Economics Exam 2

1.

1 point

The greatest advantage of a corporation is

to have two or more owners

to pay out dividens to its owners

to be a large company

to shield owner(s) from liability due to debts or judgements against the firm

2.

1 point

We utilize discounting in order to obtain the present value of a future amount of money

because the professor said so

because it mathematically correct to do so

because it is a natural law we follow

because it is a cultural phenomenon representing an accurate description of how folks value time

3.

1 point

Sunk cost

refers to a cost that a firm cannot reverse

is the cost of shipping losses due to piracy

refers to a cost that a firm has not committed to pay yet

refers to intangible cost

4.

1 point

A club good is a good that is

non rival in consumption and non excludable

rival in consumption and excludable

rival in consumption and non-excludable

non rival in consumption and excludable

5.

1 point

John has eaten another potato chip and his total utility did not change. This means that John's marginal utility for the additional potato chip is

zero

positive

negative

not enough information

6.

1 point

When does a firms average variable cost exceed the average total cost?

when the average variable cost is at its minimum

never

when the average fixed cost is at its minimum

when the average total cost equals the average fixed cost

7.

1 point

Implicit cost could be equated to

indirect cost

opportunity costs not involving monetary payments

opportunity costs in general

indirect intangible costs

8.

1 point

When a firms MC increases quickly as it expands output due to a price rise for the goods it sells, then that firm is

price inelastic

price unitary elastic

price elastic

none of the above

9.

1 point

The net present value and benefit-cost ratio measures

can only determine if the analyzed project is efficient or not

can determine which project is comparatively more efficient

allow us to select between worthy projects

do not tell us anything about about efficiency

10.

1 point

If two units of a good provide 7 utils and the marginal utility of the third unit of the good is 2 utils, what is the total utility from consuming three units of the good?

3.5 utils

7 utils

2 utils

9 utils

11.

1 point

A stock is

a certificate of ownership with a claim to the issuing firm's profit

a loan from a commercial bank to a firm

a contract that gives ownership of a property to a lender if the borrower does not make loan payments

a debt obligation of a firm stipulating specified payments on a specified dates to debt obligation holders

12.

1 point

How is utility defined as?

ease of use

government provided goods like electricity

the satisfaction experience from consuming a good

the change in benefit from producing one additional unit of a good

13.

1 point

In the long run, the firm's total cost equals:

the total fixed costs + the total variable cost

the average fixed costs + average variable cost

the average fixed cost + the marginal cost

the total variable costs only

14.

1 point

The process of "rent seeking" is socially wasteful because

wage income is converted into profit income

resources devoted to transferring rents are not used to produce goods

it results in lower prices than would exist without monopoly

it discourage innovation and risk taking

15.

1 point

If MU(1)/P(1) > MU(2)/P(2), the consumer can equally the marginal utilities per dollar by

decreasing the consumption of good 1

increasing consumption of good 2

increasing the consumption of good 2 and decreasing the consumption of good 2

increasing the consumption of good 1 and decreasing the consumption of good 2

16.

1 point

An example of a public good is

street light

public tollway

restaurant

fitness club

17.

1 point

The principal agent problem as discussed in class is primarily about

the difference between the principal of an insurance agency and its insurance agent

the conflict of interests between top level managers and lower level managers

the conflict of interest between the owners and managers of a firm

none of the above

18.

1 point

If marginal utility from consuming a good or service is negative, total utility is

falling

increasing

at its maximum

negative

19.

1 point

A third party effect from an externality from a free to the public classic car show is more likely to accuse to

the classic car owners

the public visiting the car show

the classic car organizers

a BBQ vendor serving customers displaying their classic cars to attending the car show.

20.

1 point

Compound interest is

interest earned on your principal

interest earned on your deposit

interest earned on your compound

interest earned on your prior interest earned

21.

1 point

The firm negotiates a new agreement with its workers for lower wages. The ATC curve should be _____ and the AFC curve should be ______ after the agreement goes into effect.

lower; unchanged

lower; lower

higher; higher

unchanged; lower

22.

1 point

The marginal cost curve will pass upward through the minimum point of the:

average variable cost curve

average total cost curve

average fixed cost curve

average variable cost curve and average total cost curve

23.

1 point

A firm achieves constant returns to scale:

if it increases output and holds average cost constant

if it increases output without increasing average cost

if it increases output and increase average cost

if it increases output and lowers per unit costs

24.

1 point

Average product is

the change in total product due to an increase in the quantity of labor employed

the change in total product due to a one unit increase in any resource employed

the total output produced in a given time period

the total output divided by the cost of labor

25.

1 point

If Susan discount rate is 2%, her perspective between the present and the future is such that she

values the future more

values the present more than the future

is indifferent about the present and the future

none of the above

26.

