ECON 200 Exam 2 LATEST UPDATE 2020(all answers are correct and well explained)

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Sample Exam Answers for Exam 2 Chapter 7: 1. Your friend Seltic wants to study more. You realize that when youstudy, he is more likely to study. Seltic’s increased desire to study is ________... ____ and if you ignore this effect you will study ___________ than the socially optimum level. a. a positive externality; more b. a positive externality; less c. a negative externality; more d. a negative externality; less 2. Rick recently moved into an apartment complex that is located next to an extremely busy highway. Rick plays his stereo pretty loudly, but its sound is indistinguishable from the noise of the traffic. The noise created by Rick’s stereo is an example of a. a positive externality. b. a negative externality. c. a negligibleexternality. d. both a negative and a positive externality. 3. London and Stockholm each use congestion charges to discourage driving. Which city has the best system and why? a. London because they established a flat-price congestion charge. b. London because they established a dynamic-price congestion charge. c. Stockholm because they established a flat-price congestion charge. d. Stockholm because they established a dynamic-price congestion charge. 4. A roofing company decides to fix the leaky roof during your scheduled class. The noise impairs the ability of you and the others in class to learn the material. This is a a. positive externality b. negative externality c. a negligible externality d.public good 5. A group of friends goes out to eat together and they agree to split the bill equally. They order a series of tapas, or small dishes to share. However, the best dishes get consumed very quickly while the less appetizing dishes go largely uneaten. What economic concept explains why the best tapas are consumed so quickly? a. It is a private property problem b. It is a common property problem c. Tapas are a public good d. It is a free rider problem 6.How would alter your transportation decisions if you had to pay for the pollution (a social cost) that your vehicle creates? a. You would drive more to make sure that you get the full benefit from owning and operating the car. b. You would drive more if you were poor and less if you were wealthy. c. You would drive less since the social cost (of pollution) is now be considered part of the private cost of driving. d. You would drive the same amount; the social cost is a negligible externality. 7. Which type of congestion charge will be the most effective at managing traffic flow? a. Flat pricing a. Dynamic pricing b. A gasoline tax for all car drivers c. Raising vehicle registration fees. 8. In large public gatherings (football games, movie theaters, large classrooms) you almost always find that the floors have collected trash by the end of the day. Why does this happen? a. This is a private property problem. b. This is a positive externality. c. This is a negative externality. d. This is a common property problem. 9. If government regulations force a business to take into account social costs, it will a. reduce price and cuts its pollution. b. increase price and increase the amount of pollution. c. reduce production and it charge a higher market price. d. increase production and charge a lower market price. 10. During the fall, when leaves blow from one yard into neighboring yards this is best described as a a. positive externality b. negative externality c. negligible externality d. public good 11. Which of the following would be viewed as a common property problem? a. Your property is burglarized. b. Vandals damage your property. c. People pick all of the flowers in a public park. d. To be safe you must lock your door at night. 12. When social and private costs differ, economists state that a. there will be economic profit in the society. b. the society will produce inside the production possibilities frontier. c. there is an externality. d. there is not an efficiency problem but an equity problem. 13. If a firm does not have to take social costs into account, it will establish a private optimum where a. there is reduced production and it charges a higher market price. a. there is increased production and charges a lower market price. b. it reduces price and cuts its pollution. c. it increases price and increases the amount of pollution. 