The final exam is cumulative but with greater emphasis on the last half of the class. The following quiz only cover the materials after the midterm exam. However, please try both quizzes when studying for the final.

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Economics (ECON 201-UCAL) Final Exam

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Question 1

What is consumer theory? (ID-MIF-01)

A	It explains the supply curve according to the changes in quantity demanded.
B	Study of how consumers behave to changes in income and price of commodities.
C	It explains the Supply and Demand according to macroeconomic level.
D	It is a theory that explains how consumers interact with the producers in market economy.

Question 2

What is NOT an assumption of Indifference Curve? (ID-MIF-02)

A	Utility is ordinarily measurable.
B	Indifference between bundles may exists.
C	At each point, less of on item is preferred over the other.
D	Two items in analysis makes the consumer equally happy.

Question 3

A textbook company produced 500 textbooks and sold each for $100. By producing the 500 textbooks, the company incurred a variable cost of $40,000 and a total cost of $55,000. What is the firm's total fixed costs? (ID-MIF-03)

A	$55,000
B	$15,000
C	$40,000
D	$50,000

Question 3 Explanation:

TC = TFC + TVC
55,000 = TFC + 40,000
TFC = 15,000

Question 4

A	$55
B	$110
C	$80
D	$100

Question 5

Which curve most likely represent marginal cost? (ID-MIF-05)

A	I
B	III
C	IV
D	It is not shown on the given graph.
E	II

Question 6

Which curve most likely represent budget line? (ID-MIF-06)

A	IV
B	III
C	It is not shown on the given graph.
D	I
E	II

Question 7

What is represented in curve II (second from the top) on the following diagram? (ID-MIF-07)

A	Average Fixed Cost
B	Budget Line
C	Average Variable Cost
D	Marginal Costs
E	Average Total Cost

Question 8

Which curve most likely represent average variable cost? (ID-MIF-08)

A	III
B	II
C	I
D	It is not shown on the given graph.
E	IV

Question 9

Which of the following is a property of Indifference Curves? (ID-MIF-09)

A	Indifference curves are both upwards and downwards sloping.
B	Indifference curves are upwards sloping.
C	Indifference curves are do NOT always reach the origin (x,y,=0) but always has a linear relationship to between two items.
D	Consumers always prefer higher indifference curves than the lower ones.
E	Consumers always prefer one item more than than the other at any given point on the indifference curve.

Question 10

The marginal rate of substitution can be best described as... (ID-MIF-10)

A	...the rate at which a consumer can substitute one good for another to increase consumer surplus.
B	...the rate of new products introduced to the market to replace another.
C	...the quantity of products available for substitution.
D	...the slope at any point on a given indifference curve.
E	...the rate at which a producer can substitute one good for another to increase profits.

Question 11

If the two goods compared can be easily substitute for one another, what is the most possible shape of the indifference curve? (ID-MIF-11)

A	More horizontal and linear towards one end.
B	Straight line or less bowed curve.
C	Highly curved and bowed outwards (away from the origin).
D	Highly curved and bowed inwards (towards the origin).

Question 12

Given that all other factors are equal, as income increase the budget line shifts to left. (ID-MIF-12)

A	False; it moves to the right.
B	False; it moves up.
C	True.
D	False; it starts to curve towards the origin.

Question 13

The marginal cost (MC) curve crosses the average total cost (ATC) curve at the minimum point on the average cost curve. (ID-MIF-13)

A	False because MC crosses ATC at the rising point of MC.
B	False because MC crosses ATC at the maximum point.
C	True
D	False because MC never crosses ATC.

Question 14

What is profit? (ID-MIF-14)

A	It is the total revenue minus the total capital.
B	It is the total revenue minus the total cost.
C	It is the total revenue minus the total marginal cost.
D	It is the total revenue minus the total average cost.
E	It is the total average cost divided by the quantity produced.

Question 15

What is efficient scale? (ID-MIF-15)

A	It is the total of both fixed costs and variable costs divided by the quantity of the good produced.
B	It is the the point, above which the average total cost curve start to fall.
C	It is the total of both fixed costs and variable costs.
D	It describes the quantity of output that minimizes the average total cost.

Question 16

Marginal product can be best described as... (ID-MIF-16)

A	...the increase in input to have an additional unit of output.
B	...the increase in output that raises from an additional unit of input.
C	...the difference between what a producer can afford to produce and the market demand for the good.
D	...the maximum quantity of an item a consumer can afford at a given price.

