Question

# 1.   Regarding Hershey’s Kisses, the marginal utility is the __________ satisfaction gained by eating _____________ A.  ...

1.   Regarding Hershey’s Kisses, the marginal utility is the __________ satisfaction gained by eating _____________
A.   total, all of the available Kisses.
B.   total, the last Kiss.
D.   additional, all of the available Kisses.

2.   A household’s income is spent on two goods, X and Y. If MUx / Px > MUy / Py, the household could increase its utility by buying ______ of Good X and ______ of Good Y.
A.   more, more
B.   more, less
C.   less, more
D.   less, less

3.   Jo has 4 identical bags of grain. She plans to use the first bag to make bread, which she values at \$200. The second bag will be used to make cakes and cookies, which she values at \$175. She will use the third to feed the neighborhood birds, a use she values at \$140. The fourth bag will be used to make Christmas ornaments, which she values at \$80. Suddenly—disaster! Jo finds that the grain in the first bag is moldy and unusable. She is now worse off by
A.   \$200.
B.   \$ 80.
C.   \$140.
D.   \$175.

4.   Consumer surplus is
A.   the difference between how much you would pay for a good and how much you do pay.
B.   how much spending power the consumer has at the end of the month.
C.   how many additional (marginal) units of output are left over at the end of the time period.
D.   maximized when the consumer continues buying until marginal utility is zero.

5.   Joe would pay \$1.10 for his first cup of soda during the NCAA basketball championship game. He would pay 70¢ for his second, 60¢ for his third, 50¢ for his fourth, and 40¢ for his fifth.
A.   If the price is 50¢ per cup, Joe will buy 4 cups and have a consumer surplus of \$2.90.
B.   If the price is 50¢ per cup, Joe will buy 4 cups and have a consumer surplus of \$1.90.
C.   If the price is 55¢ per cup, Joe will buy 3 cups and have a consumer surplus of 75¢.
D.   If the price is 55¢ per cup, Joe will buy 3 cups and have a consumer surplus of \$1.25.

6.   The Law of Diminishing Marginal Productivity
A.   is reflected in the fact that the firm’s short-run marginal cost curve eventually rises.
B.   explains why average variable costs will remain unchanged as output expands.
C.   implies that average fixed costs will remain unchanged as output expands.
D.   explains the presence of diseconomies of scale.

7.   A firm finds that when it doubles its inputs, its output increases so that it experiences economies of scale. We would expect that its long-run average cost would
A.   also double.
B.   decrease.
C.   increase, but wouldn’t necessarily double.
D.   be unaffected.

8.   In the long run
A.   all costs are variable.
B.   all costs are fixed.
C.   AVC is less than ATC.
D.   fixed costs may exceed variable costs.

Use the following table for the next three questions.

 Number of Workers Marginal Product 1 18 2 26 3 24 4 20 5 18

9.   If 4 workers are employed, total product is _____ units of output.
A.   20
B.   68
C.   88
D.   106

10.   Diminishing marginal productivity sets in with the ______ worker.
A.   second
B.   third
C.   fourth
D.   fifth

11.   If 3 workers are employed, average product is
A.   8 units of output.
B.   22.67 units of output.
C.   24 units of output.
D.   35.33 units of output.

12.   By the “short run” we mean a period of time short enough that
A.   all resources used by the firm are fixed.
B.   the firm cannot vary its level of production.
C.   the firm is unable to vary its price.
D.   at least one resource cannot be varied.

1.

C.

The marginal utility refers to the additional utility gained by consumption of one additional unit.

2.

B

It will help to balance the consumption so that MUx/Px = MUy/Py. Now equilibrium is achieved and utility is maximized.

3.

B

All bags are identical, and there is a diminishing marginal utility. So, if one bag is spoiled, then Jo will worse off by the utility of fourth bag that \$80.

4.

A.

Consumer surplus is the difference between the amount wiling to be paid by the consumer and the amount actually paid by the consumer.

5.

C.

If price is 55 cents,

Consumer surplus = 1.1 + .7 + .6 – 3*.55 = \$.75 or 75 cents

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