ECON 467 Quiz 2

Average fixed cost is defined as
A) total variable cost divided by quantity.
B) quantity divided by total variable cost.
C) the change in total variable cost divided by the change in quantity.
D) total fixed cost divided by quantity.

1974	2011
Minimum wage per hour	$ 2.00	$ 7.25
Weekly income from minimum wage	$80.00	$290.00
Cost of a standard basket of goods	$47.00	$225.00
Number of baskets per week	1.70	1.29

Table 2.5
By what percentage did the federal minimum wage increase from 1974 to 2011?
A) 72.41%
B) 262.5%
C) 362.5%
D) 525.0%

For the perfectly competitive firm
A) price always equals average cost.
B) price always equals marginal cost.
C) price always equals marginal revenue.
D) price always equals average variable cost.

Figure 3.3
Figure 3.3 illustrates the demand for tacos. An increase in price of tacos would bring about a movement from
A) point a to point c.
B) point c to point a.
C) D₂ to D₀.
D) D₀ to D₁.

Table 10.1
Suppose that this year the wage rate is $30 and the price of the good is $1. If the firm is maximizing profit ________ workers will be hired. Next year the wage rate will increase to $40, but the price of the good will remain at $1. Then ________ workers will be hired.
A) 6; 5
B) 6; 6
C) 7; 6
D) 5; 5

Compared to a pollution tax, a policy of uniform abatement with permits is
A) less efficient.
B) more efficient.
C) exactly as efficient.
D) either more or less efficient depending on the number of firms affected.

When economies of scale are present, but sufficiently large to generate a natural monopoly, the expected market structure is
A) monopoly.
B) monopolistic competition.
C) perfect competition.
D) oligopoly.

Which of the following is NOT an example of a consumption expenditure?
A) a digital camera you purchase to take on vacation
B) a new county jail
C) a motorcycle you purchase to ride on the weekends
D) a restaurant meal

Which of the following best characterizes the tradeoff faced by a monopolist when deciding what quantity to produce?
A) The firm can increase its output, but needs to lower its price for only the marginal unit of output.
B) The firm can increase its output, but to do so it must charge a higher price to all customers.
C) The firm gets more revenue from new customers by increasing output, but gets less revenue from existing customers given that it lowered its price.
D) The firm gets less revenue from new customers by increasing output, but gets more revenue from existing customers given that it lowered its price.

Blu-ray disc players, iPhones, and hybrid cars are generally considered to be ________ goods.
A) durable
B) nondurable
C) intermediate
D) service

Costs increase with output in an increasing-cost industry because
A) input prices increase as the industry competes for scarce resources.
B) firms may be forced to use less productive inputs.
C) the firms become monopolies.
D) Both A and B are correct.

The biggest problem caused by a deflation is that
A) prices fall.
B) wages fall.
C) people cannot repay their debts.
D) interest rates rise.

Quantity of Frozen Latte-On-A-Stick Supplied

Price	Flo’s Supply	Rita’s Supply
1	0	0
2	0	3
3	4	6
4	9	9
5	15	12

Table 3.1
Which shows Flo’s and Rita’s individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the market quantity supplied at a price of $2?
A) 0
B) 2
C) 3
D) 5

An arrangement between firms whereby decision-making is controlled by a board of trustees is known as
A) a trust.
B) a compact between industry and government.
C) predatory pricing.
D) a merger.

Number of Figs	VC	MC	AVC	FC	TC	ATC
0	100
1	90	90
2	135
3	80
4	400

Table 5.4
Table 5.4 presents the cost schedule for David’s Figs. If David produces two figs, David’s average variable costs are
A) $80.
B) $85.
C) $90.
D) $170.

A period in which real GDP in the economy declines for at least six months is referred to as
A) long term growth.
B) a recession.
C) a positive fluctuation.
D) living standards.

What happens to your purchasing power if inflation is less than you anticipated?
A) It decreases.
B) It increases.
C) It devalues your net worth.
D) It won’t change much.

Figure 7.4
Figure 7.4 shows a monopolist’s demand curve, marginal revenue, and its costs. The monopolist would maximize its profit by charging a price of
A) $35.
B) $25.
C) $20.
D) $16.

If the quantity demanded of restaurant meals increases by 20% when income increases by 10%, the demand for restaurant meals is
A) price sensitive.
B) income-inelastic.
C) income-elastic.
D) price insensitive.