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University of British Columbia
ECON 101

MICROECONOMICS 101PRACTICE FINAL EXAM A Multiple Choices1If a profitmaximizing monopoly is producing at an output at which marginal cost exceeds marginal revenue itaShould raise price and lower outputbShould lower price and raise outputcShould lower price and lower outputdIs making losseseIs maximizing profit2A natural monopoly is defined asaa market in which competition and entry are restricted by the granting of a government licenseban industry in which one firm can supply the entire market at a lower price than two or more firmsca market in which competition and entry are restricted by the granting of a patentdany market where one firm constitutes the entire industryeNone of the above3Suppose that 2 Pizzas can be produced with 2 workers and 4 pizzas can be produced with 6 workers Then which of the following is correctaAverage product is 12bAverage variable costs are risingcThe marginal product is higher than the average productdThe marginal product of labor is 2eNone of the above4Which of the following will definitely cause an increase in the equilibrium priceaAn increase in both demand and supplybAn decrease in both demand and supplycAn increase in demand combined with a decrease in supplydA decrease in demand combined with an increase in supplyeNone of the above5The relative prices of bacon to beer PP is 13If Bobs current consumption is at a level baconbeerwhere MUMUis 31 then to achieve maximum utility Bob mustbeerbacon aConsume more beer and less baconbNot change his current consumption of beer and baconcConsume less beer and more bacondIncrease the price of beereConsume three times as much beer and onethird as much bacon6 Potatoes are inferior goods if aAn increase in the price of potatoes causes a decrease in the quantity of potatoes consumers want to buybA decrease in income causes an increase in the demand for potatoescA increase in income causes an increase in the demand for potatoesdIt violates the law of demandePotatoes are a low quality good7If the income elasticity of demand is 2 then a 1 percent decrease in income willaDouble the quantity demandedbReduce the quantity demanded by halfcIncrease the quantity demanded by 2 percentdReduce the quantity demanded by 2 percenteIncrease the quantity demanded by 05 percent1
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