ECON 2010-400 Principles of Microeconomics Practice Final Exam PDF

ECON 2010-400 Principles of Microeconomics CU Boulder Fall 2024 Gruber Practice Final Exam 50 questions, 100-minute time limit. Students may use a non-graphing calculator. 1. In economics, a marginal value refers to A) the value associated with one more unit of an activity....

ECON 2010-400 Principles of Microeconomics CU Boulder Fall 2024 Gruber Practice Final Exam 50 questions, 100-minute time limit. Students may use a non-graphing calculator. 1. In economics, a marginal value refers to A) the value associated with one more unit of an activity. B) the value associated with an unimportant activity. C) the net benefit of an activity. D) the total value of an activity. 2. Which of the following is a positive question? A) What are the returns to education? B) Can a monopoly ever be good for society? C) Is there a value in putting yourself in someone else’s shoes? D) Are companies like Nike exploiting workers in the developing world? 3. Which of the following correctly describes incentives? A) The maximum price that a buyer is willing to pay for a good. B) The rewards or penalties that motivate buyers to behave in a particular way. C) The prices that are fixed by the government and not by market forces. D) The minimum price at which a seller is willing to sell a product. 4. Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours, and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. If the opportunity cost of time increases to $80 per hour, which of the following statements is true? A) She should drive as it saves her $10. B) She should drive as it saves her $150. C) She should travel by train as it saves her $10. D) She should travel by train as it saves her $150. 5. Refer to the figure above showing the production possibility frontiers for Jackson and Tahoe. Jackson has an absolute advantage in producing: A) Neither wheat nor cattle. B) Cattle only. C) Wheat only. D) Both wheat and cattle. 6. Peanut butter and jelly are complements in consumption. Assuming that the supply curve of peanut butter is upward sloping, if there is a decrease in the price of jelly, producer surplus in the peanut butter market: A) may change, but the direction is ambiguous. B) will not change. C) will decrease. D) will increase. 7. Consider the following demand and supply equations: P = 126 - 4QD, P = 2QS. What is the equilibrium price in this market? A) $12 B) $21 C) $42 D) $6 Price Quantity Quantity Supplied Demanded 52 5,000 25,000 54 10,000 20,000 56 15,000 15,000 58 20,000 5,000 8. Consider the table above. What is the equilibrium quantity in this market? A) 5,000 B) 56 C) 15,000 D) 15 9. Mountain River Adventures offers whitewater rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip is $150, Mountain River Adventures will offer _____ trips per day and will have producer surplus equal to _____. A) 3; $90 B) 3; $10 C) 2; $220 D) 4; $80 10. Suppose the price elasticity of demand for oranges is 1.8. If a fall frost destroys one- third of the nation's orange crop, how will that affect total revenue from oranges, all other things unchanged? A) Total revenue will remain unchanged. B) Total revenue will rise. C) Total revenue will fall. D) The information is insufficient to answer the question. 11. The figure above shows the market for hamburgers. If 400 hamburgers are sold, total consumer surplus is A) $600 B) $400 C) $700 D) $1,200 Price Quantity Quantity Demanded Supplied 0 30 0 1 25 5 2 20 10 3 15 15 4 10 20 5 5 25 12. Consider the demand and supply schedule shown above. What is the producer surplus if a quota is implemented at 10 units? A) $10 B) $20 C) $30 D) $40 13. Consider the figure above. If a price floor of $15 is imposed on this market, total surplus shrinks to A) $10 B) $81.25 C) $20 D) $101.25 14. A price ceiling is not binding if: A) the equilibrium price is above the price ceiling. B) it is set above the equilibrium price. C) it is set below the equilibrium price. D) it creates a shortage. 15. A rancher in Oklahoma decides to raise the price of her beef by 19% over the prevailing market price. If the demand for beef is perfectly elastic, this rancher's quantity demanded will: A) Fall to 0. B) Not change. C) Fall slightly. D) Increase slightly. 16. Consider the figure above. What is the price elasticity of demand (by the midpoint method) when the price decreases from $6 to $4? A) 1 B) 0.5 C) 0.55 D) 0.67 17. The figure above shows the market for bottled water. If the government imposes an excise tax of $3 on this market, producers will receive __ per water bottle and sell __ fewer bottles. A) $1.50 less; 15 B) $1 more; 25 C) $3 less; 25 D) $0.50 more; 1 18. Consumers in a particular market will bear the greater burden of an sales tax: A) regardless of the price elasticity of demand or supply. B) the less price-elastic supply is relative to demand. C) the more price-elastic supply is relative to demand. D) if supply has the same price-elasticity as demand. 19. Consider the figure above. A $3 excise tax will raise government tax revenue of A) $35 B) $60 C) $30 D) $25 20. The United States places a tariff on imported Brazilian ethanol. The impact of this tariff on the domestic ethanol market is a _____ domestic price, _____ consumer surplus, and _____ producer surplus. A) lower; less; more B) higher; less; more C) higher; more; less D) higher; less; less 21. The figure above shows the domestic supply and demand in an autarky, with the autarky market price PA. Which areas illustrate the producer surplus if the autarky engages in trade at the world price PW? A) A B) A + B C) A + B + C + D D) E 22. The following demand and supply equations describe the domestic market for soda in the U.S: P = 38 - 4QD, P = 2 + 2QS. If the world price of soda is $10, this country will A) Import soda B) Export soda C) Import and export soda D) Not import or export soda 23. You decide to quit your $60,000-per-year job as an information technology specialist and illustrate children's books. At the end of the first year of illustrating, you have earned $20,000. You also spent $5,000 for paint and paper. Your economic profit in the first year as an illustrator is: A) $15,000 B) $20,000 C) -$40,000 D) -$45,000 24. Consider the table above. The marginal cost of the fourth sweatshirt is: A) $9 B) $20 C) $24 D) $15 25. Steven consumes staples and paper clips. He is maximizing his utility in consumption of both goods. The price of paper clips rises. Assuming that diminishing marginal utility applies to both goods, as he adjusts to this event, the marginal utility of staples will _____, and the marginal utility of paper clips will _____. A) rise; rise B) rise; fall C) fall; rise D) fall; fall 26. The substitution effect of a price change is described by the statement that: A) when the price of canning jars falls, consumers will substitute these lower- priced canning jars for higher-priced goods. B) when the price of canning jars falls, consumers have more real income with the same nominal income and will buy more canning jars. C) the substitution effect is the change in the number of canning jars purchased when the price of spatulas changes. D) the substitution effect shows how a change in income will affect the quantity of a good purchased. 