14. Generally speaking, the government is better at providing public goods than the market is because public goods are: A. excludable and rival B. non-excludable and non-rival C. rival and non-excludable D. non-rival and excludable 15. Which concept is most closely associated with the underproduction of goods? A) Common property B) Free-riding C) Diminishing marginal utility D) Positive externalities 16. My neighbor has a large satellite dish on his roof that blocks sunlight into my house. Since I need my sun, I talk to him and I agree to pay him $200 and he switches to basic cable and takes down the satellite dish. We reached this agreement because A) it was a positive externality B) it was a negative externality C) when the transactions costs were low people have an incentive to find solutions to private property problems. D) government regulations 17. You enjoy watching Arizona compete during March Madness on cable television while eating a pizza with your friends. Where would you place cable television and pizza on the following grid? They need not be in the same box. Excludable Non-Excludable Rival Pizza Non-Rival Cable 18. What are the two characteristics of a common resource good? A) Excludable and non-rival B) Non-excludable and non-rival C) Excludable and rival D) Non-excludable and rival 19.Which of the following is the best example of a public good? A) Fish in the ocean B) Public school education C) Community swimming pool D) National defense 20. Connect each description on the left with the appropriate term on the right. Membership in a sorority Club good A rainbow Private good A Drake t-shirt Public good Hunting wildebeest on the African Savanna Common resource good 21. Consider a public television station that relies on donations to maintain operation. Herman enjoys watching this channel a lot, but he does not donate any money to keep the channel alive. Thus Herman is: A) a jerk B) a free-rider C) an opportunity-seeker D) an advantage-seeker For problems 22-25connect each description on the left with the appropriate term on the right. 22.Tuna in the Atlantic Ocean Club good 23. The Aurora Borealis Private good 24. A membership at a gym Public good 25. Pizza from Mellow Mushroom Common resource good 26. When the guys from South Park visit the water park and too much “pee” causes the water to become yellow we observe A. a club good. B. a common-resource good. C. the tragedy of the commons. D. the free rider problem 27. Which of the following meets the definition of a public good and therefore must be provided by the public sector? A. Waffles B. High-speed Internet service C. Tornado sirens D. Private hospitals 28. A city wants to reduce congestion during the morning and evening rush hour without having to build any new roads, which strategy will be most effective? A. Raising vehicle registration fees. B. A flat-rate congestion charge. C. Dynamic congestion pricing. D. A gasoline tax for all car drivers 29. If government taxes a firm in order to achieve the social optimum, this will A. reduce the price the firm charges and cut its pollution. B. increase the price the firm charges and increase the amount of pollution. C. lower the quantity produced and cause the firm to charge a higher market price. D. increase the quantity produced and cause the firm to charge a lower market price. 30. My neighbor has a rooster that crows at the break of dawn. I like to sleep in so I give my neighbor $100 and she sells the rooster. This solution is most consistent with: A. The Coase Theorem. B. The Laffer Principle C. The externality formula. D. The chicken paradox 31. The government decides to subsidize vaccinations in order to reach the social optimum. The resulting shift in demand will A. raise prices and lower the quantity. B. raise prices and raise the quantity. C. Lower prices and raise the quantity. D. Lower prices and lower the quantity, 32. In order to encourage more recycling, we A. should sign the Paris climate accord. B. Give everyone cloth bags to use instead of plastic. C. When collecting trash, price curbside service by weight. D. Outlaw the use of all plastics. Chapter 8: 33. Zero economic profits is the same thing as A. a negative accounting profit. B. zero accounting profit. C. a positive accounting profit. 34. Which of these is an implicit cost? A. the electric bill B. the capital invested in the business C. advertising expenses D. employee wages 35. Output is a function of A. profit and loss B. explicit and implicit costs C. fixed and variable costs D. labor and capital. 36. If a firm is producing where MC is sloping downwards and MC is below the AVC, then A) MR is decreasing. B) AVC is rising. C) ATC is decreasing. D) We do not have sufficient information to conclude any of the above. 