ECON 111 Mid term multiple choice questions Flashcards
Opportunity cost is
A) the highest-values alternative that we give up to get something
B) the value of your favorite activity
C) the marginal benefit from an activity
D) the money you spend on food shelter and clothing
A
The relative price of a good is all of the following except
A) the ratio of one price to another.
B) an opportunity cost.
C) the same as the money price of a good.
D) the money price of the good divided by a price index.
C
Normal profit is the ____. Normal profit ____ part of a firm’s opportunity cost because ____.
A) return that an entrepreneur can expect to receive on the average; is; it is the cost of a foregone
alternative, which is running another firm
B) profit used by the Canada Revenue Agency to calculate tax owing; is; it includes depreciation
C) profit used by the Canada Revenue Agency to calculate tax owing; is; it is paid in cash
D) return that an entrepreneur can expect to receive on the average; is not; it is not paid in cash
A
Which market is an example of a market for services?
A) tennis lessons market
B) orange market
C) energy market
D) manufactured input market
A
The short run is a time frame in which
A) the firm is not able to hire more workers.
B) at least one factor of production is fixed.
C) the amount of output produced is fixed.
D) there is a shortage of most factors of production.
B
Which of the following statements by a restaurant owner refers to the law of diminishing marginal
returns?
A) “We can serve the same number of meals with fewer kitchen staff, but we would have to buy
more labour-saving kitchen equipment.”
B) “The higher the quality of the ingredients we use, the higher the cost of producing each
meal.
C) “We can serve the same number of meals with less kitchen equipment, but we would have to
hire more kitchen staff.”
D)”We can increase the number of meals we serve by just adding more kitchen staff, but each
additional worker adds less meals than the previous worker because traffic in the kitchen
will get worse.”
D
The change in total utility that results from a one-unit increase in the quantity of a good consumed is
A) average utility.
B) marginal utility per dollar.
C) fractional utility.
D) marginal utility.
D
Plant refers to those factors of production
A) which can be purchased only in fixed quantity lots.
B) that are fixed in the short run.
C) that must be held in storage for at least one year.
D) that have a decreasing marginal product as more of the factor is used.
B
A price elasticity of demand of 2 means that a 10 percent increase in price will result in a
A) 20 percent decrease in quantity demanded.
B) 2 percent increase in quantity demanded.
C) 2 percent decrease in quantity demanded.
D) 5 percent decrease in quantity demanded.
A
An indifference curve is
A) a line that shows combinations of goods among which a consumer is indifferent.
B) the boundary between what can be produced and what cannot be produced.
C) the boundary between what a consumer can afford and what he cannot afford.
D) a line with a positive slope.
A
Consider the market for housing illustrated in Figure 1 when the demand curve is Do . The
equilibrium in an unregulated market is
A) 1,750 rooms rented at $200 a month.
C) 1,500 rooms rented at $200 a month.
B) 2,000 rooms rented at $150 a month.
D 1,500 rooms rented at $150 a month.
D
Refer to Figure 1. If the demand for rental housing increases and the demand curve shifts
rightward from Do to D1, and the market is unregulated, the number of rooms rented is
A) 1,500, and the rent rises to $200 a month.
C) 1,750, and the rent rises to $200 a month.
B) 2,000, and the rent is at its initial level.
D 1,750, and the rent rises to $175 a month.
D
Refer to Figure 2. What is the equilibrium wage rate per hour in an unregulated market?
A) $3
B) $2
C) $5
D) $4
D
Refer to Figure 2. Suppose a $5 per hour minimum wage is in force. What is the lowest wage per
hour an unemployed person would be willing to accept?
(A)$3
B) $4
C) $5
D) $2
A
As more of a good is consumed its
A)marginal utility decreases.
B) marginal utility increases.
C) marginal utility remains unchanged.
D) total utility increases at an increasing rate
A
Refer to Figure.3. Rashid buys only books and albums. The figure shows his preferences. When
Rashid chooses the consumption point of 3 books and 2 albums, his marginal rate of substitution is ___.
A 3/2 books per album
B) 0.5 books per album
C)1 book per album
D) 2/3 books per album
C
Refer to Figure 3. When Rashid chooses the consumption point of 2 books and 6 albums, his marginal rate of substitution is ____.
A) 2 books per album
C) 1/3 books per album
B) 3 books per album
D) 0.5 books per album
D
The implicit rental rate
A) is the firm’s opportunity cost of using the capital it owns.
B) is paid with cash.
C) has two components: economic depreciation and foregone interest.
D both A and C are correct.
D
As soon as diminishing returns set in, a firm’s
A) marginal cost decreases.
C) total cost decreases.
B) marginal cost increases.
D) average fixed cost decreases.
B
Refer to Figure 4 which illustrates Tania’s total product curve. Which one of the following statements is false?
A) All the points below the curve are inefficient.
B) The cost of producing at point B equals the cost of producing at point C.
C) All the points on the curve are attainable.
D) All the points above the curve are unattainable.
B
If ATC is falling, then MC must be
A) equal to ATC.
B) falling.
C) above ATC.
D) below ATC.
D
