Quiz 2

Question 1

If we describe Lola’s total satisfaction she receives from eating a given quantity of pizza, we are referring to Lola’s

Answer 1

total utility

Question 2

the measure of the benefit you get from consuming the next cup of coffee is your

Answer 2

marginal utility of coffee

Question 3

the principle of diminishing marginal utility implies that the

Answer 3

added satisfaction is diminishing as more units are consumed

Question 4

as an individual consumes more and more units of a good, at first

Answer 4

total utility increases, but marginal utility decreases

Question 5

which of the following statements is correct

Answer 5

1. consumers take account of their budget when they make their consumption decision.
2. consumers choose the consumption level that maximizes their overall utility

Question 6

at the utility maximizing equilibrium quantity for two goods, X and Y, which of the following must be true?

Answer 6

the marginal utility per dollar spent will be the same for each good

Question 7

when you chose to buy the second cup of coffee instead of the third bagel, which of the following is necessarily correct?

Answer 7

the marginal utility per dollar from the third bagel is less than the marginal utility per dollar from the second coffee

Question 8

by definition, “marginal utility per dollar spent” is the

Answer 8

marginal utility of a good divided by the price of that good.

Question 9

Bobby consumes only chocolate ice cream and vanilla ice cream. he is spending all of his income. his marginal utility of chocolate is 200 and his marginal utility of vanilla is 200, and the price of chocolate is $1.00 per scoop and the price of vanilla is $2.00 per scoop. to maximize his utility, bobby should

Answer 9

buy more chocolate ice cream and less vanilla ice cream

Question 10

the limit on people’s consumption choices is determined by

Answer 10

the prices of the goods and services the people buy and their income

Question 11

the magnitude of the slope of a budget line is equal to

Answer 11

the price of one good divided by the price of the other good.

Question 12

lizzie’s income increases, her budget line

Answer 12

shifts rightward and its slope does not change

Question 13

a characteristic of the long run is

Answer 13

all inputs can be varied

Question 14

which of the following is a factor of production that generally is fixed in the short run?

Answer 14

a factory building

Question 15

which of the following is a fixed cost?

Answer 15

payment to hire a security worker to guard the gate to the factory around the clock

Question 16

economic costs of production differ from accounting costs in that

Answer 16

economic costs add the opportunity costs of a firm using its own resources while accounting costs do not

Question 17

which of the following is an implicit cost of production?

Answer 17

rent that could have been earned on a building owned and used by the firm

Question 18

which of the following statements best describes the economic short run?

Answer 18

it is a period during which at least one of the firm’s inputs is fixed.

Question 19

the relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs is the firm’s

Answer 19

production function

Question 20

Average total cost is

Answer 20

total cost divided by the quantity of output produced

Question 21

the marginal product of labor is defined as

Answer 21

the additional output that results when one more worker is hired, holding all other resources constant

Question 22

the law of diminishing marginal returns states

Answer 22

that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline.

Question 23

if production displays increasing marginal returns, then

Answer 23

each new worker hired adds more to output than previous hires.

Question 24

marginal cost is the

Answer 24

additional cost of producing an additional unit of output

Question 25

which of the following costs will not change as output changes?

Answer 25

total fixed cost

Question 26

which of the following statements is false?

Answer 26

marginal cost will equal average total cost when marginal cost is at its lowest point

Question 27

long-run cost curves are u-shaped because

Answer 27

of economies and dis-economies of scale

Question 28

if a firm decreases its plant size and finds that its long-run average costs have decreased, then

Answer 28

its dis-economies of scale are less.

Question 29

which of the following is a reason why a firm would experience dis-economies of scale?

Answer 29

as the size of the firm increases it becomes more difficult to coordinate the operations of its manufacturing plants.

Question 30

when a firm’s long-run average cost curve is horizontal for a range of output, then that range of production displays

Answer 30

constant returns to scale

Question 31

in the long run

Answer 31

all of the firm’s costs are variable costs

Question 32

economies of scale occur when

Answer 32

a firm’s long-run average total costs fall as it increases the plant size