37. Which of the following is FALSE? A) The AFC curve can never rise with output. B) The marginal cost curve begins to increase before the average variable cost curve. C) The ATC always lies above the AVC. D) None of the above. All are true. 38. At Disneyland a one-day pass is $100, a two-day pass is $130, and a three-day pass is $150. What is the marginal cost of purchasing a three-day pass compared to the two-day pass? A. $ 20 B. $150 C. $ 15 D. $ 50 39. In the table, diminishing marginal returns begin Input Total Product 0 0 1 10 2 35 3 70 4 120 5 165 6 175 7 170 8 155 A) after the 1st unit of input B) after the 2nd unit of input C) after the 7th unit of input D) after the 4th unit of input 40. Given the table below calculate the average variable cost of producing three (3) units of the good? Output Total fixed cost Total variable cost Total cost Average fixed cost Average variable cost Average total cost Marginal cost 1 $500 $80- $580 $500 $80 $580 $20 2 $500 $100 $600 $250 $50 $300 $20 3 $500 $120 $620 $166.67 ____ $206.67 $20 4 $500 $140 $640 $125 $35 $160 $20 5 $500 $160 $660 $100 $32 $132 A) $80 B) We do not have sufficient information. C) $33 D) $40 41. The MC curve goes through the minimum point of which of the following curves? A) AVC, AFC B) ATC, AVC C) AFC, ATC D) ATC, AVC, AFC 42. The MC curve eventually rises as output increases in the short run because of A) the law of diminishing returns B) diseconomies of scale C) constant returns to scale D) economies of scale 43.Where does diminishing marginal returns to labor begin? Total Workers Total Output 0 --- 1 8 2 17 3 22 4 25 5 22 6 -17 7 -10 A) after the 1st worker B) after the 2nd worker C) after the 4th worker D) after the 5th worker 44. What explains why the SR AVC curve eventually increases as output rises? A) diseconomies of scale B) the law of diminishing returns C) economies of scale D) constant returns to scale 45. When Super Stuff Corporation produces 5,000 units, total costs equal $150,000 and total variable costs equal $75,000. At this level of output, what is Super Stuff’s average fixed cost? A) $75,000 B) $30 C) $225,000 D) $15 46. In the following table find the value of A: Output Total fixed cost Total variable cost Total cost Average fixed cost Average variable cost Average total cost Marginal cost 1 ____ $200 ____ ____ ____ $300 ____ 2 $100 $400 ____ ____ ____ ____ A=$100 3 ____ ____ $600 ____ ____ ____ ____ 4 ____ $350 ____ ____ ____ ____ ____ 5 ____ ____ ____ ____ $40 ____ 47. When a firm exhibits ______________________, production should be lowered. A) economies of scale B) constant returns to scale C) diseconomies of scale 48. In the following table find the value of A: Output Total fixed cost Total variable cost Total cost Average fixed cost Average variable cost Average total cost Marginal cost 1 ____ ____ $100 $50 ____ ____ $25 2 ____ $75 ____ A=$25 ____ ____ ____ 3 ____ ____ $150 ____ ____ ____ Chapter 9: 49. If A = 10, B = 8 and C = 20 then the profit is…. a. $ 40 b. $240 c. $150 d. $ 90 50. If your revenue while producing is greater than your variable cost you should a. operate in the short run. b. shut down. 51. MR = MC is a rule used to determine when to STOP/START (circle answer) production? 52. Which of the following is an assumption of perfect competition? A) There are high barriers to entry and exit in the market. B) Each of the firms has a significant market share C) Each of the firms sells a differentiated product. D) Each firm is small relative to the market. 53. Consider a perfectly competitive industry where all firms are making a loss. All of the following are true EXCEPT A) We are in the short-run. B) We expect more firms to exit than enter. C) Market supply will decrease. D) Government intervention is necessary to ensure that the industry survives. 54. What quantity should a firm produce if it wants to maximize profit? A) A B) B C) C D) D 55. Your business currently charges the profit-maximizing price, but you are making a loss. Which of the following should you do? A) Continue producing regardless; things will turn around eventually. B) Shut down immediately; get out while you can. C) Continue producing if your price is greater than your average fixed cost (AFC). D) Shut down if your price is less than your average variable cost (AVC). 56. When the perfectly competitive firm is at its breakeven point in the long run which of the following is true? A) It has an accounting profit of zero. B) It is operating at the lowest point on its ATC curve. C) It is highly regulated. D) The price it charges is greater than the average cost of production. 