Exam_2_with_key

Barnard College ̶ Columbia University Department of Economics Econ BC1003 (02) Introduction to Economic Reasoning Spring 2023 Test II 3/27/23 _____________________________________ __________________________ PRINT NAME UNI ID Notes 1. This exam is a closed book/ closed notes exam. You are only allowed to use a calculator. 2. The exam has two parts: 30 Multiple choice questions (75 points) and one problem (25 points). 3. Multiple choice questions have ONLY one correct answer. 4. If you think a question is incorrect or contains a typo, mark it on the question and respond to it to the best of your knowledge. If there is a problem with a question, I will fix it after the exam, and you will get the allocated points for the question. 5. Make sure you answer all the questions. You DO NOT get penalized for incorrect answers. GOOD LUCK!

1. 2. 3. 4. 5. Production functions indicate the relationship between A. factor inputs and factor prices. B. the value of inputs and average costs. C. factor inputs and the quantity of output. D. factor costs and output prices. Marginal product is A. the change in total output from using an additional unit of all variable inputs. B. the change in total output from using an additional unit of one variable input, holding other inputs constant. C. the change in total output divided by the number of units of the variable input, holding constant all other inputs. D. the total output divided by the number of units of the variable input. In the table at right, the average product for 5 workers and the marginal product of the 5th worker is A. 3.6; 2. B. 2; 0.6. C. 0.72; 1. D. 16; 2. Quantity of Workers Total Product 0 0 1 3 2 7 3 12 4 16 5 18 6 18 Refer to the table at right. What is AVC at an output of 2 units? A. $61 B. $45 C. $16 D. $7 Q TFC TVC TC 0 $90 $0 $90 1 90 25 115 2 90 32 122 3 90 42 132 4 90 64 154 5 90 95 185 Q TFC TVC TC AFC AVC ATC 1 2 $75 $25 3 $40 Refer to the table above. What are total fixed costs at an output of 3 units? A. $150 B. $270 C. $120 D. $90

10. 11. 12. 13. 14. 15. The short-run break-even price is the point at which A. marginal cost, price and average variable cost are all equal. B. average variable cost is at a minimum. C. price is less than marginal cost. D. marginal cost, average total cost and marginal revenue are all equal. The law of demand states that A. consumers will exhaust their incomes as they purchase goods and services at given absolute prices. B. at lower relative prices, a larger quantity of a good will be purchased than at higher relative prices. C. there is a direct positive relationship between relative price and quantity demanded. D. if the price of a good increases both relatively and absolutely, there will be no change in quantity demanded. The price of a new textbook increases from $200 to $270, while the price of used copies of the textbook increased from $100 to $125. Other things being equal, we would expect A. the quantity demanded of both to fall. B. the demand for the new textbook to increase and the demand for the used textbook to decrease. C. the quantity demanded of the used textbook to increase and the quantity demanded of the new textbook to decrease. D. the quantity demanded of the used textbook to decrease and the quantity demanded of the new textbook to increase. Suppose an individual experiences a permanent increase in income. As a result of this increased income, further assume that the individual eats dinner at restaurants more frequently each month. This information suggests that dinners at restaurants for this individual are A. a substitute good. B. both complimentary and inferior. C. a normal good. D. an inferior good. If goods A and B are substitute goods, then an increase in the price of B, other things being equal, A. results in a decrease in the quantity of B consumed, but increases the demand for A. B. decreases the quantity demanded of B, but has no effect on the amount of A consumed. C. has no real effect on the quantity demanded of good B, but increases the demand for A. D. results in a decrease in the amounts of both A and B consumed. Which of the following will NOT cause a shift in the demand for portable power banks? A. a change in the price of smartphones B. a change in income C. a change in taste D. a change in the price of portable power banks

