ECO 365 Final Exam

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ECO 365 WEEK 1 Knowledge Check

1. Price elasticity of demand is the

change in the quantity of a good demanded divided by the change in the

price of that good

change in the price of a good divided by the change in the quantity of the
good demanded

percentage change in price of that good divided by the percentage change

in the quantity of that good demanded

percentage change in quantity of a good demanded divided by the

percentage change in the price of that good

2. in general, the greater the elasticity, the

smaller the responsiveness of price to changes in quantity

smaller the responsiveness of quantity to changes in price

larger the responsiveness of price to changes in quantity

larger the responsiveness of quantity to changes in price

3. The price elasticity of supply is the

change in the quantity supplied divided by the change in price

percentage change in the quantity supplied divided by the percentage

change in price

change in price divided by the change in the quantity supplied

percentage change in the price divided by the percentage change in the

quantity supplied

4. The distinction between demand and the quantity demanded is best made by
saying that

demand is represented graphically by a curve and quantity demanded as a

point on that curve

the quantity demanded is represented graphically by a curve and demand

as a point on that curve

the quantity demanded is in a direct relation with prices, whereas demand

is in an inverse relation

the quantity demanded is in an inverse relation with prices, whereas

demand is in direct relation

5. The U.S. Postal Service printed 150,000 sheets of stamps depicting Bill Pickett,
but recalled them when the USPS realized the image on the stamp was Bill's
brother, Ben, instead. They were unable to recall 183 sheets that had already been
sold. The effect of this recall was to

drastically reduce the demand for the stamps, causing their equilibrium
price to fall

have no effect on either supply or demand for the Bill Pickett stamps
because there is no market for them

drastically reduce the supply of the Bill Pickett stamps, causing their
equilibrium price to rise

increase the supply of the Bill Pickett stamps, causing their equilibrium
price to fall.

Read More: ECO 365 Week 1 Knowledge Check

ECO 365 Week 2 Knowledge Check

1. A perfectly competitive firm will be profitable if price at the

Profit maximizing quantity is above

MC

ACV

ATC

AFC

24
2. in a perfectly competitive market,

individual producers determine market prices

market supply and market demand determine the price

the entrepreneur determines the price

individual consumers determine market prices

3. The demand for clothing increases. As a result, the price of Clothing increases
above
the minimum average cost of producing it. In the long run, if the
clothing industry is
Perfectly competitive and is a constant-cost industry,

the supply of clothing and the price of clothing will increase

the supply of clothing will increase but the price will not

the price of clothing will increase but the price will not

neither the price nor the supply of clothing will increase

4. If the long-run market supply curve is perfectly elastic, an

Increase in demand will cause the final equilibrium to be at

the original price but at a smaller output

a higher price with a higher output

the original price but with a higher output

a higher price but with the same output

Read More: ECO 365 Week 2 Knowledge Check

ECO 365 Week 3 Knowledge Check

1. in a monopolistically competitive market,

firms produce differentiated products

there are barriers to entry

firms produce homogeneous products

the demand for any firm's product is perfectly elastic

2. Strategic decision making is most important in

competitive markets

monopolistically competitive markets

oligopolistic markets

monopolistic markets

3. The general monitoring problem implies that

profit maximization should always be considered to be a firm's goal

there is a cost of supervising employees so that they work toward the

owner's goals rather than their own

government must intervene to protect national goals

competition will ensure common goals among the owners and managers of
a firm

4. Lazy monopolists are characterized by the tendency to

maximize profits at the cost of losing market share

pay too much to protect their monopoly positions

earn enough profits to keep their shareholders happy without trying too
hard to hold costs down

minimize losses so that the dividends of shareholders are maximized

5. Judgment by performance means that the competitiveness of a market is

determined

the actual behavior of firms in the market

the structure of the industry

the number of firms in the market

technological considerations

6. Consumers tend to accept the market restrictions imposed by suppliers

because

governments prevent them from organizing

they see themselves as laborers and therefore benefit from restrictions

their costs of organizing are higher than the cost of collusion by the
suppliers

when combined, their losses are small for the group as a whole

7. The fact that U.S. managers' salaries are about four times higher than those of
comparable managers in Japan, where banks control firms more closely, is
probably

an example of the monitoring problem in the United States

an example of X-inefficiency in Japan

due to the fact that the U.S. economy is much less competitive

due to the fact that there are more natural monopolies in the United States

ECO 365 Week 4 Knowledge Check

1. What do economists mean when they say there is "market failure"?

Business has introduced a product that consumers did not want.

