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PRINCIPLES OF ECONOMICS

 

Text:

 


 

Essentials of Economics

 

2nd Edition, 2009

 

ISBN-13: 978-0-13-608623-9

 

ISBN-10: 013-608623-3

 


 

Publisher:

 


 

R. Glenn Hubbard and Anthony Patrick O?Brien

 

Pearson/Prentice Hall

 


 

925 N. Spurgeon Street, Santa Ana, CA 92701

 

04/09

 


 

Final Examination

 


 

Authors:

 


 

Phone: 714-547-9625

 


 

Fax: 714-547-5777

 


 

Principles of Economics

 


 

Final Examination

 


 

Multiple Choice Questions (Enter your answers on the enclosed answer sheet)

 

1) Every society faces economic tradeoffs. This means

 

a.

 

b.

 

c.

 

d.

 


 

producing more of one good means less of another good can be produced.

 

not everyone can have enough goods and services to survive.

 

some people live better than others do.

 

society?s output cannot be made available to all.

 


 

2) Which of the following statements is false?

 

a. Tradeoffs do not apply when consumers purchase a product for which there is

 

excess supply, such as a stock clearance sale.

 

b. Every individual, no matter how rich or poor, is faced with making tradeoffs.

 

c. Anytime you have to decide which action to take you are facing an economic

 

tradeoff.

 

d. Economics is a social science that studies the tradeoffs we are forced to

 

make because of scarcity.

 

3) Which of the following is not an example of an economic tradeoff that a firm

 

has to make?

 

a.

 

b.

 

c.

 

d.

 


 

whether it should produce more of its product.

 

whether it is cheaper to produce with more machines or with more workers.

 

whether or not consumers will buy its products .

 

whether to outsource the production of a good or service

 


 

4) How are the fundamental economic decisions determined in Cuba?

 

a. Primarily, the government decides because Cuba is a centrally planned

 

economy.

 

b. These decisions are made by the country?s elders who have had much experience in answering these questions.

 

c. Individuals, firms, and the government interact in a market to make these

 

economic decisions.

 

d. The United Nations decides because Cuba is a developing economy.

 

5) Which of the following correctly describes the relationship between economic

 

efficiency and economic equity?

 

a.

 

b.

 

c.

 

d.

 


 

They are both automatically achieved in a free market economy.

 

There is no conflict between the two goals.

 

There is often a trade-off between the two.

 

They always call for opposite outcomes.

 


 

1

 


 

Principles of Economics

 


 

Final Examination

 


 

6) Which of the following statements best characterizes the disagreements between Paul Samuelson and Jagdish Bhagwati in their debate about outsourcing?

 

a. Their disagreements are grounded in normative economic analysis. They disagree over how to interpret the relevant economic statistics.

 

b. Their disagreements are grounded in positive economic analysis. They disagree about the relevant economic statistics used in the model.

 

c. Their disagreements are grounded in normative economic analysis. They disagree over the types of jobs lost to outsourcing.

 

d. Their disagreements are grounded in positive economic analysis. They disagree about the model and the assumptions used in the model.

 

7) Which of the following statements about profit is true?

 

a.

 

b.

 

c.

 

d.

 


 

Profit refers to the revenue received from the sale of a quantity of goods.

 

Profit is the difference between a firm?s revenue and its costs.

 

Profit is calculated by multiplying price per unit by the number of units sold.

 

The terms ?accounting profit? and ?economic profit? can be used interchangeably.

 


 

8) Which of the following is an example of an activity undertaken by an entrepreneur?

 

a.

 

b.

 

c.

 

d.

 


 

holding a position as the president of a liberal arts college

 

landscape design for your new home

 

running for the president of the United States

 

starting your own pet sitting business

 


 

9) Suppose when the price of laptops falls, college students buy more laptops.

 

This implies that

 

a. there is a negative relationship between laptop prices and quantities purchased by college students.

 

b. there is a one-to-one relationship between laptop prices and quantities purchased by college students.

 

c. there is a direct relationship between laptop prices and quantities purchased

 

by college students.

 

d. there is a positive relationship between laptop prices and quantities purchased by college students.

 


 

2

 


 

Principles of Economics

 


 

Final Examination

 


 

Figure 1-2

 


 

10) Refer to Figure 1-2. Calculate the area of the triangle A.

 

a.

 

b.

 

c.

 

d.