16. 17. 18. 19. 20. 21. Suppose it is discovered that consumption of chocolate leads to a longer life. This information would lead to A. an increase in quantity demanded. B. an increase in demand for chocolate of chocolate. C. a decrease in quantity demanded of chocolate. D. a decrease in demand for chocolate. Flour is an input used to produce bread. Suppose that the price of flour rises. As a result A. the supply curve for flour will shift to the right. B. the supply curve for bread will shift to the right. C. the supply curve for bread will shift to the left. D. the supply curve for flour will shift to the left. A technological improvement in the production of wireless earbuds would A. decrease the supply of wireless earbuds. B. decrease the demand for wireless earbuds. C. increase the supply of wireless earbuds. D. increase the demand for wireless earbuds. Each of the following would cause an increase in the supply of TVs EXCEPT A. an improvement in technology. B. an increase in the number of TV producers. C. an expectation that the price of TVs will rise in the future. D. a decrease in the cost of labor used to produce TVs. There will be an increase in supply when A. the market price rises from $3 to $4. B. there is an improvement in technology. C. a consumer's income increases. D. the demand curve shifts. Price per Constant-Quality Unit Quantity Demanded of Constant-Quality Units per Year Quantity Supplied of Constant-Quality Units per Year $1.00 1,000 200 2.00 800 400 3.00 600 600 4.00 400 800 5.00 200 1,000 According to the above table, at a price of $1 per unit, which of the following would exist? A. a shortage of 800 units B. a surplus of 800 units C. a surplus of 200 units D. a shortage of 200 units

25. 26. 27. 28. There has recently been an increase in the price of dairy products used in the production of ice cream. Lower temperatures have also induced people to consume less ice cream. In the market for ice cream, the effects these changes will have on equilibrium price and quantity are A. price will decrease and the effect on quantity is indeterminate. B. quantity will decrease and the effect on price is indeterminate. C. price will increase and quantity will decrease. D. price will decrease and quantity will increase. In which of the following situations will market clearing price increase and the equilibrium quantity decrease? A. a decrease in demand with no change in supply B. a decrease in supply with no change in demand C. an increase in demand with no change in supply D. an increase in supply with no change in demand Price ceilings are adopted in most cases because A. producers need incentives to produce more of the good or service. B. the government wants to create surpluses. C. the government views the current equilibrium price as too high for consumers. D. the government favors a non-intervention policy. Refer to the figure. At a price of $2 per gallon, there is A. a shortage of 80,000 gallons per week. B. a shortage of 60,000 gallons per week. C. a surplus of 20,000 gallons per week. D. a shortage of 40,000 gallons per week.

29. 30. Strawberries (pounds) Price Q d Q s $2 5,000 1,000 $4 4,000 2,000 $6 3,000 3,000 $8 2,000 4,000 $10 1,000 5,000 Consider the above table. If the government imposes a price ceiling on strawberries of $8 per pound, what would be the likely result? A. Market equilibrium will be reached. B. a shortage of 2,000 strawberries on the market C. The quantity demanded of strawberries would fall to zero. D. a surplus of 2,000 strawberries on the market If Nathan is willing to pay up to $3 for an ice cream but he actually pays $2 for it, the consumer surplus of the ice cream for Nathan is A. $2. B. $1. C. $3. D. cannot be determined without information about the market structure.

1. C. factor inputs and the quantity of output. 2. B. the change in total output from using an additional unit of one variable input, holding other inputs constant. 3. A. 3.6; 2. 4. C. $16 5. A. $150 6. B. $106. 7. D. Profits are negative and equal to BCEA. 8. A. $20 9. D. $150.00 10. D. marginal cost, average total cost and marginal revenue are all equal. 11. B. at lower relative prices, a larger quantity of a good will be purchased than at higher relative prices. 12. C. the quantity demanded of the used textbook to increase and the quantity demanded of the new textbook to decrease. 13. C. a normal good. 14. A. results in a decrease in the quantity of B consumed, but increases the demand for A. 15. D. a change in the price of portable power banks 16. B. an increase in demand for chocolate of chocolate. 17. C. the supply curve for bread will shift to the left. 18. C. increase the supply of wireless earbuds. 19. C. an expectation that the price of TVs will rise in the future. 20. B. there is an improvement in technology.

21. A. a shortage of 800 units 22. C. the price equals $10. 23. B. It is impossible to know, given only this information, whether the prices of smartphones will go up or down in the future. 24. B. more than $275. 25. A. price will decrease and the effect on quantity is indeterminate. 26. B. a decrease in supply with no change in demand 27. C. the government views the current equilibrium price as too high for consumers. 28. B. a shortage of 60,000 gallons per week. 29. A. Market equilibrium will be reached. 30. B. $1.