57. Which of the following is the best example of a perfect competitor? A) Pacific Gas and Electric Company B) Dominos Pizza C) Target D) A farmers market 58. If price is below the AVC curve, which options (shut down temporarily, operate to minimize loss, or go-out-of-business) should a business consider? A) Shut down now B) Operate to minimize loss C) Go-out-of-business D) Depending on your expectations about future demand, either shut down or go-out-business 59. In perfect competition, if the price of the good is higher than the AVC, but lower than the ATC, and the business environment is optimistic, then a firm will A) Go-out-of-business B) Operate in the short run C) Shut down immediately D) Expand production in order to maximize profits 60. The demand curve for a perfectly competitive firmis A) Perfectly inelastic B) Perfectly elastic C) Relatively inelastic D) Relatively elastic 61. If a perfectly competitive firm is producing an output rate at which marginal cost is greater than price, the firm A) is sustaining economic loss. B) should increase its output level. C) should reduce its output level. D) will not be covering its fixed cost. 62. The MR curve for a price taker is A) vertical B) horizontal C) downward sloping D) upward sloping 63. According to the figure below, a firm would be suffering a loss but still be producing if the price is: A) anywhere below $5. B) below $5 but above $4. C) anywhere above $4. D) below $4. 64. Which of the following lists the three main characteristics of a competitive market? A) many buyers and sellers, similar products, easy entry into the market B) many buyers and few sellers, similar products, easy entry into the market C) many buyers and sellers, differentiated products, easy entry into the market D) many buyers and sellers, similar products, barriers to entry into the market 65. Which answer is consistent with the highest profit? a. Maximizing profit per unit b. Maximizing total revenue c. Equating marginal revenue with marginal cost d. Minimizing average total costs 66. Identify the profit maximizing OUTPUT level in the table. A) 30 B) 50 Output MC MR 10 20 15 20 17 15 30 15 15 40 13 15 50 12 15 60 14 15 70 16 15 80 19 15 C) 60 D) 40 67. In markets characterized by competition we expect to find _______ and _______ compared to a monopoly. a. lower prices; greater output b. lower prices; lower output c. higher prices; greater output d. higher prices; lower output 68. Define efficiency: Efficiency in production occurs at the lowest ATC. 69. When you get home you throw your jacket over the back of a chair rather than hang the jacket in the closet. Is this potentially efficient?YES 70. ______ and ______ play a crucial role in signaling where to guide resources in markets. a. Public goods; private goods b. Entry; exit c. Average total cost; average fixed cost 71. Where will a firm maximize profits in a competitive industry? A) Where the ATC is at a minimum B) Where the profit per unit is maximized C) Where the extra revenue received from one more unit is just equal to the extra cost of producing one more unit D) Where MR is maximized 72. Which of these reasons best describes why an economist may view losses as desirable in a perfectly competitive market? A) Losses ensure we have losers in addition to winners in business, and hence balance. B) Losses signal that there are too many firms in the industry relative to market demand. C) Losses signal to the government that the market requires regulation. D) Losses must mean that firms are not charging the profit maximizing price. 73. Sunk costs: A) should be taken into consideration when making decisions about future production. B) are costs that have been incurred as a result of past decisions. C) cause the profit-maximizing rule to no longer be useful. D) are included only in economic profits. 74. What is the best example of someone who doesn’t understand sunk costs? A) A person who pays twice as much for a new pair of shoes than they are worth B) A student who laments how poorly they did on the second exam and, as a result, spends less time worrying about the final exam C) An employee who steals from the cash register and therefore causes the business to lose money D) Someone who obsesses about the future and forgets to focus on their past accomplishments 75. A company is currently producing 10 fog machines at an average total cost of $15. Given the table below, should the firm produce the 11th fog machine if the company can sell it for $20? YES or NO (circle answer) # of fog machines Average cost TC MC 10 $15 $150 NA 11 $16 $176 $26 MR = $20, the MC of the 11th fog machine is $26 so NO is the answer. Chapter 10: 76. Which of the following is true about a monopolist MR curve? A) The MR curve may lie above or below the demand curve dependent on the price elasticity of demand. B) The MR curve and the demand curve are equivalent because the monopolist faces the entire market demand. C) The MR curve lies below the demand curve because the monopolist faces a downward sloping market demand curve. D) The MR curve is above the demand curve because the monopolist has a high profit margin and pulls the average up. 77. Monopolists A) always make a profit B) always lose money C) are regulated by the government and therefore they are not allowed to earn excessive profits D) can make profits or losses, depending on demand conditions 78. A monopolist faces a A) downward-sloping demand curve. B) perfectly elastic demand curve. C) perfectly elastic supply curve. D) downward-sloping supply curve. 