 


 

$6.3 million

 

$3.15 million

 

$8.4 million

 

$2.1 million

 


 

11) You explain to your friend Haslina, who runs a catering service called ?Meals

 

in a Zip,? about an economic theory that asserts that consumers will purchase less of a product at higher price than they will at lower prices. She

 

contends that the theory is incorrect because over the past two years she has

 

raised the price of her catered meals and yet has seen a brisk increase

 

in sales. How would you respond to Haslina?

 

a. I will explain to her that there are some omitted variables that have contributed to an increase in her sales such as changes in income.

 

b. Haslina is making the mistake of assuming that correlation implies causation.

 

c. I will explain to her that she confusing positive economic analysis with normative economic analysis.

 

d. Haslina is right; she has evidence to back her claim. The theory must be

 

false.

 

12) In a production possibilities frontier model, a point inside the frontier is

 

a.

 

b.

 

c.

 

d.

 


 

inefficient. Maximum output is not being obtained from available resources.

 

allocatively efficient.

 

allocatively inefficient.

 

productively efficient

 


 

3

 


 

Principles of Economics

 


 

Final Examination

 


 

13) A production possibilities frontier with a bowed outward shape indicates

 

a.

 

b.

 

c.

 

d.

 


 

decreasing opportunity costs as more and more of one good is produced.

 

constant opportunity costs as more and more of one good is produced.

 

the possibility of inefficient production.

 

increasing opportunity costs as more and more of one good is produced.

 


 

Figure 2-3

 


 

14) Refer to Figure 2-3. Carlos Vanya grows tomatoes and strawberries on his

 

land. A portion of his land is more suitable for growing tomatoes and the

 

other portion is better suited for strawberry cultivation. Which of the graphs

 

in Figure 2-3 represent his production possibilities frontier?

 

a.

 

b.

 

c.

 

d.

 

e.

 


 

Graph A

 

Graph B

 

Graph C

 

either Graph A or Graph B

 

either Graph B or Graph C

 


 

Figure 2-4

 


 

4

 


 

Principles of Economics

 


 

Final Examination

 


 

Figure 2-4 shows various points on three different production possibilities frontiers for a nation.

 

15) Refer to Figure 2-4. A movement from X to Y

 

a. is the result of advancements in plastic production technology only, with no

 

change in food production technology.

 

b. is the result of advancements in food production technology only, with no

 

change in the technology for plastic production.

 

c. could occur because of an influx of immigrant labor.

 

d. could be due to a change in consumers? tastes and preferences.

 

Figure 2-6

 


 

German auto producer BMW currently produces two types of automobiles, sports

 

utility vehicles (SUVs) and coupes, in its U.S. plant. Since it opened in 1994,

 

the company has made several strategic production decisions. Figure 2-6 shows

 

changes to its production possibilities frontier in response to some of these production strategies.

 

16) Refer to Figure 2-6. Between 1995 and 2003 worker productivity increased

 

so that the total number of vehicles produced increased as the company

 

added more machinery and workers and changed the layout of its factory.

 

This is best represented by the

 

a.

 

b.

 

c.

 

d.

 


 

movement from G to H in Graph B.

 

movement from L to K in Graph C.

 

movement from J to H in Graph B.

 

movement from E to F in Graph A.

 


 

Table 2-2

 

George

 


 

Jack

 


 

Lawns Mowed

 


 

10

 


 

6

 


 

Gardens Cultivated

 


 

5

 


 

4

 


 

5

 


 

Principles of Economics

 


 

Final Examination

 


 

Table 2-2 shows the output per day of two gardeners, George and Jack. They can

 

either devote their time to mowing lawns or cultivating gardens.

 

17) Refer to Table 2-2. What is George?s opportunity cost of cultivating a garden?

 

a.

 

b.

 

c.

 

d.

 


 

two lawns mowed

 

one and a half lawns mowed

 

two-thirds of a garden cultivated

 

one-half of a garden cultivated

 


 

Table 2-3

 

One Digital Camera

 


 

Wheat (per pound)

 


 

China

 


 

100 hours

 


 

4 hours

 


 

south Korea

 


 

60 hours

 


 

3 hours

 


 

Table 2-3 shows the number of labor hours required to produce a digital camera

 

and a pound of wheat in China and South Korea.

 

18) Refer to Table 2-3. What is South Korea?s opportunity cost of producing one

 

digital camera?

 

a.

 

b.

 

c.

 

d.

 


 

25 pounds of wheat

 

20 pounds of wheat

 

0.05 pounds of wheat

 

60 pounds of wheat

 


 

19) Refer to Table 2-3. China has a comparative advantage in

 

a.

