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Economics

ECN 104

Tom Barbiero

Winter

Description

Ryerson University
Department of Economics
ECN 104 Test Two F09
Instructor: Dr. T.Barbiero Duration: 50 minutes
Name___________________________________________
Student No._______________________________________
Choose the BEST answer and record on your scanner sheet. The questions are of equal weight.
Use the following to answer questions 1-3:
1. Refer to the diagram above wherein the downsloping linear lines are budget lines and
I , I , and I comprise an indifference map. With respect to points 2, 3, and 4, it can be
1 2 3
said that:
A) point 4 entails more utility than 3, but less than 2.
B) point 4 entails more utility than 2, but less than 3.
C) point 4 yields more utility than either 2 or 3.
D) the levels of utility associated with these three points cannot be compared.
E) Both B and D are correct.
Page 1 2. Refer to the diagram above where the downsloping linear lines are budget lines and I ,
1
I2, and 3 comprise an indifference map. The combinations of products M and N
indicated by points 1, 2, and 5 are such that:
A) point 2 yields more utility than either 1 or 5.
B) points 1 and 5 yield more utility than point 2.
C) points 1, 2, and 5 yield equal amounts of utility.
D) the levels of utility associated with these three points cannot be compared.
E) Both B and D are correct.
3. Refer to the diagram above where the downsloping linear lines are budget lines and I1,
I2, and 3 comprise an indifference map. The combinations of products M and N
indicated by points 1, 3, and 5 are such that:
A) all three imply the same level of utility.
B) 1 and 5 imply a higher level of utility than does 3.
C) 3 implies a higher level of utility than does 1 or 5.
D) none of the above statements are correct.
Use the following to answer questions 4-5:
The table below shows the hypothetical utility schedule for a consumer of chocolate candy bars.
Number consumed Total utility
0 0
1 5
2 11
3 18
4 24
5 30
6 35
7 32
4. Refer to the table above. Marginal utility becomes negative with the consumption of the:
A) third candy bar.
B) fourth candy bar.
C) fifth candy bar.
D) sixth candy bar.
E) seventh candy bar.
Page 2 5. Refer to the table above. This consumer begins to experience diminishing marginal
utility when consuming the:
A) first candy bar.
B) second candy bar.
C) third candy bar.
D) fourth candy bar.
E) fifth candy bar.
Page 3 6. Refer to the data.
Average
Average
fixed
variable
Output
cost
cost
1
$50.00
$100.00
2
25.00
80.00
3
16.67
66.67
4
12.50
65.00
5
10.00
68.00
6
8.37
73.33
7
6.14
80.00
8
6.25
86.50
Page 4 A) would be zero.
B) would be $50.
C) would be $150.
D) would be $150 plus the opportunity cost of shutting down.
Use the following to answer questions 7-9:
The following two schedules show the amounts of additional satisfaction (marginal utility) which
a consumer would get from successive quantities of products J and K.
Units MU j Units MU k
of J of K
1 56 1 32
2 48 2 28
3 32 3 24
4 24 4 20
5 20 5 12
6 16 6 10
7 12 7 8
7. Refer to the data. What level of total utility is realized from the equilibrium combination
of J and K determined in the previous question?
A) 156 utils
B) 124 utils
C) 276 utils
D) 36 utils
E) 24 utils
8. Refer to the data. If the consumer's money income were cut to $28, she would maximize
her satisfaction by purchasing:
A) 3 units of J and 3 units of K.
B) 1 unit of J and 3 units of K.
C) 4 units of J and 1 unit of K.
D) 3 units of J and 5 units of K.
E) 2 units of J and 3 units of K.
Page 5 9. Refer to the data. If the consumer has a money income of $52 and the prices of J and K
are $8 and $4 respectively, the consumer will maximize her utility by purchasing:
A) 2 units of J and 7 units of K.
B) 5 units of J and 5 units of K.
C) 4 units of J and 5 units of K.
D) 6 units of J and 3 units of K.
E) 7 units of J and 4 units of K.
Page 6 10. Refer to the table. The average total cost of producing 35 units of output is:
Input workers
Output
TFC
TVC
Total cost
0
0
50
0
1
8
50
40
90
2
20
50
80
3
28
50
120
170
4
35
50
210
5
41
50
200
250
Page 7 A) $1.41.
B) $4.57.
C) $4.90.
D) $5.00.
E) $6.00.
11. Refer to the data.
The accompanying table shows average total costs (ATC) for a manufacturing firm
whose total fixed costs are $10:
Output
ATC
1
$40
2
27
3
29
4
31
5
38
The total cost of producing 4 units of output:
A) is $31.
B) is $87.
C) is $104.
D) is $108.
E) is $124.
Page 8 Use the following to answer questions 12-13:
The following total utility data is for products L and M. Assume that the prices of L and M are
$3 and $4 respectively and that the consumer's income is $18.
Units of L Total utility Units of M Total utility
1 9 1 16
2 15 2 28
3 18 3 36
4 20 4 40
5 21 5 42
12. Refer to the above data. What level of total utility does the consumer realize in
equilibrium?
A) 87 utils
B) 114 utils
C) 51 utils
D) 58 utils
E) A and B can both be correct
13. Refer to the above data. How many units of the two products will the consumer
purchase?
A) 3 of L and none of M
B) 4 of L and 2 of M
C) 3 of L and 5 of M
D) 3 of L and 3 of M
E) 2 of L and 3 of M
Use the following to answer questions 14-17:
The marginal utility schedules for product X and product Y for a hypothetical consumer. The
price of product X is $4 and the price of product Y is $2. The income of the consumer is $20.
Product X Product Y
Quantity MU x Quantity MU y
1 32 1 24
2 28 2 20
3 24 3 16
4 20 4 12
5 16 5 8
Page 9 14. Refer to the table. If the consumer buys both product X and product Y, how much will
the consumer buy of each to maximize utility?
A) 4X and 2Y
B) 3X and 4Y
C) 4X and 3Y
D) 5X and 3Y
E) 5X and 4Y
15. Refer to the table. When the consumer purchases the utility-maximizing combination of
product X and product Y, total utility will be:
A) 72.
B) 84.
C) 136.
D) 146.
E) 156
16. Refer to the table. Suppose that the consumer's income increased from $20 to $30.
What would be the utility-maximizing combination of products X and Y?
A) 3X and 3Y
B) 4X and 4Y
C) 5X and 4Y
D) 5X and 3Y
E) 5X and 5Y
17. Refer to the table. If the consumer can only buy product X, how much will the
consumer buy and what will be the total utility per dollar spent?
A) 4X and 20
B) 4X and 104
C) 5X and 16
D) 5X and 116
E) 5X and 120
Page 10 Use the following to answer questions 18-22:
The following table provides information on the production of a product that requires one
variable input.
Input Total product
0 0
1 5
2 20
3 32
4 42
5 50
6 55
7 58
8 58
9 56
18. Refer to the table above. With the addition of the first unit of input, the marginal product
is:
A) 5 and the average product is 8.4.
B) 5 and the average product is 5.0.
C) 8 and the average product is 8.4.
D) 8 and the average product is 10.0.
E) 8 and the average product is 12.0
19. Refer to the table above. There are negative marginal returns when the:
A) fifth unit of input is added.
B) sixth unit of input is added.
C) seventh unit of input is added.
D) eight unit of input is added.
E) ninth unit of input is added.
20. Refer to the table above. Diminishing returns set in with the addition of the:
A) first unit of input.
B) second unit of input.
C) third unit of input.
D) fourth unit of input.
E) fifth unit of input.
Page 11 21. Refer to the table above. When the marginal product is zero, then total produ

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