Question 17

In the Production Theory, the constant return to scale refers to a situation where... (ID-MIF-17)

A	...the long run average cost stays the same as the quantity of input changes.
B	...the long run total cost stays the same as the quantity of input changes.
C	...a firm cannot produce additional units of an item regardless of the increase in input.
D	...a firm uses diversification of products to reduce economic loss.
E	...it is no longer suitable for a firm to integration to take control over the entire production process.

Question 18

If you draw an indifference curve for two goods that are perfect compliments, what kind of general shape would you expect from the curve? (ID-MIF-18)

A	A straight line perfectly parallel to the y-axis.
B	A curve with a right angle 90-degree bend towards the origin.
C	A curve that increase its' slope on one side when moving away from the origin.
D	A curve that bends outward away from the origin.
E	A straight line perfectly parallel to the x-axis.

Question 19

Given the following scenario, please choose the best possible answer. (ID-MIF-19)

You buy a movie ticket for $15. However, you lose the ticket. On the day of the screening, you can buy another ticket for $20. Assuming you brought the new ticket, what statement best describe the situation?

A	The total opportunity cost of the movie is $20.
B	The $5 additional you paid is a consumer surplus.
C	The decision to buy the second ticket was a mistake.
D	The $15 lost on the original ticket is a sunk cost.

Question 20

It is possible to operate a firm with negative accounting profits if, somehow, the economic profits are positive. (ID-MIF-20)

A	True
B	False

Question 21

A student decided to take a degree in Geology instead of Computer Engineering. The amount of money this student would have earned if he had went with Computer Engineering degree is... (ID-MIF-21)

A	...an explicit cost.
B	...an implicit cost.
C	...an accounting cost.
D	...a variable cost.
E	...a fixed cost.

Question 22

According to production theory, which of the following can be one of many causes for increasing "return to scale"? (ID-MIF-22)

A	Decrease in taxes.
B	Increase in investments.
C	Labor specialization.
D	Short term investments.

Question 23

In diseconomies of scale... (ID-MIF-23)

A	...the Return to Scale Average Cost curve decreases and the long-run Average Total Cost rises as input increases.
B	...the Return to Scale Average Cost curve decreases and the long-run Average Total Cost falls as input increases.
C	...the Return to Scale Average Cost curve increases and the long-run Average Total Cost rises as input increases.
D	...the Return to Scale Average Cost curve increases and the long-run Average Total Cost falls as input increases.

Question 24

Over Long Run Average Cost (LRAC), a firm intitally faces __I__, but eventually experiences __II__. (ID-MIF-24)

A	I. profit rise II. profit fall
B	I. profit fall II. profit rise
C	I. economies of scale II. diseconomies of scale
D	I. increased competition II. limited competition
E	I. diseconomies of scale II. economies of scale
F	I. limited competition II. increased competition

Question 25

On a P-Q diagram; with the development of new technologies, the Long Run Average Cost (LRAC) curve to move __I__ and with increase in input cost, the LRAC curve will move __II__. Assume all other factors remains unchanged. (ID-MIF-25)

A	I. right II. left
B	I. up II. down
C	I. down II. up
D	I. left II. right

Question 26

Under Perfect Competition market model, we assume the following except... (ID-MIF-26)

A	...all firms are price takers and there are no price setters.
B	...that we have very large number of very large firms.
C	...produce a standardized product.
D	...extremely limited or no barriers to entry.

Question 26 Explanation:

This would be correct if we have very large number of very small firms.

Question 27

Profit maximization point occurs when... (ID-MIF-27)

A	...marginal cost equals to the marginal revenue.
B	...the supply is higher than the demand.
C	...the demand is higher than the supply.
D	...marginal cost is higher than the marginal revenue.
E	...marginal cost is lower than the marginal revenue.

Question 28

All of the following statements are correct about market collusion, except... (ID-MIF-28)

A	It prevents cheating among members of the organization.
B	Members of a given collusion group are price setters.
C	Under international laws, collusion is NOT always illegal.
D	Organizations that promotes collusion could fail a market (lead a market to a failure).

Question 28 Explanation:

Example would be OPEC group in which some powerful members cheated on agreed caps on oil production.

