Principles of Microeconomics EC 110 SAMPLE FINAL EXAM ANSWERS TO MULTIPLE CHOICE QUESTIONSARE AT THE END OF THE EXAM. If you find what you believe is an error in the answer key, please let me know. Name ________________________________ Student Number ____________ ____________ 1. Suppose a firm in a perfectly competitive market produces and sells 8 units of output and has a marginal revenue of $8.00. What would be the firm’s total revenue if it instead produced and sold 4 units of output? A. $4 B. $8 C. $32 D. $64 2. For a monopoly, when does marginal revenue exceed demand? A. When output is less than profit maximizing output. B. When output is greater than profit maximizing output. C. Never. D. None of the above. 3. When there is a surplus in a market A. there is downward pressure on price B. there is upward pressure on price C. the market could still be in equilibrium D. there are too many buyers chasing too few goods. 4. Marginal cost is the change is cost that results from a one unit increase in A. price B. cost C. output D. revenue 5. If an increase in the price of gasoline increases the demand for gas/electric hybrid cars, then A. hybrid cars are an inferior good. B. gasoline and hybrid cars are complements in consumption. C. gasoline is an inferior good. D. gasoline and hybrid cars are substitutes in consumption.6. In the above figure, at a price of $5, the firm's output would be _______units and it would ________. A. 12; incur an economic loss B. 5; shutdown C. 16; breakeven D. 12; breakeven 7. In order to be successful, a cartel must A. find a way to encourage members to produce more than they would otherwise produce B. agree on the total level of production for the cartel, but they need not agree on the amount produced by each member C. agree on the total level of production and on the amount produced by each member D. agree on the prices charged by each member, but they need not agree on amounts produced 8. Which of the following is correct about firms in an oligopoly? A. Each firm has complete control over its own selling price. B. All firms independently charge monopoly prices. C. No one firm controls price, but each has an influence on the price. D. There is no competition in oligopoly industries 9. A category 5 hurricane hits central Florida wreaking havoc with the orange crop. The devastation causes the A. supply curve for orange juice to shift to the left, causing the price of orange juice to fall B. supply curve for orange juice to shift to the left, causing the price of orange juice to rise C. supply curve for orange juice to shift to the right, causing the price of orange juice to rise D. supply curve for orange juice to shift to the right, causing the price of orange juice to fall 10. The downward slope of a demand curve A. represents the law of demand B. shows that as the price of a good rises, consumers increase the quantity they demand C. indicates how quantity demanded changes when incomes rise and the good is normal D. indicates how demand changes when incomes rise and the good is normal 11. When a person has a comparative advantage in producing a good or service, the person has a(n) A. higher opportunity cost in producing that product than someone else B. constant opportunity cost in producing that product C. increasing opportunity cost in producing that product D. lower opportunity cost in producing that product than someone else 12. The long run is a time period that is A. five years or longer B. long enough to change the level of labor hired C. long enough to change the size of the firm’s plant D. ten years or longer13. Consumer surplus is A. the quantity of a good consumers get but did not have to pay for B. the amount a consumer has to pay less the amount the consumer was willing to pay C. the amount the consumer was willing to pay less the amount the consumer paid D. the total value of a good to a consumer 14. A firm that is a price taker faces a perfectly A. elastic supply curve B. inelastic demand curve C. elastic demand curve D. inelastic supply curve 15. The above figure shows the demand and supply curves for housing. What would be the effects of a rent ceiling equal to $1000 per month? A. nothing because the rent ceiling has no effect on the equilibrium price and quantity. B. a shortage equal to 3000 apartments. C. a surplus equal to 3000 apartments. D. a surplus equal to 250 apartments. 16. New firms will exit a perfectly competitive market when: A. average variable costs are less than average total costs B. price is greater than average variable costs C. marginal revenue is greater than average total costs in the short run D. price is less than average total costs in the long run 17. A point on the production possibilities frontier reflects an A. attainable point with full employment of all resources B. attainable point without full employment of all resources C. unattainable point with full employment of all resources D. unattainable point without full employment of all resources18. Sue's Sea Shells by the Sea Shore is a perfectly competitive firm selling sea shells at the market price of $3.50/dozen. Sue's Sea Shells by the Sea Shore has fixed costs of $30/day and a daily variable cost schedule in the table above. The profitmaximizing level of output for Sue's Sea Shells by the Sea Shore is A. 202 dozen sea shells by the sea shore per day. B. 204 dozen sea shells by the sea shore per day. C. 206 dozen sea shells by the sea shore per day. D. 205 dozen sea shells by the sea shore per day. 19. If Pizza Hut raises the price of a slice of pizza from $3.00 to $3.25, the quantity demanded decreases from 1,500 slices per week to 1,300 slices per week. The demand for slices of pizza is ________ and the total revenue received by this Pizza Hut ________. A. elastic; decreases B. inelastic; decreases C. elastic; increases D. inelastic; decreases 20. Paula Deen runs a seafood restaurant in Savannah, Georgia. Her total revenue last year was $150,000. The rent on her restaurant was $48,000, her labor costs were $42,000, and her materials, food, and other variable costs were $20,000. Paula Deen could have worked as a cookbook writer and earned $40,000 per year or as a chef in another restaurant and earned $35,000. Paula Deen’s economic profit is equal to A. $0.0 per year. B. $5,000 per year. C. –$35,000 per year. D. $40,000 per