Exam # 2 Name: _________________________________
ECO 182 Student #_______________________________
1) International trade arises from
A) absolute advantage.
B) comparative advantage.
C) importation duties.
D) the advantage of execution.
2) The United States has a comparative advantage in producing airplanes if
A) it can produce them at a lower opportunity cost than can other nations.
B) it can produce them at a lower dollar cost than can other nations.
C) it can produce a larger quantity than can other nations.
D) it has a larger quantity of skilled workers than do other nations.
3) The gains from trade that are possible when two countries have different opportunity costs for wheat and coffee are realized when
A) trade occurs and resources are reallocated within the two countries.
B) the two countries continue to produce the same quantities of wheat and coffee.
C) each country has an absolute advantage in one of the two commodities.
D) the demand curves in both countries shift inward.
4) A country specializes in the production of goods for which it has a comparative advantage, so
A) some producers and consumers win, some lose, but overall the gains exceed the losses.
B) all producers win.
C) all consumers win.
D) producers win, consumers lose, but overall the gains exceed the losses.
5) A country opens up to trade and imports clothing. In the clothing market, surplus has been redistributed from
A) producers to consumers
B) consumers to producers
C) government to consumers
D) producers to government
6) A tariff is a
A) tax on an exported good or service.
B) tax on an imported good or service.
C) subsidy on an exported good.
D) subsidy on an imported good.
7) A major purpose of tariffs is to
A) encourage imports.
B) encourage exports.
C) discourage imports.
D) discourage exports.
8) A person's consumption possibilities is defined by the budget line because
A) it marks the boundary between what is affordable and unaffordable.
B) it represents the individual's preference for different combinations of goods.
C) it marks the boundary between what can be produced and what is unattainable given the current state of technology and resources.
D) all consumers must consume on their budget line.
9) The total benefit that a person receives from the consumption of goods and services is called
A) total utility.
B) marginal utility.
C) marginal cost.
D) opportunity cost.
10) Marginal utility is the
1 A) total satisfaction that a person gets from the consumption of all of the units of a good consumed.
B) The change in satisfaction that results from a oneunit increase in the quantity of a good consumed.
C) maximum price that a consumer is willing to pay for an additional unit of a good.
D) additional cost to a consumer when an additional unit of a good is consumed.
11) ________ is the additional satisfaction a person receives from consuming an extra unit of a good.
A) Total utility
B) Marginal utility
C) Diminishing marginal utility
12) The marginal utility from the consumption of a good is equal to the
A) total utility divided by the quantity consumed.
B) total utility divided by the price.
C) change in total utility divided by the change in the quantity consumed.
D) change in total utility divided by the change in price.
13) The total utility from three skirts is
A) three times the marginal utility of the third skirt.
B) three times the price of a skirt.
C) three skirts divided by total income.
D) the sum of the marginal utility of the first skirt plus the marginal utility of the second skirt plus the marginal utility of the
14) The principle of diminishing marginal utility says that
A) marginal utility is negative as the quantity of the good consumed increases.
B) total utility decreases as the quantity of the good consumed increases.
C) total utility increases by smaller and smaller amounts as the quantity of the good consumed increases.
D) total utility increases by larger and larger amounts as the quantity of the good consumed increases.
15) Which of the following is consistent with the assumptions of marginal utility theory?
A) As Jose consumes more of one good, his marginal utility from consuming more of that good decreases.
B) As Jose consumes more of one good, his marginal utility from consuming more of that good increases.
C) As Jose consumes more of one good, his marginal utility from consuming more of all goods decreases.
D) As Jose consumes more of one good, his marginal utility from consuming more of all good increases.
16) As the quantity of a good consumed increases, its marginal utility ________ and its total utility ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
17) If marginal utility is positive but diminishing, as more units of a good are consumed, then the total utility from the good must be
B) positive and rising at an increasing rate.
C) positive and rising at a decreasing rate.
D) positive and rising at any rate.
18) The variables that determine a household's budget line are
A) its preferences and income.
B) its preferences and prices.
C) prices and income.
D) None of the above are correct.
19) A budget line shows the
2 A) consumption possibilities of a consumer at a given level of income and prices.
B) complete set of preferences for a household at various incomes.
C) consumption possibilities for several sets of relative prices at a level of income.
D) rate at which consumers wish to substitute one good for another.
20) Anne consumes only magazine and CDs. Her income equals $60 per month. CDs are $12 each and magazines are $5 each. What is
the equation for her budget line?
A) $60 = Q + Q
B) $60 = $12Q + $5Q
C) 12 = 2Q + 6
D) $60 = 12Q + 5Q
21) If the price of the good measured on the horizontal axis falls, a consumer's budget line
A) becomes flatter.
B) becomes steeper.
C) shifts rightward and its slope does not change.
D) shifts leftward and its slope does not change.
22) The most important goal of the firm is to
A) maximize its revenues.
B) maximize its sales volume.
C) maximize its profits.
D) minimize its costs.
23) Firms that survive in the long run are usually those that
A) become as large as possible.
B) remain small.
C) use more capital rather than more labor.
D) earn the largest possible profit.
24) A firm's opportunity costs ________.
A) equal the costs of resources it buys from others in the market
B) include the cost of using resources owned by the firm
C) increase when economies of scope exist
D) do not include any opportunity costs for resources the owner suppliers
25) Which of the following is part of a firm's opportunity costs?
II. utility costs
III. interest on a bank loan
IV. interest forgone on funds used to