ECO402 Mid

 1.    The “perfect information” assumption of perfect competition includes all of the following except one. Which one?
 Consumers know their preferences.
Consumers know their income levels.
Consumers know the prices available.
Consumers can anticipate price changes.
 2.    Incremental cost is the same concept as ______________ cost.
 Average
Marginal
Fixed
Variable
 
 3.    A production function assumes a given:
 Technology.
Set of input prices.
Ratio of input prices.
Amount of output.
 4.    Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results in the person buying ______ of the good and the income effect results in the person buying ______ of the good.
 More, more
More, less
Less, more
Less, less
 5.    Producer surplus for the whole market can be thought of as:
 
Total profit.
Variable operating profit plus factor rents.
Total profit minus factor rents earned by lower cost firms.
Total profit plus factor rents earned by lower cost firms.
  
6.    Baba Burgers has discovered there are economies of scope available to the restaurant. Which is most likely to be a response to this discovery?
 Baba expands burger production, focusing on that one good.
Baba contracts burger production.
Baba adds grilled chicken sandwiches to the menu.
Baba cuts back on the diversity of the menu.
 
7.    The endpoints (horizontal and vertical intercepts) of the budget line:
 
Measure its slope.
Measure the rate at which one good can be substituted for another.
Measure the rate at which a consumer is willing to trade one good for another.
Represent the quantity of each good that could be purchased if all of the budget were allocated to that good.
 
 
8.    The “perfect information” assumption of perfect competition includes all of the following except one. Which one?
 
 
Consumers know their preferences.
Consumers know their income levels.
Consumers know the prices available.
Consumers can anticipate price changes.
 
9.    The difference between the economic and accounting costs of a firm are:
 
The accountant’s fees.
The corporate taxes on profits.
The opportunity costs of the factors of production that the firm owns.
The sunk costs incurred by the firm.
 
10. Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:
 
 
The price of steel to fall.
The demand curve for steel to shift to the right.
The demand curve for plastic to shift to the left.
The demand curve for steel to shift to the left.
 
 
11. Cost-output elasticity can be written and calculated as:
 
MC/AC.
AC/MC
(AC)(MC)
(AC)2(MC)
 
 
12. Fixed costs are fixed with respect to changes in:
 
Output.
Capital expenditure.
Wages.
Time.
 
 
13. The presence of a learning curve may induce a decision maker in a startup firm to choose:
 
Low levels of output to exploit economies of scale.
High levels of output to exploit economies of scale.
Low levels of output to shift the average cost curve down over time.
High levels of output to shift the average cost curve down over time.
 
 
14. Which of the following is true regarding the relationship between returns to scale and economies of scope?
 
A firm experiencing economies of scope must also experience increasing returns to scale.
Economies of scale and economies of scope must occur together.
A firm experiencing increasing returns to scale must also experience economies of scope.
There is no definite relationship between returns to scale and economies of scope.
 
15. John would prefer a certain income of $20,000 to a gamble with a 0.5 probability of $10,000 and a 0.5 probability of $30,000. Based on this information:
 
We can infer that Salman is risk neutral.
We can infer that Salman is risk averse.
We can infer that John is risk loving.
We cannot infer Salman ‘s risk preferences.
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