2) Suppose a product suddenly loses popularity and the firms producing the produ
ID: 1092657 • Letter: 2
Question
2) Suppose a product suddenly loses popularity and the firms producing the product begin to realize large losses. In
response, entrepreneurs would:
A) enter the market and increase production.
B) exit the market and decrease production.
C) exit the market and increase production.
D) enter the market and decrease production.
Final Exam ECON 203 OL3 Summer 2014
I.
MULTIPLE CHOICE (40 questions 2 points each). Choos
e the one alternative that best
completes the statement or answers the question.
Table 2.2
1) Julianne runs a business and needs to decide how
many hours to stay open. Table 2.2 illustrates her
marginal costs of
staying open for each additional hour. Suppose that
Julianne's marginal benefit of staying open per ho
ur is $28. If she is
following the marginal principle, how many hours sh
ould Julianne stay open? 1) _______
A) 7 hours B) 3 hours C) 1 hour D) 6 hours
2) Suppose a product suddenly loses popularity and
the firms producing the product begin to realize la
rge losses. In
response, entrepreneurs would: 2) _______
A) enter the market and increase production.
B) exit the market and decrease production.
C) exit the market and increase production.
D) enter the market and decrease production.
Table 3.2
3) Consider two individuals, Rose and Sharon, who p
roduce fish and coconuts. Rose and Sharon's hourly
productivity are
shown in Table 3.2. Sharon's opportunity cost of pr
oducing 1 fish is: 3) _______
A) 3 coconuts. B) 3/4 coconut. C) 4 coconuts. D) 1
1/3 coconuts.
Table 3.1
4) Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots. From the table, we can conclude that:
A) Willy has both an absolute and comparative advantage in carrot production.
B) Willy has neither an absolute nor a comparative advantage in carrot production.
C) Willy has neither an absolute nor comparative advantage in apple production.
D) Willy has both an absolute and comparative advantage in apple production
8) At a price of $25, a store can sell 28 picture frames a day. If the price falls to $20, the store can sell 35 picture frames a day. Using the initial-value method, the price elasticity of demand is:
A) 2.5. B) 1.9. C) 0.8. D) 1.25.
14) All else equal, if supply is relatively elastic and demand is relatively inelastic, a tax on a product will cause:
A) buyers to bear a larger portion of the tax burden.
B) buyers and sellers to share the tax burden equally.
C) sellers to bear a larger portion of the tax burden.
D) It is impossible to tell from this information who will bear the greater tax burden.
15) Table 6.1 indicates the demand and supply schedules for oil in the United States. Suppose also that the world price ofoil is $75 per barrel and that the United States can buy all the oil it wants at that price. Which of the following statements is TRUE about the impact of a law banning all oil imports?
A) Domestic producers benefit from the law because they can charge a higher price and sell more.
B) Consumer surplus increases.
C) Consumers would pay a lower price for oil than they would under free trade.
D) Total surplus in the oil market rises.
16) Figure 6.8 shows the market for taxicab services in a small town. If the government creates a new law limiting taxicab services to 20 per day:
A) total surplus will be unaffected. B) total surplus will fall.
C) consumer surplus will rise. D) producer surplus will be unaffected.
Explanation / Answer
C
B
C
B
B
A
B
C
D
C
B
A
C
D
B
C
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