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Tutorial Questions III
Assist. Prof. Dr. Barış GÖK
INTRODUCTION TO MICROECONOMICS
TUTORIAL QUESTIONS III
1) Jane has $500 a week to spend on clothing (c) and food (f). The price of clothing is $25 and the price of food is $10. What is the equation for Jane's budget constraint? A) $25 × Clothing + $10 × Food = $ B) ($25 × Clothing) × ($10 × Food) < $ C) $25 × Clothing + $10 × Food ≥ $ D) ($25 × Clothing) / ($10 × Food) = $
2) Refer to Figure above. Assume Mr. Lingle is on budget constraint AC. If the price of a gardenburger is $6, Mr. Lingle's monthly income is A) $24. B) $60. C) $200. D) $240. 3) Refer to Figure above. Assume Mr. Lingle's budget constraint is AC. He will not spend his entire income at point A) A. B) B. C) E. D) D. 4) Refer to Figure above. Assume Mr. Lingle's budget is AC. Given his current monthly income, he CANNOT purchase the quantities of the two goods at point A) A. B) B. C) E. D) D. 5) Refer to Figure above. Assume Mr. Lingle's budget is AC. At which point does Mr. Lingle spend exactly his income? A) A. B) D. C) E. D) The answer cannot be determined with the given information. 6) Refer to Figure above Along budget constraint AC, the opportunity cost of one gardenburger is A) 1/4 of a beer. B) 1 beer. C) 2 beers. D) changing as Mr. Lingle moves down his budget constraint. 7) Refer to Figure above. Along budget constraint AC, the opportunity cost of one beer is A) 1/4 of a gardenburger. B) 1 gardenburger. C) 2 gardenburgers. D) changing as Mr. Lingle moves down his budget constraint.
Tutorial Questions III
Assist. Prof. Dr. Barış GÖK
8) Refer to Figure above. Mr. Lingle's budget constraint is AC. His choice set is all points A) to the right of budget constraint AC. B) along the vertical and horizontal axes. C) along budget constraint AC. D) in the area bounded by OAC.
Number of Hamburgers per Day
Total Utility Marginal Utility
1 30 2 52 3 67 4 76 5 4 Number of Sodas per Day
Total Utility Marginal Utility
1 20 2 35 3 47 4 57 5 7 9) Refer to Table above. The marginal utility of the third hamburger per day is A) 5. B) 15. C) 22. D) 67. 10) Refer to Table above. Diminishing marginal utility sets in after the ________ soda per day. A) first B) second C) third D) fourth 11) Refer to Table above. The total utility of five hamburgers per day is A) 76. B) 80. C) 96. D) indeterminate from this information. 12) Refer to Table above. If the price of a soda is $2, the price of a hamburger is $6, and George has $14 of income, George's utility maximizing combination of sodas and hamburgers per day is A) 4 sodas and 1 hamburger. B) 3 sodas and 1.5 hamburgers. C) 1 soda and 2 hamburgers. D) indeterminate from this information. 13) The law of diminishing marginal utility refers to A) a consumer's decrease in total satisfaction as she consumes more units of a good. B) the idea that total utility is negative. C) a consumer's decrease in additional satisfaction as she consumes more and more units of a good. D) the idea that marginal utility is negative. 14) We can state the utility-maximizing rule in words in the following way: A person maximizes utility when she equalizes the ________ across products. A) total utility per TL spent B) marginal utility per TL spent C) total utility D) marginal utility 15) A utility-maximizing consumer buys so as to make ________ for all pairs of goods. A) TUx/Px = TUy/Py
Tutorial Questions III
Assist. Prof. Dr. Barış GÖK
C) marginal product must be decreasing. D) marginal product could either be increasing or decreasing. 24) Firms have an incentive to substitute labor for capital as the A) price of capital increases. B) price of labor increases. C) marginal product of labor decreases. D) price of capital decreases. 25) The cost minimizing equilibrium condition can be written as A) P (^) L = P (^) K. B) (MP (^) L)(P (^) L) = (MP (^) K)(P (^) K). C) MP (^) L = MP (^) K. D) MP (^) L/P (^) L = MP (^) K/P (^) K. 26) Costs of production are determined A) only by the input prices that are available. B) by the technologies that are available and by the demand for the output. C) by the technologies that are available and by input prices. D) only by the technologies that are available. 