ECON 312 Midterm Exam New

1. (TCO 1) What is the economic meaning of the expression that "There is no such thing as a free lunch?"

2. (TCO 1) Henry wants to buy a book. The economic perspective suggests that Henry will buy the book if

3. (TCO 1) The law of increasing opportunity costs indicates that

4. (TCO 1) Which expression is another way of saying "marginal cost"?

5. (TCO 1) The individual who brings together economic resources and assumes the risk of business ventures in a capitalist economy is called the

6. (TCO 1) Another term for capitalism is

7. (TCO 1) Markets in which firms sell their output of goods and services are called

8. (TCO 1) Consumers express self-interest when they

9. (TCO 1) Consumer sovereignty and "dollar votes" guide the market system in dealing with which fundamental question?

10. (TCO 1) The major "success indicator" for business managers in command economies like the Soviet Union and China in the past was

11. (TCO 2) The quantity demanded of a product increases as its price declines because the

12. (TCO 2) A surplus of a product will arise when price is

13. (TCO 2) Black markets are associated with

14. (TCO 2) An increase in demand for oil along with a simultaneous increase in supply of oil will

15. (TCO 2) If Product Y is an inferior good, a decrease in consumer incomes will

16. (TCO 2) If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will increase quantity demanded by

17. (TCO 2) Demand is said to be inelastic when

18. (TCO 2) You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than 1. To increase total revenues, you should

19. (TCO 2) If the demand for a product is elastic, then

20. (TCO 2) Airlines charge business travelers more than leisure travelers because there is a more

21. (TCO 3) Suppose that you could prepare your own tax return in 15 hours, or you could hire a tax specialist to prepare it for you in two hours. You value your time at $11 an hour. The tax specialist will charge you $55 an hour. The opportunity cost of preparing your own tax return is

22. (TCO 3) If a firm's revenues just cover all its opportunity costs, then

23. (TCO 3) In the short run

24. (TCO 3) Fixed costs are those costs which are

25. (TCO 3) Marginal cost can be defined as the

26. (TCO 3) If you know that total fixed cost is $200, total variable cost is $600, and total product is four units, then average total cost must be:

1. (TCO 3) Which market model assumes the least number of firms in an industry?

2. (TCO 3) Local electric or gas utility companies mostly operate in which market model?

3. (TCO 3) The steel and automobile industries would be examples of which market model?

4. (TCO 3) Sam owns a firm that produces tomatoes in a purely competitive market. The firm's demand curve is

5. (TCO 3) T-Shirt Enterprises is selling in a purely competitive market. It is producing 3,000 units, selling them for $2 each. At this level of output, the average total cost is $2.50 and the average variable cost is $2.20. Based on these data, the firm should

6. (TCO 3) A firm should increase the quantity of output as long as its

7. (TCO 3) In pure competition, price is determined where the industry

8. (TCO 3) Which phrase would be most characteristic of pure monopoly?

9. (TCO 3) Natural monopolies result from

10. (TCO 3) One feature of pure monopoly is that the demand curve

11. (TCO 3) Which case below best represents a case of price discrimination?

12. (TCO 3) Which of the following is a characteristic of monopolistic competition?

13. (TCO 3) Which set of characteristics below best describes the basic features of monopolistic competition?

14. (TCO 3) In an oligopolistic market there are

15. (TCO 3) A low concentration ratio means that

16. (TCO 3) A major reason that firms form a cartel is to

17. (TCO 1) Money is not an economic resource because

18. (TCO 1) Refer to the diagram which refers to the Circular Flow Model in Chapter 2. Arrows (1) and (3) are associated with

19. (TCO 2) Refer to the diagram. An increase in quantity demanded is depicted by a

20. (TCO 2) Refer to the information and assume the stadium capacity is 5,000. If the Mudhens' management wanted a full house for the game, it would

Price per Ticket	Quantity Demanded
$13	1,000
11	2,000
9	3,000
7	4,000
5	5,000
3	6,000

21. (TCO 2) Which type of goods is most adversely affected by recessions?

22. (TCO 3) The following cost data are for a firm in the short run:

Output	Total Cost
0	$400
1	500
2	550
3	600
4	650
5	700

What is the firm's average variable cost at an output of 5 units?

23. (TCO 1) Refer to the diagram. Points A, B, C, D, and E show

24. (TCO 3) Assume that the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as

25. (TCO 3) a.) What is the relationship between economies of scale and a natural monopoly? b.) Why is the level of output at which marginal revenue equals marginal cost the profit-maximizing output?

26. (TCO 2) What effect should each of the following have upon the demand for portable music players in a competitive market? Explain your reasoning in each cas