Microeconomics: Exam 2 Practice Questions & Answers

Microeconomics: Exam 2 Practice
Questions & Answers
The supply curve is the same as the ___________.
(a)Marginal Cost Curve
(b)Demand Curve
(c)Total Cost Curve
(d)Expected Market Supply Curve - -(a)Marginal Cost Curve

-Allocative efficiency is achieved when which of the following
conditions are met?
(a)The difference between marginal benefit and marginal cost is at its
greatest.
(b)Total surplus is maximized.
(c)Consumer surplus is maximized.
(d)More than one of the above are correct. - -(b)Total surplus is maximized.

-Which of the following externalities will cause a market t
o fail to reach equilibrium?
(a)A coal-burning power plant produces air pollution.
(b)A volunteer organization cleans the local river.
(c)Your best friend gets a new mobile phone, making it easier to contact
him/her.
(d)All of the above. - -(d)All of the above.

-At quantities below the equilibrium quantity,
(a)Marginal benefit is greater than marginal cost
(b)Marginal benefit is less than marginal cost
(c)Marginal benefit is equal to marginal cost
(d)Allocative efficiency is achieved. - -(a)Marginal benefit is greater than
marginal cost

-Which of the following is NOT a public good?
(a)Fish
(b)Air traffic control
(c)Public parks
(d)Ocean water - -(a)Fish

-Cable television fits into which of the following categories?
(a)Rival, excludable
(b)Rival, nonexcludable
(c)Nonrival, excludable
(d)Nonrival, nonexcludable - -(c)Nonrival, excludable

, -Cable television fits into which of the following categories?
(a)Public good
(b)Natural monopoly good
(c)Common resource
(d)Private good - -(b)Natural monopoly good

-Common resources suffer from (over, under)use, due to (the free-rider
problem,
negative externalities).
(a)over; the free-rider problem
(b)under; the free-rider problem
(c)over; negative externalities
(d)under; negative externalities - -(c)over; negative externalities

-Which of the following describes the
law of diminishing returns?
(a)Marginal benefits from consumption goods are always decreasing--
consuming
more of a good adds benefit at a slower rate.
(b)Marginal product is always decreasing--adding more units of an input (like
labor)will increase output at a slower rate.
(c)Marginal product will eventually decrease--adding more units of an input
(like labor) will eventually increase output at a slower rate.
(d)Average product is always decreasing--
adding more units of an input (like labor)
will make the other inputs less productive on average - -(c)Marginal product
will eventually decrease--adding more units of an input (like labor) will
eventually increase output at a slower rate.

-Which of the following definitions is incorrect?
(a)Constant returns to scale--Long-run average costs are zero.
(b)Diseconomies of scale--Long-run average costs are increasing.
(c)Economies of scale--Long-run average costs are decreasing.
(d)Minimum efficient scale--The first point where long-run average costs are
minimized. - -(a)Constant returns to scale--Long-run average costs are zero.

-When marginal cost (MC) is greater than average total cost (ATC), then ATC
is
(a)decreasing.
(b)increasing.
(c)maximized.
(d)minimized. - -(b)increasing.

-If the marginal product of labor is greater than the average product of
labor, which of the following would you expect?
(a)Average product of labor is rising