Question 29

If a firm would like to price discriminate a product or server, which of the following criteria must be met? (ID-MIF-29)

A	The firm must have a specialized product or service.
B	The firm must have the ability to control all steps of the production process of a product. A firm cannot price discriminate a service.
C	The market type must be a free unregulated market.
D	The firm must have a significant market power.

Question 30

In a monopoly market, an economic loss occurs when the Average Revenue is ____ the Average Total Cost. (ID-MIF-30)

A	cannot be answered
B	equal to
C	smaller than
D	greater than

Question 31

If a firm is in a revenue losing position and shutdown/exit is not an option, what will be the next best course of action? (ID-MIF-31)

A	Reduce spending on advertisements and terminate promotional programs.
B	Price the product/service at the equilibrium point.
C	Increase implicit costs.
D	Improve the quality of product/service.

Question 32

Which of the following scenarios is not an example of price discrimination? (ID-MIF-32)

A	Cheaper price for last year version of the Economics textbook (new/unused) than the price for the this years' version (new/unused).
B	Different prices a Geologic Consultation company charging their customers for soil testing.
C	A travel agency selling the identical travel package to you for cheaper than for your friend who brought it later.
D	Calgary Transit offering lower ticket price for children compared to higher priced adult tickets.

Question 33

The government can reduce the environmental impact of heavy industries by... (ID-MIF-33)

A	...banning the operation of such industries.
B	...controlling the industries by selling licenses for releasing harmful chemicals.
C	...increasing the tax on the industry.
D	...artificially increasing the price of goods by creating a binding floor price.

Question 34

Which of the following is a true statement about oligopoly? (ID-MIF-34)

A	Only produce a standardized product but by different firms.
B	This type of structure will result in more competitive market than any other type of market structure.
C	At least two firms have majority of control in the market.
D	All firms are price takers in this market.

Question 35

Brand proliferation is an advantage to the consumer/buyer. (ID-MIF-35)

A	True; it will create more competition.
B	False; it will reduce the competition because of product specialization.
C	True; it will provide the consumers with more choices.
D	May or may not be beneficial to the consumer.

Question 35 Explanation:

If the verity of the products (brands) in the market is owned by the same company, then it will not benefit the consumer. Ex: Kellogg's cereal brands. But if the different brands are owned by different companies, then it will benefit the consumers. Ex: Duracell vs Eveready.

Question 36

The Air Traffic Control program can be best described as a... (ID-MIF-36)

A	...public good.
B	...non-excludable good.
C	...private good.
D	...excludable good.

Question 37

The following graph is shows Marginal Benefit (MB) and Marginal Costs (MC) associated with pollution prevention for few different scenarios. Given all other things remain constant, what is the optimal intervention point for the first situation (orange)? (ID-MIF-37)

A	Not enough data is provided to answer this question because the cost of pollution prevented is not shown.
B	Any point right of the intersection between MB1 and MC1 where MC1 is above the MB1.
C	At the intersection between MB1 and MC1
D	Any point left of the intersection between MB1 and MC1 where MC1 is bellow the MB1.
E	Not enough data is provided to answer this question because the quantity of pollution prevented is not shown.

Question 38

The following graph is shows Marginal Benefit (MB) and Marginal Costs (MC) associated with pollution prevention for few different scenarios. Given all other things remain constant, which of the following statement is correct? (ID-MIF-38)

A	At the optimum intervention point for both scenarios, the second scenario is always the best option because the intersection (MC2-MB2) prevent higher % of pollution than the first one.
B	The best intervention point for pollution prevention for the second scenario (MC2, MB2, MC3) is at the intersection occur closer to 0% between MB2 and MC3. Hint: This means 0% of pollution is prevented. No benefit to any party.
C	At the optimum intervention point for both scenarios, the first scenario is always the best option because the intersection (MC1-MB1) is lower than the second one.
D	The best intervention point for pollution prevention for the second scenario (MC2, MB2, MC3) is at the intersection occur closer to 80% between MB2 and MC2.

Question 39

The following graph is shows Marginal Benefit (MB) and Marginal Costs (MC) associated with pollution prevention for few different scenarios. Given all other things remain constant, which of the following statements is correct? (ID-MIF-39)

A	The MC3 curve is a situation where pollution prevention costs are too high compared to the economic benefits of industries.
B	The increase in marginal benefits (MB) from MB1 to MB2 most likely cause by an economic collapse.
C	The increase in marginal benefits (MB) from MB1 to MB2 most likely cause by a depletion in technological advancements.
D	The MC3 curve is a situation where the market will experience a failure.