27. Consider the table above. The marginal product of the 5th worker is: A) 8 B) 3 C) 30 D) 4 28. Which of the following correctly identifies the trade-off that a budget constraint represents? A) The amount of income that must be given up to obtain an additional unit of a good. B) The maximum amount of two goods that a consumer can purchase given their income. C) The optimum combination of goods that a consumer with a given income should purchase. D) The amount of one good that has to be given up to purchase an additional unit of the other good. 29. ___ in economics is a measure of satisfaction or happiness that comes from consuming a good or service A) Budget B) Utility C) Income effect D) Substitution effect 30. Refer to the table above. The table shows the costs of producing different amounts of masks. What is the marginal cost of producing 130 units? A) $10 B) $200 C) $0.50 D) $1.50 31. A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and $5 in average fixed cost. The average total cost of producing 10 pairs of eyeglasses is: A) $35 B) $30 C) $500 D) $300 32. The marginal cost curve intersects the average variable cost curve at: A) Its lowest point. B) Its maximum C) Its end point. D) The curves don’t intersect. 33. For the Colorado beef industry to be classified as perfectly competitive, ranchers in Colorado must have _____ on prices and beef must be a _____ product. A) no noticeable effect; differentiated. B) a huge effect; standardized. C) a huge effect; differentiated. D) no noticeable effect; standardized. 34. Consider the figure above. If the market price is $14, what is the total cost of production? A) $16. B) $14. C) $56. D) $90. 35. The entry and exit of firms in a perfectly competitive market does NOT: A) change a firm’s marginal cost of producing any given level of output. B) change a firm’s level of output. C) change a firm’s revenue. D) change the market price. 36. If a monopolist is producing a quantity where MC=P, then profit: A) Is maximized. B) Cannot be increased. C) Can be increased by increasing production. D) Can be increased by decreasing production. 37. Consider the figure above. A monopolist will charge which price? A) N B) O C) P D) H 38. Consider the figure showing a monopolist producer above. What is consumer surplus? A) $100 B) $1,225 C) $2,200 D) $2,275 39. A monopolist is likely to produce _____ and charge _____ than a comparable perfectly competitive firm. A) more; more B) less; less C) more; less D) less; more 40. If the state government gave you the exclusive right to sell cement to municipalities, your monopoly would result from: A) Government restrictions to entry. B) Sunk costs. C) Location. D) Economies of scale. 41. The market for breakfast cereal contains hundreds of similar products, such as Froot Loops, cornflakes, and Rice Krispies, that are considered to be different products by different buyers. This situation violates the perfect competition assumption of: A) Many buyers and many sellers. B) A standardized product. C) Ease of entry. D) Ease of exit. 42. A monopolistically competitive firm ___ in the long run. A) earns low but positive economic profits B) earns high economic profits C) earns zero economic profits D) incurs losses 43. The presence of a positive externality in a market leads to A) An underproduction of the good B) An overproduction of the good C) a shortage of the good D) a surplus of the good 44. Traffic congestion is an example of A) Positive externality B) Negative externality C) Pecuniary externality D) Free-rider problem 45. The figure above shows the market for hamburgers. If the production of hamburgers involves an external benefit of $0.75 per hamburger, the socially optimal equilibrium quantity in this market it A) 500 units. B) 200 units. C) 400 units. D) 300 units. 46. Suppose the town of Falls Valley has a mosquito problem. After a bad summer, the town accountants explain that the marginal cost of providing one more treatment for mosquito control is $100,000. The town should provide the additional mosquito control only if the marginal: A) social cost of mosquito control is more than $100,000. B) social cost of mosquito control is less than $100,000. C) benefit for any individual citizen is at least $100,000. D) benefit for all individual citizens adds up to at least $100,000. 47. Consider the figure above. What is the socially optimal market equilibrium quantity in this market showing a positive externality? A) 9 B) 13 C) 16 D) 20 48. The licenses that are exchangeable and that enable the holder to pollute up to a specified amount during a given period are called: A) Tradeable emissions permits. B) Emissions taxes. C) Pigouvian taxes. D) Environmental standards. 49. The best example of a private good is: A) A car. B) Public education. C) National defense. D) Law enforcement. 50. When the allocation of resources is such that a different allocation would increase society’s welfare, economists say: A) decision makers have faced the full marginal benefits and marginal costs of their decisions. B) The efficiency condition is met. C) A market failure has occurred. D) Producers have maximized profit. 1. A 44. B 2. A 45. A 3. B 46. D 4. C 47. C 5. C 48. A 6. D 49. A 7. C 50. C 8. C 9. A 10. C 11. B 12. C 13. B 14. B 15. A 16. A 17. A 18. C 19. C 20. B 21. D 22. A 23. D 24. D 25. C 26. A 27. D 28. D 29. B 30. C 31. A 32. A 33. D 34. C 35. A 36. D 37. A 38. B 39. D 40. A 41. B 42. C 43. A