Micro Final Review ECN150 Spring 2011

Question 1 If Deaconville is producing at point C, then a) the opportunity cost of acquiring an additional unit of tourism is greater than it is at point D. b) the opportunity cost of acquiring an additional unit of tourism is less than it is at point D. c) Deaconville can be said to be allocating its resources efficiently. d) both a) and c) are correct. e) both b) and c) are correct.

Question 2 Based on the above information, which of the following statements is correct? a) Deaconville faces an opportunity cost of 1.5 units of coffee for every unit of cigarettes it produces. b) Church Mount faces an opportunity cost of 2 units of cigarettes for every unit of coffee it produces. c) Church Mount would not want to trade with Deaconville because it can produce more coffee and cigarettes than Deaconville can. d) None of the above are correct.

Question 3 What will Church Mount produce? Cigarettes or Coffee? What is the highest price Church Mount will accept for trading for the good it doesn’t have the comparative advantage in?

Question 4 The market for widgets is in equilibrium at $X/unit. The price of an input used in the production of widgets rises. What happens to the market for widgets? (More than one answer is possible.) a) The supply of widgets decreases. b) The supply of widgets increases. c) The demand for widgets decreases. d) The demand for widgets increases. e) The quantity of widgets supplied increases. f) The quantity of widgets supplied decreases. g) The quantity of widgets demanded increases. h) The quantity of widgets demanded decreases. i) The price of a widget rises due to the shortage that occurs after the input price change. j) The price of a widget rises due to the surplus that occurs after the input price change. k) The price of a widget falls due to the shortage that occurs after the input price change. l) The price of a widget falls due to the surplus that occurs after the input price change.

Question 5 Which of the following statements regarding elasticity is incorrect? a) There is a positive relationship between the amount of time a consumer is given and the elasticity of a good. b) There is a positive relationship between the elasticity of a good and the number of substitutes for the good. c) There is a negative relationship between the level of necessity of a good and the elasticity of a good. d) All of the above are incorrect.

Lightning Round What is the marginal cost of producing the fourth good? QuantityAvg. Total Cost

Lightning Round The average total cost of producing one widget at Action Widgets is 50. The marginal cost of producing the first widget is 20.

Lightning Round The average total cost of producing one widget at Action Widgets is 50. The marginal cost of producing the first widget is 20. What are fixed costs at Action Widgets?

Lightning Round QuantityAvg. Total CostAvg. Variable Cost

Lightning Round What is the profit that this firm will earn if the price of a widget is 30?

Final Challenge $/unit Market MC D 10 15Q MR a)What is the market price and quantity produced? b)Assume that one manufacturer, Mick’s, Inc., starts to buy all the firms in the market. What will be the new outcome? c)Will this turn of events cause the Dept. of Justice to become suspicious of Mick’s? Why? Be specific!