79. According to the accompanying figure, if a firm is producing a quantity of 150 and charging a price of $13 A) the firm should continue to produce 150 units but lower the price to $10 to maximize profits. B) the firm should continue to produce 150 units but raise the price to $25 to maximize profits. C) the firm should lower production to 100 units but keep charging $13 to maximize profits. D) the firm should lower production to 100 units and raise the price to $25 to maximize profits. 80. Which of following is NOT a cost of monopoly? A) The monopolist produces too much output compared to perfect competition. B) The monopolist charges too high a price relative to perfect competition. C) The monopolist limits the choices that consumers have. D) Competition to become a monopolist leads to rent seeking. 81. Which of the following most accurately describes the economic benefit of issuing a patent? a. An incentive to innovate. b. A profit-sharing mechanism. c. A redistribution of wealth. d. An original invention. 82. Which of the following is the best example of rent seeking? a. You find an apartment with a low rent b. Politicians competing to win an election c. A bicyclist wins an endurance race 83. Name three barriers to entry: control over a natural resource, economies of scale, legal barriers 84. Compared with perfect competition, a firm in a monopolistic industry will a. charge a higher price and produce a larger output b. charge a lower price and produce a larger output c. charge a lower price and produce a smaller output d. charge a higher price and produce a smaller output 85. Which of the following is NOT an essential characteristic of a monopoly? a. A single firm b. The firm sells a well-defined product with no good substitutes. c. The barriers to entry are high. d. The monopolist makes an economic profit. 86. If a country liberalizes trade what effect will this have on a monopolist? a. None, the monopolist is still the only firm that produces the good in the country. b. None, there are still substantially barriers to entry in the market. c. None, the monopolist sells a unique product for which there are no good substitutes. d. Some, non-domestic firms are now free to compete with the monopolist. 87. Monopolies are inefficient because they A) produce too much output. B) they can earn excessive long-run profits. C) do not produce where MR = MC. D) none of the above. 88. monopolists are price ______. a. shakers b. makers c. takers d. fakers 89. Which of the following is NOT one of the four defects of monopoly we discussed? a. The price is too high and quantity produced is too low. b. Consumers have too many choices c. Rent seeking d. Profit signals for firms to enter the market no longer work. 90. When a monopolist is trying to maximize revenue by changing the price it charges, it must be aware of a. The elasticity effect. b. The cost effect. c. The cost and demand effects. d. The price and output effects. Chapter 13: 91. Your economics instructor decides to assign a two-student project. We will assume that both students are interested in maximizing their happiness. Your partner Work hard Work less hard You Work hard Grade = A, but you had to work 10 hours. Happiness = 7/10 Grade = A, and you only worked 5 hours. Happiness = 9/10. Grade = A, but you had to work 10 hours. Happiness = 7/10 Grade = A, but you had to work 15 hours. Happiness = 4/10 Work less hard Grade = A, but you had to work 15 hours. Happiness = 4/10 Grade = B, but you only worked 5 hours. Happiness = 6/10. Grade = A, and you only worked 5 hours. Happiness = 9/10. Grade = B, but you only worked 5 hours. Happiness = 6/10. What is your dominant strategy? A. Work hard B. Work hard, only if your partner works hard C. Work less hard D. Work less hard, only if your partner works less hard 92. Trade agreements encourage countries to curtail tariffs so that goods are able to flow across international boundaries without restrictions. Using the following payoffs determine the Nash equilibrium for these two countries? China Low tariffs High Tariffs United States Low tariffs China gains $50 billion China gains $100 billion U.S. gains $50 billion U.S. gains $10 billion High tariffs China gains $10 billion China gains $25 billion U.S. gains $100 billion U.S. gains $25 billion A. Low tariff for the U.S., low tariff for China. B. Low tariff for the U.S., high tariff for China. C. High tariff for the U.S., high tariff for China. D. High tariff for the U.S., low tariff for China. 