Question 40

When the supply curve with the social costs are lower than the supply curve with private cost of an item... (at the private cost level) (ID-MIF-40)

A	...the price will be artificially higher and smaller quantities are produced.
B	...the price will be artificially higher and larger quantities are produced.
C	...the price will be artificially lower and smaller quantities are produced.
D	...the price will be content higher and lower quantities are produced.
E	...the price will be content higher and larger quantities are produced.

Question 41

If you have a higher social cost than a private cost, the best way to reduce or eliminate the difference is to... (ID-MIF-41)

A	...deregulate industry in question.
B	...do nothing and wait for the market equilibrium to occur.
C	...subsidize the industry in question.
D	...tax the industry in question.

Question 42

Which of the following can be considered as a non-excludable resource? (ID-MIF-42)

A	A groundwater remediation treatment facility near a major city.
B	A private owned solar energy farm.
C	A farmhouse build by a farmer to keep his/her livestock.
D	A private road an oil company built in Alberta to access a remote location.
E	A Economics textbook written by you.

Question 43

Economic profit... (ID-MIF-43)

A	...is the total revenue minus the explicit cost.
B	...will always be equals to the accounting profit if the firm is producing a positive average revenue.
C	...will always be lower than the accounting profit.
D	...is not very useful measure of how well a firm is performing in the market.

Question 44

No party can be better off without making making another party worse off in this type of equilibrium. (ID-MIF-44)

A	Pareto Equilibrium
B	Supply-Demand Equilibrium
C	Nash Equilibrium
D	Dominant Strategy Equilibrium

Question 45

What is Cournot competition? (ID-MIF-45)

A	It is a situation in which all firms sets the price at the same time hence creating very high competition.
B	It is a situation in which a powerful group of companies such as OPEC sets the market price.
C	It is a situation in which one company takes the leadership in the majority quantity of output.
D	It is a situation in which a powerful group of companies or a company sets the market price.
E	It is a situation in which companies compete on the amount of output they will produce.

Question 46

What is Bertrand competition? (ID-MIF-46)

A	It is a situation in which all firms sets the price at the same time hence creating very high competition.
B	It is a situation in which one firms takes the leadership in the majority quantity of output.
C	It is a situation in which a powerful group of companies such as OPEC sets the market price.
D	It is a situation in which one company takes the leadership in the majority quantity of output.
E	It is a situation in which a powerful group of companies or a company sets the market price.

Question 47

What term or phrase is used to describe the study of how people behave in strategic situations? (ID-MIF-47)

A	Decision theory
B	Strategic planning
C	Game theory
D	Dependency theory

Question 48

What is the concentration ratio of Firm 1? (ID-MIF-48)

...	Firm 1	Firm 2
I	70	18
II	5	18
III	5	18
IV	5	18
V	5	18

A	70
B	180
C	5
D	90

Question 48 Explanation:

CR = 70 + 5 + 5 + 5 + 5 = 90

Question 49

What is the concentration ratio of Firm 2? (ID-MIF-49)

...	Firm 1	Firm 2
I	70	18
II	5	18
III	5	18
IV	5	18
V	5	18

A	18
B	70
C	5
D	90

Question 49 Explanation:

CR = 70 + 5 + 5 + 5 + 5 = 90

Question 50

What is the Herfindahl Index for Firm 2? (ID-MIF-50)

...	Firm 1	Firm 2
I	70	18
II	5	18
III	5	18
IV	5	18
V	5	18

A	1450
B	5000
C	1820
D	1620
E	4820

Question 51

What is the Herfindahl Index for Firm 1? (ID-MIF-51)

...	Firm 1	Firm 2
I	70	18
II	5	18
III	5	18
IV	5	18
V	5	18

A	1820
B	1450
C	5000
D	4820
E	1620

Question 52

In a monopolistic economy, the positive profit is the always above the ATC curve. (ID-MIF-52)

A	False
B	True

Question 53

As firms exits the market, the demand curve shifts ___ for the firms remaining. (ID-MIF-53)

A	down
B	up
C	right
D	left

Question 54

Public goods can benefit society but it can also harm firms. (ID-MIF-54)

A	True
B	False

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Credits: Based on the excellent class notes provided by, Dr. Ronald Schlenker during Summer 2014.
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Sanuja Senanayake

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Standing on the shoulders of giants