 

b.

 

c.

 

d.

 


 

both products.

 

digital camera production.

 

wheat production.

 

neither product.

 


 

20) Refer to Table 2-3. If the two countries specialize and trade, who should

 

export digital cameras?

 

a.

 

b.

 

c.

 

d.

 


 

6

 


 

South Korea

 

There is no basis for trade between the two countries.

 

They should both be importing digital cameras.

 

China

 


 

Principles of Economics

 


 

Final Examination

 


 

Figure 2-10

 


 

21) Refer to Figure 2-10. The segment of the circular flow diagram in the Figure

 

shows the flow of funds from market F to economic agents G. The funds represent spending on goods and services. What is market F and who are economic agents G?

 

a.

 

b.

 

c.

 

d.

 


 

F = factor markets; G = firms

 

F = factor markets; G = households

 

F = product markets; G = firms

 

F = product markets; G = households

 


 

22) Although it is a popular product, Apple makes little profit from each song

 

downloaded through iTunes. Why does Apple charge only $0.99 to download

 

a song?

 

a. Although Apple makes a small amount of profit per song, total profit is large

 

because the quantity sold is large.

 

b. The low price makes it more likely that consumers will buy iPods, which are

 

relatively expensive.

 

c. Apple plans to increase the price of downloading songs after it sells a large

 

enough number of iPods.

 

d. Apple cannot raise the price above $0.99 per song because consumers can

 

download songs at even lower prices from Apple?s competitors.

 

23) The income effect of a price change refers to the impact of a change in

 

a.

 

b.

 

c.

 

d.

 


 

the price of a good on a consumer?s purchasing power.

 

income on the price of a good.

 

demand when income changes.

 

the quantity demanded when income changes.

 


 

7

 


 

Principles of Economics

 


 

Final Examination

 


 

24) The Internet has created a new category in the book selling market, namely,

 

the ?barely used? book. How does the availability of barely used books affect

 

the market for new books?

 

a.

 

b.

 

c.

 

d.

 


 

the demand curve for new books shifts to the left

 

the demand curve for new books shifts to the right

 

the supply curve for new books shifts to the right

 

the supply curve for new books shifts to the left

 


 

25) A supply schedule

 

a. is a table that shows the relationship between the price of a product and the

 

quantity of the product that producers and consumers are willing to exchange.

 

b. is a table that shows the relationship between the price of a product and the

 

quantity of the product supplied.

 

c. is a curve that shows the relationship between the price of a product and the

 

quantity of the product supplied.

 

d. is the relationship between the supply of a good and the cost of producing the

 

good.

 

26) In October 2005, the U.S. Fish and Wildlife Service banned the importation

 

of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U. S.?

 

a.

 

b.

 

c.

 

d.

 


 

The demand curve shifted to the right.

 

The demand curve shifted to the left.

 

The supply curve shifted to the right.

 

The supply curve shifted to the left.

 


 

Figure 3-2

 


 

8

 


 

Principles of Economics

 


 

Final Examination

 


 

27) Refer to Figure 3-2. If the price is $25,

 

a.

 

b.

 

c.

 

d.

 


 

there would be a shortage of 200 units.

 

there would be a surplus of 300 units.

 

there would be a shortage of 300 units

 

there would be a surplus of 200 units.

 


 

28) Assume there is a shortage in the market for digital music players. Which of

 

the following statements correctly describes this situation?

 

a. The shortage will cause an increase in the equilibrium price of digital music

 

players.

 

b. The price of digital music players will rise in response to the shortage; as the

 

price rises the quantity demanded will increase and the quantity supplied will

 

decrease.

 

c. Some consumers will be unable to obtain digital music players at the market

 

price and will have an incentive to offer to buy the product at a higher price.

 

d. The demand for digital music players is greater than the supply of digital

 

music players.

 

29) Select the phrase that correctly completed the following statement. ?A positive change in technology caused an increase in the supply of flat-screen

 

televisions. As a result

 

a. the price of flat-screen televisions decreased and the quantity demanded of

 

flat-screen televisions increased.?

 

b. the price of flat-screen televisions decreased. The lower price caused the

 

supply of flat-screen televisions to decrease.?

 

c. the equilibrium quantity of flat-screen televisions decreased.?

 

d. the price of flat-screen televisions decreased and the demand for flat-screen

 

televisions increased.?

