02 Jun Question 1) Suppose that the price of peanuts falls from $3 to $2 pe
Question
1) Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus:
A. the demand curve for peanuts has shifted to the right.
B. the demand for peanuts is elastic.
C. the demand for peanuts is inelastic.
D. no inference can be made as to the elasticity of demand for peanuts.
2) The advent of DVDs has virtually demolished the market for videocassettes. This is an example of:
A. capital accumulation.
B. the difference between normal and economic profits.
C. creative destruction.
D. derived demand.
3) If the demand for farm products is price inelastic, a good harvest will cause farm revenues to:
A. be unchanged.
B. either increase or decrease, depending on what happens to supply.
C. increase
D. decrease
4) Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information we can conclude that:
A. The supply of and demand for clothing have grown by the same proportion.
B. There is no way to determine what has happened to supply and demand with this information.
C. The supply of clothing has grown faster than the demand for clothing.
D. Demand for clothing has grown faster than the supply of clothing.
5) Suppose that in 2007 Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements:
A. suggest that the demand for Mustangs increased between 2007 and 2008.
B. constitute an exception to the law of demand in that they suggest an upsloping demand curve.
C. suggest that the demand for Mustangs decreased between 2007 and 2008.
D. suggest that the supply of Mustangs must have increased between 2007 and 2008.
6) Which of the following statements is true about productive and allocative efficiency?
A. Society can achieve either productive efficiency or allocative efficiency, but not both simultaneously.
B. Productive efficiency and allocative efficiency can only occur together; neither can occur without the other.
C. Realizing allocative efficiency implies that productive efficiency has been realized.
D. Productive efficiency can only occur if there is also allocative efficiency.
7) If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:
A. will be less than $5.
B. will be greater than $5.
C. may be either greater or less than $5.
D. will also be $5.
8) If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use:
A. less labor as a consequence of the substitution effect.
B. less labor as a consequence of the output effect.
C. more labor as a consequence of the substitution effect.
D. more labor as a consequence of the output effect.
9) If a firm is selling in an imperfectly competitive product market, then:
A. the marginal products of successive workers can be sold at higher prices.
B. the marginal products of successive workers can be sold at a constant price.
C. A. average product will be less than marginal product for any number of workers hired.
D. the marginal products of successive workers must be sold at lower prices.
10) In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2. 00 and its average fixed costs are $. 50. The firm’s total costs:
A. are $750.
B. are $1,100.
C. are $2. 50.
D. are $1,250.
11) In which of the following industries are economies of scale exhausted at relatively low levels of output?
A. concrete mixing
B. newspaper printing
C. aircraft production
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