Free markets have led to excessive profits.

Markets have surpluses or shortages so that government rationing is

necessary.

Free markets yield results that economists do not consider socially

optimal.

2. If a market has no externalities, marginal private costs

exceed marginal social costs

equal marginal social costs

are below marginal social costs

intersect marginal social costs

3. Economists generally call the effect of an agreement on others that is not taken
into account by the parties making the agreement

an externality

welfare loss

Pareto optimality

excess burden

4. The size performance improvements sought by those pursuing horizontal

mergers is

economies of scale

increased market share

to coordinate activities more efficiently to spur growth

to decrease competition

5. A company buys another company in the same supply chain, but either in front
of it or behind it in the supply chain. This is called

a horizontal acquisition

a vertical acquisition

a conglomerate

a joint venture

6. Sony and Toshiba become partners in a microprocessor manufacturing

company. This is called

a horizontal acquisition

a vertical acquisition

a conglomerate

a joint venture

Read More: ECO 365 Week 4 Knowledge Check

ECO 365 Week 5 Knowledge Check

1. What problem do economists see with free trade areas such as
NAFTA and the European Union?

They tend to lead to free trade rather than fair trade.

They can lead to regional trading blocs then restrict trade.

They lead to globalization.

They encourage countries to rely on others rather than being self-sufficient

2. A group of countries that allows free trade among its members and puts up
common barriers against all other countries' goods is

Called

a tariff-free zone

a most-favored nation agreement

an autarky

a free trade association

3. Mexico has a comparative advantage in producing corn

if its opportunity cost of producing corn is higher than the opportunity cost
in other countries

if its opportunity cost of producing corn is the same as the opportunity

cost in other countries

if its opportunity cost of producing corn is lower than opportunity cost in

other countries

regardless of the opportunity cost in other countries

4. Workers in education, health care, and government sectors have

seen their incomes fall just like in manufacturing

been mostly hurt from globalization

benefited from globalization in terms of lower consumer prices

been hurt because the sector has been shrinking

5. In the United States globalization has

played a significant role in growing income disparity because some sectors

have benefited and others have not

played little role in growing income disparity because all Americans are
consumers who have enjoyed lower prices

played a significant role in growing income disparity because foreign

workers' incomes have risen

played little role in growing income disparity because while some jobs
were lost, the gain in jobs balanced out those that were lost

6. Most economists

oppose free trade

favor free trade

have no opinion on free trade

Would prefer to have no trade with other nations

Read More: ECO 365 Week 5 Knowledge Check

ECO 365 Week 5 Final Exam (Latest - August 2015)

1). The DeBeers company is a profit-maximizing monopolist that exercises
monopoly power in the distribution of diamonds. If the company earns positive
economic profits this year, the price of diamonds will:

Exceed the marginal cost of diamonds but equal to the average total cost
of diamonds.

Exceed both the marginal cost and the average total cost of diamonds.

Be equal to the marginal cost of diamonds.

Be equal to the average total cost of diamonds.

2). Using 100 workers and 10 machines, a firm can produce 10,000 units of
output; using 250 workers and 25 machines, the firm produces 21,000 units of
output. These facts are best explained by:

Economies of scope

Diseconomies of scale

Diminishing marginal productivity

Economies of scale

3). Suppose that college tuition is higher this year than last and that more
students are enrolled in college this year than last year. Based on this
information, we can best conclude that:

despite the increase in price, quantity demanded rose due to some other
factors changing.

the demand for a college education is positively sloped.

the law of demand is invalid.

this situation has nothing to do with the law of demand.

4). A monopoly firm is different from a perfectly competitive firm in that:

A monopolists demand curve is perfectly inelastic whereas a perfectly

competitive firms demand curve is perfectly elastic.

A competitive firm has a u-shaped average cost curve whereas a

monopolist does not.

A monopolist can influence market price whereas a perfectly competitive

firm cannot.

There are many substitutes for a monopolists product whereas there are
no substitutes for a competitive firms product.

5). The best example of positive externality is:

Alcoholic beverages

Pollution

Education

Roller coaster rides

6). the theory that quantity supplied and price are positively related, other things
constant, is referred to as the law of:

supply

profit maximization

opportunity cost

demand

Read More: ECO 365 Week 5 Final Exam (Latest - August 2015)

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