Econ 202 Name_________________________ Exam 3 Spring 2011 Due: No Later Than Midnight Friday May 13

05 Jun Econ 202 Name_________________________ Exam 3 Spring 2011 Due: No Later Than Midnight Friday May 13

Question
Econ 202 Name_________________________
Exam 3
Spring 2011
Due: No Later Than Midnight Friday May 13

(5 Point Deduction for each day it is late.)

Multiple Choice: Each of the following questions or incomplete statements is followed by a series of suggested answers or completions. Select the one best response for each question. (1 point each) [This exam has a maximum possible value of 75 points. 30 of these points come from the multiple choice questions – there are four extra multiple choice questions – and 45 of these points come from the essay questions.]

1. The “wastefulness” of excess capacity is not considered totally bad by economists because

A. advertisers make more income that is then circulated to the rest of the economy via the

multiplier.

B. the monopolistically competitive firm has a negatively sloped demand curve.

C. the monopolistically competitive firm allocates resources more efficiently than firms in other

market structures.

D. excess capacity may allow for a greater diversity of products than would otherwise be available.

2. Which of the following will create a demand for U.S. dollars in the foreign exchange market?

A. travel abroad by U.S. citizens

B. the desire of foreigners to buy U.S. stocks

C. the desire of U.S. citizens to purchase foreign stocks

D. U.S. imports

3. Consumers who clip and redeem discount coupons:

A. cause total revenue to decrease for firms that issue coupons for their products.

B. exhibit a unitary price elasticity of demand since all consumers have the ability to use

coupons.

C. exhibit the same price elasticity of demand for a given product as consumers who do not

clip and redeem coupons.
D. exhibit a more elastic demand for a given product than consumers who do not clip and

redeem coupons.
E. exhibit a more inelastic demand for a given product than consumers who do not clip and

redeem coupons.

4. Antitrust laws ________ whereas social regulations ________

A. are designed to promote competition; only improve competition in a market.

B. apply to specific firms and specific industries; apply to all firms and all industries.

C. lead to less competition in a market;. improve the quality of and the manner in which products

and services are produced.

D. Both B and C are correct.

E. All of the above are correct.

5. If the CEO of United Airlines plays golf with the CEO of American Airlines and then both

companies increase the prices of their airline tickets by 5% this is most likely a case of

A. a gentleman’s agreement.
B. multiproduct pricing.
C. cost-plus pricing.
D. price leadership.

6. Skilled workers generally earn more than unskilled workers do because

A. the productivity of skilled labor is higher than that of unskilled labor.

B. the supply of skilled labor is greater than the supply of unskilled labor.
C. the marginal cost of unskilled labor is higher than that of skilled labor.

D. the demand for unskilled labor is greater than the demand for skilled labor.
E. the demand for unskilled labor is more elastic than the demand for skilled labor.

7. The smaller the number of firms in a monopolistically competitive industry and the greater the differentiation degree of product,

A. the greater the divergence between the demand and the marginal revenue curves for the firms in

the industry.

B. the larger will be the monopolistically competitive firm’s fixed costs.

C. the more inelastic is the monopolistically competitive firm’s demand curve.

D. the more elastic is the monopolistically competitive firm’s demand curve.

8. An example of an inclusive type labor organization / association is

A. the United Automobile Workers

B. the Brotherhood of Electrical Workers (electricians)

C. the American Institute of Certified Public Accountants (CPAs)
D. both A and B.

E. All of the above.

9. A natural monopoly most often occurs when
A. diseconomies of scale occur at relatively low levels of output.

B. a firm owns or controls some resource essential to production.
C. long-run average costs rise continuously as output is increased.
D. economies of scale extend over an extremely large level of output.

10. Firms are most likely to engage in price discrimination when

A. the product being sold can easily be resold.

B. they operate in a purely competitive industry.
C. they operate in an industry which experiences excess capacity.
D. all consumers in the market have the same price elasticity of demand.
E. All of the above

11. The U.S. garment (clothing) workers’ union

A. favors free trade because American and foreign clothing and clothing workers are substitutes.

B. opposes free trade because American and foreign clothing and clothing workers are substitutes.

C. favors free trade because American and foreign clothing and clothing workers complement each

other.