27) Which statement is true? Fixed costs A) are the difference between total costs and average variable costs. B) depend on the firm's level of output. C) are zero if the firm is producing nothing. D) do NOT exist in the long run. 28) Which statement is NOT true? Variable costs A) are equal to the difference between total cost and total fixed cost. B) are zero if output is zero. C) remain constant as output goes up. D) are equal to total costs in the long run. 29) Economists usually assume that ________ is a fixed input in the ________ run. A) labor; long B) capital; long C) labor; short D) capital; short 30) The formula for total fixed cost is A) TFC = TC + TVC. B) TFC = TC -TVC. C) TFC = TC/TVC. D) TFC = TVC -TC. 31) The total fixed costs for a Barber Shop are $3,000. If The Barber Shop produces 300 haircuts, the average fixed costs are A) $0.20. B) $5. C) $10. D) $100. 32) As output increases, average fixed costs A) decrease. B) increase. C) remain constant. D) initially decrease and then increase. 33) Marginal cost A) always equals average cost. B) is the average cost of production divided by output. C) is the increase in total cost resulting from producing one more unit. D) equals the increase in AVC resulting from producing one more unit. 34) A firm will begin to experience diminishing returns at the point where A) marginal product increases. B) marginal cost increases. C) marginal cost decreases.
Tutorial Questions III
Assist. Prof. Dr. Barış GÖK
D) Both B and C are correct. 35) Diminishing marginal returns implies A) decreasing marginal costs. B) decreasing average fixed costs. C) increasing marginal costs. D) decreasing average variable costs. 36) Marginal cost is ________ average variable cost when ________. A) equal to; average variable cost is minimized. B) less than; total cost is maximized C) equal to; average total cost is minimized D) greater than; average fixed cost is minimized 37) The explanation for why marginal cost is positive and rising in the short run is ________ marginal product of labor in the production process. A) an increasing B) a diminishing C) a constant D) a zero 38) In the short run when the marginal product of labor ________, the marginal cost of an additional unit of output ________. A) falls; falls B) rises; rises C) falls; doesn't change D) rises; falls 39) In the short run, as output increases, A) marginal cost eventually decreases. B) the difference between total cost and average variable cost decreases. C) the difference between average total cost and average variable cost decreases. D) All of the above are correct. 40) If the marginal cost curve is below the average variable cost curve, then A) average variable costs are increasing. B) marginal cost must be decreasing. C) average variable costs could either be increasing or decreasing. D) average variable costs are decreasing. 41) If the average variable cost curve is above the marginal cost curve, then A) marginal costs must be increasing. B) marginal costs can be either increasing or decreasing. C) average variable costs must be increasing. D) marginal costs must be decreasing. 42) If marginal cost is between average variable cost and average total cost, then A) average variable cost is increasing and average total cost is decreasing. B) both average variable cost and average total cost are decreasing. C) average variable cost is decreasing and average total cost is increasing. D) both average variable cost and average total cost are increasing. 43) The marginal cost curve intersects the average variable cost curve at the ________ value of the average variable cost curve. A) minimum B) zero C) maximum D) average 44) Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to ________ and their profit maximizing level of output to ________. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
Tutorial Questions III
Assist. Prof. Dr. Barış GÖK
B) AVC is greater than MC. C) price is greater than or equal to AVC. D) price is greater than or equal to AFC. 53) The short-run supply curve of a competitive firm is the portion of A) its average total cost curve that lies above its marginal cost curve. B) the average variable cost curve that lies above its marginal cost curve. C) its marginal cost curve that lies above its average total cost curve. D) its marginal cost curve that lies above its average variable cost curve.
54) Refer to Figure above. This firm's shutdown point corresponds to Point
A) A.
B) B.
C) C.
D) D.
