Question

ECO 251: Question Pool STUDY GUIDE

Assume that each firm faces perfect competition and wishes to maximize profits. Each firm operates in a constant-cost industry unless otherwise stated.

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.
C.   additional, one more 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.

Answer 1

1) Regarding Hershey’s Kisses, the marginal utility is the additional satisfaction gained by eating one more kiss- option (C)

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 more of Good X and less of Good Y- option (B)

3) Option (B)

4)  Consumer surplus is the difference between how much you would pay for a good and how much you do pay- Option (A)

In a single question, only 4 subparts can be answered.Hence repost for the pending answers.