 

30) ?Because apples and oranges are substitutes, an increase in the price of oranges will cause the demand for apples to increase. This initial shift in

 

demand for apples results in a higher price for apples; this higher price will

 

cause the demand curve for apples to shift to the right.? Which of the following correctly comments on this statement?

 

a. The statement is false because a change in the price of apples would not

 

change the demand for apples.

 

b. The statement is false because one cannot assume that apples and oranges

 

are substitutes for all consumers.

 

c. The statement will be true, if consumer tastes for apples and oranges do not

 

change.

 

d. The statement is false because oranges are inferior goods; apples are normal

 

goods.

 


 

9

 


 

Principles of Economics

 


 

Final Examination

 


 

31) The demand for lobster is lower in the spring than in the summer. If the

 

price of lobster is higher in spring than in summer then

 

a.

 

b.

 

c.

 

d.

 


 

there are more substitutes for lobster in summer than there are in spring.

 

there is a shortage of lobster in spring and a surplus of lobster in summer.

 

the supply of lobster is greater in summer than in spring.

 

consumers? tastes for lobster are greater in spring than in summer.

 


 

32) Suppliers will be willing to supply a product only if

 

a. the price received is less than the additional cost of producing the product.

 

b. the price is higher than the average cost of producing the product.

 

c. the price received is at least equal to the additional cost of producing the

 

product.

 

d. the price received is at least double the additional cost of producing the product.

 

Table 4-3

 

Hourly Wage

 

(Dollars)

 


 

Quantity of Labor Supplied

 


 

Quantity of Labor Demanded

 


 

$6.00

 


 

350,000

 


 

390,000

 


 

6.50

 


 

360,000

 


 

380,000

 


 

7.00

 


 

370,000

 


 

370,000

 


 

7.50

 


 

380,000

 


 

360,000

 


 

8.00

 


 

390,000

 


 

350,000

 


 

8.50

 


 

400,000

 


 

340,000

 


 

Table 4-3 shows the demand and supply schedules for the low-skilled labor market in the city of Westover.

 

33) Refer to Table 4-3. If a minimum wage of $7.50 an hour is mandated, what

 

is the quantity of labor supplied?

 

a.

 

b.

 

c.

 

d.

 


 

10

 


 

370,000

 

380,000

 

390,000

 

340,000

 


 

Principles of Economics

 


 

Final Examination

 


 

Figure 4-7

 


 

Figure 4-7 shows the demand and supply curves for the almond market. The

 

government believes that the equilibrium price is too low and tries to help almond

 

growers by setting a price floor at Pf.

 

34) Refer to Figure 4-7. What is the area that represents producer surplus after

 

the imposition of the price floor?

 

a.

 

b.

 

c.

 

d.

 


 

B+E+F

 

B+C+D+E

 

A+B+E

 

B+E

 


 

35) Which of the follow is not a result of imposing a rent ceiling?

 

a. an increase in the quantity demanded of apartments

 

b. a reduction in the quantity supplied of apartments

 

c. the marginal benefit of the last apartment rented is greater than the marginal

 

cost of supplying it

 

d. some consumer surplus is converted to producer surplus

 

36) If your neighbor burns auto tires in the yard and you can smell them and cannot see sunlight because of the black smoke, you are experiencing

 

a.

 

b.

 

c.

 

d.

 


 

a positive externality.

 

a private benefit.

 

a private cost.

 

a negative externality.

 


 

11

 


 

Principles of Economics

 


 

Final Examination

 


 

37) Vaccinating people against a communicable disease such as influenza not

 

only reduces the chances that the person vaccinated will catch the disease

 

but also reduces the probability that an epidemic of the disease will occur.

 

Which of the following statements is true?

 

a. The benefits of the influenza vaccination outweigh the costs.

 

b. Reducing the chances that the person vaccinated will catch the disease is a

 

private benefit while reducing the probability of an influenza epidemic is a

 

social benefit.

 

c. Vaccinating people against communicable diseases yields private benefits in

 

excess of social benefits.

 

d. Reducing the chances that the person vaccinated will catch the disease is

 

a private cost while reducing the probability of an influenza epidemic is a

 

social benefit.

 

38) Which of the following conditions holds in an economically efficient competitive market equilibrium?

 

a. The marginal benefit of the last unit produced and consumed is maximized.

 

b. Producer and consumer surplus are exactly equal in size.

 

c. There are no positive and no negative external effects from consumption and

 

production.

 

d. The deadweight loss is positive but at a minimum.