55) Refer to Figure above. This firm's short-run supply curve is the firm’s
A) AVC curve to the right of Point B. B) marginal cost curve above Point A. C) marginal cost curve above Point D. D) marginal cost curve above Point B.
56) Refer to Figure above. This firm will continue to operate in the short run, but incur an
economic loss if price is A) between $0 and $4. B) between $4 and $7. C) between $7 and $13. D) above $13.
57) Refer to Figure above. This firm will earn a zero economic profit if price is
A) $0.
B) $4.
C) $7.
D) $13.
58) For economies of scale, a(n) ________ in a firm's scale of production leads to ________
average total cost. A) increase; higher B) decrease; no change in C) increase; lower D) decrease; lower
59) When an increase in the scale of production leads to higher average costs, the industry
exhibits A) constant returns to scale. B) diminishing returns. C) decreasing returns to scale. D) increasing returns to scale. 60) On the downward sloping portion of a firm's long-run average cost curve, it is experiencing A) economies of scale. B) diseconomies of scale.
Tutorial Questions III
Assist. Prof. Dr. Barış GÖK
C) diminishing marginal returns. D) constant returns to scale. 61) Monopolists differ from perfectly competitive firms A) on the cost and demand sides of the profit equation. B) on the cost side of the profit equation alone. C) on neither the cost nor demand sides of the profit equation. D) on the demand side of the profit equation alone. 62) For a monopolist, price A) can be greater than or less than marginal revenue. B) is less than marginal revenue. C) is greater than marginal revenue. D) equals marginal revenue at all output levels.
63) Refer to Figure above. The profit-maximizing level of output for this monopolist is ________ units of output. A) 20 B) 22 C) 24 D) 26 64) Refer to Figure above. The profit-maximizing price for this firm is A) $5. B) $7. C) $9. D) $11. 65) Refer to Figure above. If this firm is producing the profit-maximizing quantity and selling it at the profit-maximizing price, the firm's profit will be A) $0. B) $88. C) $154. D) $242. 66) A profit-maximizing monopolist will produce the level of output where A) price equals marginal cost. B) marginal cost is minimized. C) marginal revenue equals marginal cost. D) marginal revenue is zero. 67) A monopolist sets both price and quantity simultaneously, and the amount of output that it supplies depends A) only on the demand curve. B) on both its marginal cost curve and the demand curve that it faces. C) only on the marginal cost curve. D) on both its average cost curve and the demand curve that it faces.
Tutorial Questions III
Assist. Prof. Dr. Barış GÖK
B's Strategy Advertise Don't Advertise A's profit $75 million A's profit $200 million Advertise B's profit $75 million B's profit $50 million A's Strategy Don't A's profit $50 million A's profit $100 million Advertise B's profit $200 million B's profit $100 million
78) Refer to Table above. Firm A’s dominant strategy is A) to not advertise. B) to advertise. C) dependent on what Firm B does. D) indeterminate from this information, as no information is provided on Firm A s risk preference. 79) Refer to Table above. What is the Nash equilibrium in the game? A) (Don't Advertise, Advertise) B) (Advertise, Don't Advertise) C) (Advertise, Advertise) D) (Don't Advertise, Don't Advertise) 80) Refer to Table above. If both firms follow a maximin strategy, the equilibrium in the game is ________. A) (Don't Advertise, Don't Advertise) B) (Advertise, Advertise) C) (Don't Advertise, Advertise) D) (Advertise, Don't Advertise) 81) Refer to Table above. The result of this game is known as a ________. A) prisoner's dilemma B) collusive outcome C) tit-for-tat outcome D) repeated strategy 82) Refer to Table above. The result of this game is a prisoner's dilemma. In which of the following cases is it most likely that the firms will be able to overcome the prisoner's dilemma? A) government intervention B) when both firms follow a maximin strategy C) repeated play D) a single interaction 83) A ________ occurs if all players in a game play their best strategies given what their competitors do. A) tit-for-tat strategy B) dominant strategy C) prisoner's dilemma D) Nash equilibrium 84) A player chooses a maximin strategy to ________ gain the player can earn. A) maximize the maximum B) minimize the minimum C) minimize the maximum D) maximize the minimum