93. Which is the best example of a zero-sum game? A. Playing poker B. The value meal you buy from Wendy’s C. A riot in downtown 4th Avenue after a big football win over ASU. D. A UofA t-shirt you buy at the bookstore. 94. In the prisoner’s dilemma which outcome is the dominant strategy? A. seek legal advice B. lie to the police and make sure you implicate an innocent third party. C. keep quiet and don’t tell the cops anything. D. rat out your partner to avoid jail time. 95. A small town has only one pizza place, The Pizza Factory. A small competitor, Perfect Pies, is thinking about entering the market. The profits of these two firms depends on whether Perfect Pies enters the market and whether The Pizza Factory – as a price leader – decides to set a high or low price. Perfect Pies Enter Stay out The Pizza Factory High price Perfect Pies makes $10,000 Perfect Pies makes $0 The Pizza Factory makes $20,000 The Pizza Factory makes $50,000 Low price Perfect Pies loses $10,000 Perfect Pies makes $0 The Pizza Factory makes $10,000 The Pizza Factory makes $25,000 What is the dominant strategy of The Pizza Factory? A. keep its price high B. keep its price low C. keep its price high only if Perfect Pies enters the market D. The Pizza Factory does not have a dominant strategy. 96. What is the dominant strategy in Rock, Paper, Scissors? A. Always choose rock. B. Choose rock when you partner chooses scissors, scissors when they choose paper, and paper when they choose rock. C. RPS does not have a dominant strategy. D. Try to outguess your opponent. 97. Which of the following outcomes is the NASH equilibrium? Freaky Cat Woof Meow Mad Dog Woof 15 -5 5 15 Meow 0 10 -5 10 A. Mad Dag and Freaky Cat both woof B. Mad Dog and Freaky Cat both meow C. Mad Dog woofs and Freaky Cat meows D. Freaky Cat woofs and Mad Dog meows 98. Which of the following is the best example of a zero-sum game? A. your laptop gets stolen B. global warming C. you buy a ticket home to see your family 99. Which is the best example of an oligopoly? A. The sole gas station at a stop along a rural highway B. Coca-Colaand Pepsi C. Lettuce growers at a farmers market D. A part-time Uber driver 100. As the owner of a small restaurant should you be more concerned about the cleanliness of your restroom or kitchen? A. The dominant strategy is to clean the restrooms more often than the kitchen. B. The dominant strategy is to clean the kitchen more often than the restrooms. C. The dominant strategy is the clean both the restrooms and the kitchen. D. There is no dominant strategy, you should clean the tables, floors, restrooms, kitchen, and maintain a nice outside appearance always in order to attract customers. 101.The Nash equilibrium occurs when a. Neither player has an incentive to switch their strategy given what the other player is doing. b. Both players earn the largest possible payoffs. c. Both players experience a prisoner’s dilemma d. When the combined profits are maximized. 102. Because consumers have ___________ ____________ about products this leads oligopolies to compare their products to more highly rated brands. a. mutual interdependence b. incomplete information c. high barriers d. monopoly power 103. Which of the following is a zero-sum game? a. climate change b. trade c. rioting d. racquetball 104. Which of the following is an example of the prisoner’s dilemma in everyday life? a. Not making up your bed b. Not paying back a loan from your parents c. Not leaving a tip at an out-of-town restaurant. d. Not earning enough money to afford to pay your rent. 105. If you want to encourage someone to cooperate with you in the long run you should a. find the Nash equilibrium. b. deploy the dominant strategy. c. use tit-for-tat. d. be cooperative. Chapter 16: 106. Why is the price of water so much lower than the price of diamonds even though people cannot survive long without water? A) This is an unsolved mystery. B) A price change affects the purchasing power of an individual’s income. C) Marginal utility, not total utility, determines how much a person is willing to pay for a good. D) There are no good substitutes for diamonds while there are good substitutes for water. 