ECON 103 Study Guide - Final Guide: Marginal Revenue, Monopolistic Competition, Average Variable Cost

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ultramarinekoala638

30 Dec 2015

School

University of Victoria

Department

Economics

Course

ECON 103

Professor

All

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Sample final exam questions (choose the best answer for each question. Unless told otherwise, assume that demand is downward sloping and supply is upward sloping. : suppose that - at a given level of an economic activity - marginal cost is equal to marginal benefit. Which of the following statements is true: net benefits are maximized. Marginal net benefit equals zero. a) b) c) d) I and iii only: suppose that - at a given level of some economic activity - marginal cost is greater than marginal benefit. Opportunity cost accounts for the alternative uses of resources such as time and money. a) b) c) d) 41: suppose that you are willing to pay to see a movie on saturday night. A ticket costs , and the next-best alternative use of your time would be to go to a concert which costs and which you value at .

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2. A buyer has purchased four units of good X. The marginal benefit of the fifth unit of X exceeds the marginal cost of the fifth unit of good X. Which of the following reasons explains why the buyer should purchase the fifth unit?

I. The marginal net benefit of the fifth unit is positive.
II. Buying the fifth unit will increase total benefits by more than total costs.
III. Buying the fifth unit will increase total benefits and decrease total costs.

a) I only
b) I and II only
c) II only
d) I, II, III

1. Suppose marginal cost of abating X units of pollution is given by: MC(X) = 2X and marginal benefits are MB(X) = 16-2x when X<= 3 and 10 when X > 3. Current pollution = 6.

a.) What is the optimal level of pollution abatement, X*? How much pollution is there when X = X*?

COMMENT: For this part I set 2x = 16-2x and got 4 but 4>3 so I don't think that's a valid solution. So I set 2x = 10 when X >3 and got 5, what's the correct approach?

b.) What are total costs, marginal costs, and total net benefits at X = X*?

c.) What is the total net benefit of making (and encofring) a rule that bans pollution completely? What is the marginal benefit from removing the last little bit of pollution (i.e. the marginal benefit around the point X = Xmax)

d.) Suppose air pollution abatement in the U.S. is currently X* (that is, we currently have the ideal amount of air pollution given the costs and benefits of abatement). Now suppose that an effective vaccine against asthma is invented and given to everyone. Would this increase or decrease X*? Come up with your own example of a new technology that would move X* in the opposite direction and explain why it would have this effect.

Poster below me asked for irrelevant information that is not needed to answer the question.

Can you solve them and tell me if youre sure 100% 100% 100%

Question 1 (1 point)

If two variables move together but are otherwise unrelated, we have

Question 1 options:

a fallacy of composition.

an econometric model.

a spurious correlation.

an efficiency problem.

evidence of a weak correlation but strong causation.

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Question 2 (1 point)

The Latin expression "ceteris paribus": is essential in ______.

Question 2 options:

collecting data.

identifying sunk costs.

evaluating theories.

recognizing scarcity.

developing spurious relationships.

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Question 3 (1 point)

Opportunity cost is best defined as

Question 3 options:

marginal cost minus marginal benefit.

the time spent on an economic activity.

the value of the best forgone alternative.

the monetary cost of an economic decision.

marginal cost plus marginal benefit.

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Question 4 (1 point)

A cost that cannot be recovered at the time a decision is being made is termed a(n)

Question 4 options:

marginal cost.

scarcity cost.

sunk cost.

average cost.

opportunity cost.

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Question 5 (1 point)

If the marginal costs of 1, 2, and 3 hours of talking on the phone are $50, $75, and $105, then the total costs are

Question 5 options:

$50, $150, and $315.

$50, $41.67, and $115.

$50, 125, and $230.

$50, $175, and $405.

impossible to calculate with information given.

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Question 6 (1 point)

In general, individuals should specialize in producing those goods for which they

Question 6 options:

can produce more quickly than others.

can produce less quickly than others.

have the lowest opportunity cost compared to others.

have the highest opportunity cost compared to others.

have an average opportunity cost.

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Question 7 (1 point)

The extra benefit that comes from an extra unit of activity is called the _________ of the activity.

Question 7 options:

benefit

marginal benefit

marginal cost

average benefit

reservation benefit

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Question 8 (1 point)

The marginal benefit of an activity is the

Question 8 options:

same as the total benefits of the activity.

total benefit divided by the level of the activity.

change in the activity divided by the change in benefits.

extra benefit associated with an extra unit of the activity.

total benefit divided by the change in the level of the activity.

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Question 9 (1 point)

The fundamental problem that is studied in economics is that

Question 9 options:

consumers have limited wants in the face of unlimited resources.

markets should function without government interference.

Canada is too wealthy.

consumers have unlimited wants in the face of limited resources.

there are unlimited resources.

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Question 10 (1 point)

The range of topics, or issues, that fit within the definition of economics is

Question 10 options:

limited to market activities, e.g., buying soap.

limited to individuals and firms.

extremely wide, requiring only the ideas of choice and scarcity.

limited to governments and nations.

very limited.

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Question 11 (1 point)

When economists make predictions using the framework of a given economic model, it is usually based on

Question 11 options:

personal experiences.

important relationships between particular variables.

mathematical abstractions.

political implications.

the profit-maximizing objective.

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Question 12 (1 point)

The cost of spending an evening partying instead of studying economics is

Question 12 options:

the resulting decrease in the test score in Economics.

the time spent at the party.

the score of the test.

the cost of the textbook.

university tuition.

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Question 13 (1 point)

As one progresses from a one-person economy to a large, multi-person economy, the shape of production possibilities curve changes from

Question 13 options:

downward sloping to upwards sloping.

linear to convex (bowed into the origin).

concave (bowed out from the origin) to linear.

convex (bowed into the origin) to concave (bowed out from the origin).

linear to concave (bowed out from the origin).

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Question 14 (1 point)

Which is NOT a sunk cost?

Question 14 options:

Monthly rent of $1,000 contractually specified in a one-year lease.

An insurance premium of $50 per year, paid last month.

An attorney's retainer of $50,000 per year.

A worker's wage of $15 per hour.

A non-refundable deposit for a tender.

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Question 15 (1 point)

"We should support government intervention because the market produces undesirable outcomes" is an example of

Question 15 options:

positive economics.

normative economics.

comparative economics.

negative economics.

formative economics.

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ECON 103 Study Guide - Final Guide: Marginal Revenue, Monopolistic Competition, Average Variable Cost

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