 

Figure 4-14

 


 

Figure 4-14 shows a market with a positive externality.

 


 

12

 


 

Principles of Economics

 


 

Final Examination

 


 

39) Refer to Figure 4-14. The deadweight loss due to the externality is represented by the area

 

a.

 

b.

 

c.

 

d.

 


 

msn.

 

nso.

 

mso.

 

mtn.

 


 

Figure 4-15

 


 

Companies producing toilet paper bleach the paper to make it white. The bleach

 

is discharged into rivers and lakes and causes substantial environmental damage.

 

Figure 4-15 illustrates this situation in the toilet paper market.

 

40) Refer to Figure 4-15. The efficient output is

 

a.

 

b.

 

c.

 

d.

 


 

Q3.

 

Q1.

 

Q2.

 

Q4.

 


 

41) How has organizing a successful firm in a market economy changed over the

 

last century?

 

a.

 

b.

 

c.

 

d.

 


 

There has been no change over the last century.

 

It has become easier as more and more firms discover how to do it.

 

As government intervention has decreased, firms now have more freedom.

 

It has become more difficult to organize an efficient and successful firm.

 


 

13

 


 

Principles of Economics

 


 

Final Examination

 


 

42) What is the relationship of the owners of a corporation to the corporation?

 

a. The personal assets of the owners are part of the corporation?s assets.

 

b. The owners of the corporation have a separate legal distinction from the corporation.

 

c. The owners of the corporation have no separate legal distinction from the

 

corporation.

 

d. None of the above describes the relationship.

 

43) When you buy previously-issued shares of Google stock, this transaction takes

 

place in the

 

a.

 

b.

 

c.

 

d.

 


 

secondary market.

 

bond market.

 

primary market.

 

bear market.

 


 

44) You have a bond that pays $60 per year in coupon payments. Which of the

 

following would result in an increase in the price of your bond?

 

a.

 

b.

 

c.

 

d.

 


 

The price of a share of stock in the company falls.

 

The likelihood that the firm issuing your bond will default on debt increases.

 

Coupon payments on newly-issued bonds fall to $50 per year.

 

Coupon payments on newly-issued bonds rise to $80 per year.

 


 

45) In June 2007 General Motors (GM) posted a price-earnings ratio of 9.84. If

 

the price of the stock at that time was $36 per share, which of the following

 

must have been true?

 

a.

 

b.

 

c.

 

d.

 


 

GM?s earnings per share was 3.66.

 

GM?s coupon payment was $35 per year.

 

GM?s dividend yield for the year was 26%.

 

GM?s revenues that month were $366 million.

 


 

46) In 2007, the dividend yield on General Motors (GM) stock fell from 8.6% to

 

4.4%. Which of the following would have generated that result?

 

a.

 

b.

 

c.

 

d.

 


 

14

 


 

The price-earnings ratio rose.

 

GM issued bonds with a coupon rate equal to 8%.

 

GM announced a decrease in the dividend it would pay per share.

 

The closing price of GM stock fell.

 


 

Principles of Economics

 


 

Final Examination

 


 

47) Which of the following is an example of an implicit cost a firm might incur?

 

a.

 

b.

 

c.

 

d.

 


 

taxes owed to the state and federal governments

 

the out-of-pocket expense to hire resources

 

the revenue a firm generates in using its resources

 

the rental value of the office space the company owns and uses for itself

 


 

48) What is shown on a firm?s income statement?

 

a.

 

b.

 

c.

 

d.

 


 

profits

 

revenues

 

costs

 

All of these are shown on a firm?s income statement.

 


 

49) In addition to requiring that CEO?s personally certify the accuracy of financial

 

statements, the Sarbanes-Oxley Act of 2002 also requires that

 

a.

 

b.

 

c.

 

d.

 


 

corporations issue financial statements monthly rather than quarterly.

 

firms raise funds for expansion through the sale of bonds only, not stocks.

 

auditors disclose any potential conflicts of interest.

 

CEOs conduct audits of their corporations themselves.

 


 

50) Suppose your marginal utility from consuming a third slice of cake is zero,

 

then your total utility from consuming cake is

 

a.

 

b.

 

c.

 

d.

 


 

increasing.

 

negative.

 

decreasing.

 

maximized.

 


 

51) When the price of summer tank tops falls and you buy more them because

 

they are relatively less expensive, this is called

 

a.

 

b.

 

c.

 

d.

 


 

the elasticity effect.

 

the deadweight loss effect.