107. Which of these statements is true about the utility created in society from consuming meals at fancy restaurants? A) The TU is high. B) The MU and TU are both low. C) The MU is high. D) The MU and TU are both high. 108. A new restaurant offers an all-you-can-eat buffet for $9.99. What economic concept is this business relying on to earn a profit? A) a price ceiling B) elastic demand C) diminishing marginal utility D) price discrimination 109. Jason is trying to decide what to buy Diane for her birthday. Fortunately, Diane has given him the following utility table. If Jason has $100 to spend (and he intends on spending all of it on Diane) what combination of goods should he buy her to maximize the amount of utility she gets? Roses $20/dozen Marginal Utility Candy $10/box Marginal Utility 1 40 1 18 2 32 2 16 3 24 3 14 4 11 4 12 5 8 5 10 A) 5 dozen roses B) 4 dozen roses and 2 boxes of candy C) 3 dozen roses and 4 boxes of candy D) 2 dozen roses and 6 boxes of candy 110. Refer to the following MU table: Mangoes MUm MU/Pm Pineapple MUp MU/Pp 1 20 20 1 24 12 2 15 15 2 18 9 3 10 10 3 12 6 4 5 5 4 6 3 You have a budget of $10. Mangoes cost $1 and Pineapples cost $2. How many of each should you buy to maximize total utility? 4 Mangoes and 3 Pineapples. Using the 3rd and 6th columns that you must calculate yourself we see that the consumer will buy 20 utils, then 15, then 12, then 10, then 9, then 6 and final 5 utils (at that point they have spent their entire budget). 111. You and a friend try the burritos at Illegal Pete’s. You give them 15 utils and your friend gives them 10 utils. Circle the best answer below: You like the burritos more than your friend Your friend likes the burritos more than you The friends should have gone to Chipotle You cannot compare utils among friends 112 In the table, diminishing marginal utility begin? Units Bought Total utility 0 0 1 10 2 35 3 70 4 120 5 165 6 175 7 170 8 155 a. after the 1st unit b. after the 2nd unit c. after the 7th unit d. after the 4th unit 113.A student enjoys milkshakes. They spend $12 a week buying milkshakes. A milkshake at Baby’s costs $3.00 and a milkshake at McDonald’s costs $2.00. How many times should they go to each place? Refer to the following MU table: Visits to Baby’s MUBaby’s Visits to McDonald’s MUMcD’s 1 40 1 30 2 30 2 25 3 20 3 20 4 10 4 15 5 10 6 5 114. Tina enjoys fresh produce. If Tina gets more utility per dollar spent (Hint: think of the equal marginal principle) from broccoli than from tomatoes she should a. eat more broccoli because it is cheaper than tomatoes. b. eat more tomatoes. c. eat more organic tomatoes since it is healthier than regular tomatoes. d. eat more broccoli. 115. What is the equal marginal principle? a. The utility gain, or happiness, that people receive what they buy. b. The price of an item divided by extra utility that item brings you. c. TU of A = TU of B = …… = TU of Z d. MU of A / price of A = MU of B / price of B = ...= MU of Z / price of Z 116. The following table describes the extra utility a customer gets from Pumpkin pie. When does diminishing marginal utility begin? Slices of pumpkin pie consumed Marginal Utility (utils) 1 10 2 25 3 35 4 30 5 20 6 5 7 -15 a. after they eat the second slice. b. after they eat the third slice. c. after they eat the sixth slice. 117. The following table describes the extra utility Joey Chestnut gets from eating a bunch of hot dogs. Determine when he begins to experience diminishing marginal utility: Number of hot dogs consumed Marginal Utility (utils) 1 14 2 20 3 22 4 12 5 6 6 -4 7 -18 a. after he eats the first hot dog b. after he eats the third hot dog c. after he eats the fifth hot dog. d. after he eats the sixth hot dog 118. Refer to the following MU table: Five Guys Hamburgers MUh Five Guys Fries MUf 1 16 1 10 2 12 2 8 3 8 3 6 4 4 4 4 You have a budget of $12 to get lunch. Hamburgers cost $3 and the fries cost $2. How many of each should you buy to maximize your total utility? Number of wings MUwings Number of pizza slices MUpizza 1 10 1 30 2 8 2 24 3 6 3 18 4 4 4 12 5 2 5 6 6 0 6 0 119.A consumer is trying to decide between purchasing one hamburger or one order of fries. They get 20 utils of enjoyment from fries and the fries cost $4 and they get 30 utils of enjoyment from the hamburger. Below what price will they decide to buy the hamburger? Answer: ____$6_____ 120. I enjoy going to the downtown farmer’s market on Fridays. This time of year there are many different varieties of fresh flowers and produce to buy. If I get more utility per dollar spent from buying fresh flowers than from fresh produce I should a. buy more fresh produce because it is cheaper than fresh flowers. b. buy more produce. c. buy more organically grown produce since it is healthier than non-organic. d. buy more fresh flowers. 121. If the price of a pack of a certain brand of gum goes up by 50 cents, this creates a. a substitution effect. b. an income effect. c. both a substitution and an income effect. d. neither a substitution nor and income effect. [Show More]

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