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Midterm

# 01:220:102 Study Guide - Midterm Guide: Fixed Cost, Consumer Choice, Demand CurveExam

Department
Economic
Course Code
01:220:102
Professor
All
Study Guide
Midterm

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1
Name: ___________________________________ Date: ______________
Use the following to answer question 1:
1.
(Total Product and Marginal Product) Look at the table Total Product and Marginal
Product. The marginal product of the fourth worker is ________ units.
A)
90
B)
50
C)
20
D)
22.5
Use the following to answer question 2:
Scenario: Tom's Budget Constraint
Tom is trying to decide how to allocate his \$50 budget for music downloads and online movie
streaming when the price of a music download is \$1 and the price of a movie is \$5.
2.
(Scenario: Tom's Budget Constraint) Look at the scenario Tom's Budget Constraint. If
we measure music downloads on the horizontal axis and movies on the vertical axis, the
vertical intercept of Tom's budget line is:
A)
5.
B)
1/2.
C)
10.
D)
2.

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2
Use the following to answer question 3:
3.
(Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals.
If one wished to use a proportional or flat tax structure, one should use proposal
________, in which the percentage of income taxed is ________.
A)
3; 20%
B)
2; 20%
C)
2; 10%
D)
1; 20%
4.
In the short run, as the level of total production for a firm increases, the firmās total
product curve
A)
decreases but at a decreasing rate.
B)
decreases but at an increasing rate.
C)
increases but at an increasing rate.
D)
increases but at a decreasing rate.
5.
Sarah's accountant tells her that she made a profit of \$43,002 running a pottery studio in
Orlando. Sarah's husband, an economist, claims Sarah lost \$43,002 running her pottery
studio. This means her husband is claiming that she incurred ________ in ________
costs.
A)
\$43,002; explicit
B)
\$86,004; implicit
C)
\$86,004; explicit
D)
\$43,002; implicit
6.
At the optimal consumption bundle:
A)
the price of all goods consumed is equal.
B)
total utility from all goods consumed is equal.
C)
the marginal utility per dollar spent is equal for all goods consumed.
D)
the marginal utility of all goods consumed is equal.

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3
7.
When marginal cost is below average variable cost, average variable cost must be:
A)
falling.
B)
above average total cost.
C)
rising.
D)
below average total cost.
8.
As production increases and the fixed cost is divided by larger quantities of output, this
leads to lower average fixed cost. This is referred to as the ________ effect.
A)
constant cost
B)
diminishing returns
C)
increasing returns
D)
9.
Increases in the price of the good measured on the horizontal axis will make the
horizontal intercept ________ and make the budget line ________.
A)
smaller in value; flatter
B)
smaller in value; steeper
C)
larger in value; steeper
D)
larger in value; flatter
Use the following to answer question 10:
Figure: The Market for Yachts