 

the income effect.

 

the substitution effect.

 


 

52) Most film processing companies have a policy of printing every picture on a

 

roll of film and allowing customers to request a refund for pictures that were

 

not clearly developed. The companies do this knowing that most customers

 

do not ask for refunds. This is an example of consumers

 

a. not taking non-monetary opportunity costs into account.

 


 

15

 


 

Principles of Economics

 


 

Final Examination

 


 

b. not making themselves aware of the policy regarding refunds.

 

c. failing to ignore sunk costs.

 

d. being overly optimistic about their future behavior.

 

53) If demand is perfectly price elastic, the absolute value of the price elasticity

 

of demand is

 

a.

 

b.

 

c.

 

d.

 


 

less than one.

 

more than one.

 

infinity.

 

equal to the absolute value of the slope of the demand curve.

 


 

54) If the market for a product is broadly defined, then

 

a. there are many substitutes for the product and the demand for the product is

 

relatively elastic.

 

b. the good has many complements.

 

c. there are few substitutes for the product and the demand for the product is

 

relatively inelastic.

 

d. the expenditure on the good is likely to make up a large share of one?s budget.

 

Figure 6-2

 


 

55) Refer to Figure 6-2. The inelastic segment of the demand curve

 

a.

 

b.

 

c.

 

d.

 

16

 


 

lies above the midpoint of the curve.

 

is coincident with the horizontal axis.

 

lies below the midpoint of the curve.

 

is coincident with the vertical axis.

 


 

Principles of Economics

 


 

Final Examination

 


 

Table 6-3

 

Price per pound

 

(Dollars)

 


 

Quantity Demanded of cheese

 

(pounds)

 


 

$16

 


 

3

 


 

14

 


 

4

 


 

12

 


 

5

 


 

10

 


 

6

 


 

8

 


 

7

 


 

6

 


 

8

 


 

4

 


 

9

 


 

2

 


 

10

 


 

56) Refer to Table 6-3. Over what range of prices is the demand price elastic?

 

a.

 

b.

 

c.

 

d.

 


 

over the entire range of prices

 

between $8 and $16

 

between $12 and $16

 

between $2 and $8

 


 

57) When a firm changes its price, the change in total revenue

 

a. depends on the value of the price elasticity of demand and the direction of

 

the price change.

 

b. is zero.

 

c. is negative.

 

d. is positive.

 

58) A characteristic of the long run is

 

a.

 

b.

 

c.

 

d.

 


 

there are both fixed and variable inputs

 

plant capacity cannot be increased or decreased.

 

all inputs can be varied.

 

there are fixed inputs.

 


 

17

 


 

Principles of Economics

 


 

Final Examination

 


 

59) Academic book publishers hire editors, designers, and production and marketing managers who help prepare books for publication. Because these employees work on several books simultaneously, the number of people the

 

company hires will not go up and down with the quantity of books the company publishes during any particular year. The salaries and benefits of people

 

in these job categories will be included in

 

a.

 

b.

 

c.

 

d.

 


 

marginal cost and total cost but not fixed cost.

 

fixed cost but not variable cost and total cost.

 

fixed cost and marginal cost but not variable cost.

 

fixed cost and total cost but not variable cost.

 


 

60) If another worker adds 9 units of output to a group of workers who had an

 

average product of 7 units then the average product of labor

 

a.

 

b.

 

c.

 

d.

 


 

will increase.

 

will decrease.

 

will remain the same.

 

cannot be determined from the information given.

 


 

Table 7-1

 

Number of workers

 


 

Mushrooms per day (pounds)

 


 

1

 


 

12

 


 

2

 


 

30

 


 

3

 


 

45

 


 

4

 


 

50

 


 

5

 


 

54

 


 

6

 


 

56

 


 

Table 7-1 shows the technology of production at the Matsuko?s Mushroom Farm

 

for the month of May 2007.

 


 

18

 


 

Principles of Economics

 


 

Final Examination

 


 

61) Refer to Table 7-1. Diminishing returns set in when the ________ worker is

 

hired.

 

a.

 

b.

 

c.

 

d.

 


 

2nd

 

3rd

 

4th

 

None of the above; the production function displays increasing marginal

 

returns.

 


 

62) If production displays economies of scale, the long run average cost curve is

 

a.

 

b.

 

c.

 

d.

 


 

upward sloping.

 

above the short run average total cost curve.

 

below the long run marginal cost curve.

 

downward-sloping.

 


 

63) W...

 


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