as the MSB = MSC. B) not enough pollution is being emitted, as the MSB > MSC. C) not enough pollution is being emitted, as the MSB < MSC. D) too much pollution is being emitted, as the MSB > MSC. Use the following to answer question 12: Figure: Efficiency and Pollution 12. (Figure: Efficiency and Pollution) In the absence of government intervention, the quantity of pollution will be: A) 45 tons. B) 40 tons. C) 20 tons. D) 30 tons. 13. Externalities and external effects are the same thing. A) True B) FalseVersion 1 Page 5 14. I-70 is a public good A) True B) False 15. Basic consumer theory, as we learned in class, assumes that individual ranks goods not bundles. A) True B) False Use the following to answer question 16: Figure: Efficiency and Pollution 16. (Figure: Efficiency and Pollution) If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 30 tons, there would be: A) too little pollution, because the marginal social benefit of pollution would exceed the marginal social cost of pollution. B) too much pollution, because any pollution is too much pollution from an economist's perspective. C) a socially optimal quantity of pollution. D) too much pollution, because the marginal social cost of pollution would exceed the marginal social benefit of pollution.Version 1 Page 6 17. Assuming goods are normal goods and pollution reduction is a superior good, is the following statement correct? " Everything else constant, efficiency dictates that pollution-intensive industries be located in poor, rather than rich, communities. A) True B) False 18. Austin's total fixed cost is $3,600. Austin employs 20 workers and pays each worker $60. The average product of labor is 30, and the marginal product of the twentieth worker is 12. What is the marginal cost of the last unit produced by the last worker Austin hired? A) $240 B) $720 C) $5 D) $0.20 19. According to many economists, the government should: A) achieve the efficient level of pollution by reducing the costs of pollution, which will always increase the benefits to society. B) reduce the level of emissions as far as possible. C) reduce emissions whenever the marginal cost exceeds a predetermined level set by the courts. D) achieve the least-cost way of reducing the level of emissions. 20. More efficient is always preferred to less efficient. A) True B) False 21. An external effect occurs when the actions of one economic agent directly affects, not indirectly through market prices, another economic agent. A) True B) False 22. Which statement best describes how the competitive firm chooses the input combination it will use to produce, in the long run, its chosen level of output. A) It is determined by the state of technical knowledge for producing its output and the constraints imposed on the firm by the market. B) It is determined by the input prices C) It is determined by its chosen level of output D) It is determined by the isoquant mapVersion 1 Page 7 23. Lauren has 11 people working in her tangerine grove. The marginal product of the eleventh worker equals 13 bushels of tangerines. If she hires a twelfth worker, the marginal product of that worker will equal: A) 12 bushels. B) The answer cannot be determined with the information available. C) 15 bushels. D) 14 bushels. 24. With respect to the allocation of public goods the market fails A) True B) False 25. Santa Claus on Christmas Eve is A) Not a public commodity because his services on Christmas Eve are excludable B) Not a public commodity because his services on Christmas Eve are not congestible. C) A good example of a public commodity because his time is not congestible. D) A good example of a public commodity because his time is not rivalrous. 26. A recent study found that by the age of 20 years, in the U.S., A)