1 point

The present value of a sum to be received in the future is smaller

the smaller the discount rate

the less the time period before receiving the sum

the smaller the inflation rate

the greater the discount rate

27.

1 point

As output increases average variable cost

stays constant

increase

decreases

decreases at first due to the effects of specialization but then increases

28.

1 point

Which of the following best describes the economic concept of a "free rider" problem?

the inability of Greyhound to get every passenger to pay

once provided, a public good can be used by everybody for free

a sports team owner can convince the city to build a new stadium

a requirement that each person entering a facility must pay to do so

29.

1 point

Suppose that in a month the per pound of Raspberries increase from $3.00 to $3.75. At the same time, the quantity of Raspberries decreases from 200 to 180 units. The price elasticity of demand is

2.5

.4

20

.55

30.

1 point

The addition to total cost that results from employing one additional unit of a resource is called

average factor cost

marginal revenue

average total cost

marginal cost

31.

1 point

When price elasticity of demand is 1.25, consumers are

price elastic

price inelastic

price unitary elastic

not enough information

32.

1 point

If a firm does not produce any output, it's:

fixed cost must be zero

variable cost must be zero

economic profit must be zero

total costs must be zero

33.

1 point

Which of the following is an example of something that economists would consider a cost but accountants would not?

a cost of material and supplies purchased by a firm

the salary that the firm actually pays to the firm owner

the interest income foregone by the firms owner because the owner invested funds into the firm

the cost of advertising

34.

1 point

Which of the following would be a variable cost to an automobile manufacturing firm?

property insurance

a factory in Detroit

car batteries

building burglar alarm

35.

1 point

The rational ignorance effect primarily refers to

ignoring low offers for one's used car when private persons are trying to sell a used car

ignoring a low grade on first midterm exam as it represents cost that can't be recovered

lack of incentives to go out and vote in elections as one's individual vote does not make a difference

lack of incentive to pay attention to a proffers lecture in a college class

36.

1 point

You deposit $5,000 in a high-yield savings account. The annual interest rate you earn is 5%. Assuming monthly compounding, you will have approximately $______ after three years

$5,250

$5,750

$5,775

$5,810

37.

1 point

What is your economics professor name?

38.

1 point

If a person goes to college to get an academic degree so that she is able to put her degree initials on her business card later in life and feel accomplished, we would say that this pride feeling is ______ of the higher education and academic degree.

an intangible and indirect benefit.

an intangible and direct benefit

tangible indirect benefit

tangible direct benefit

39.

1 point

The smaller the size of a county/city/village, the greater is the percentage of the budget spent, on average, on the following budget line item:

roads

education

parks

public safety

40.

1 point

If marginal utility from consuming a good or service is zero, total utility is

falling

increasing

decreasing

at its maximum

41.

1 point

Accounting profit can be calculated as

total revenue - explicit cost

total revenue - implicit cost

total revenue - explicit cost - implicit cost

total revenue - fixed costs

42.

1 point

Which of the following is easiest to start?

association

self-proprietorship

partnership

corporation

43.

1 point

Which of the following is a benefit of the free market price system?

The freedom of consumers to decide what they want to purchase

the existence of positive externalities

the price system encourages the production of public goods

the existence of negative externalities

44.

1 point

Which of the following is TRUE about the short run?

at least one resource is fixed

all resources are variable

all resources are fixed

none of the above

45.

1 point

Assuming a discount rate equal to 4%, what is the present value of $300 to be received two years from today?

$325

$288

$324

$277

46.

1 point

Joe runs a restaurant. He pays his employees $200,000 per year. His ingredients cost him $50,000 per year. Prior to running his restaurant, Joe was a lawyer earning $150,000 per year. What would economists say is Joe's economic cost of running a restaurant?

$150,000

$200,000

$400,000

$250,000

47.

1 point

The difference between "voting" in the market system and voting in the political system is primarily that:

In the election booth, you do not get what you vote for and get what you do not vote for

In the election booth, you do get what you vote for and do not get what you do not vote for

In the market, you are told what to buy, but in the election booth, democracy prevails

In the market, you get what vote for and do not get what you do not vote for

48.

1 point

Assuming that the discount rate is equal to 4%, what is the present value of $500,000 to be received two years from today?

$460,000

$481,000

$540,800

$462,500

49.

1 point

An externality is

a cost benefit arising from an activity that falls on a third party

an economic event that has nothing to do with the activity under discussion

an unforeseen consequence of an economic decision made by the government

an illegal method to increase buyers benefits and lower sellers cost

50.

1 point

if TFC is $2,000 and AVC is $10, a firm producing 1000 units of its product has total costs of _____.

$2,010

$12,000

$3,010

$8,000