The margin a l utilit y o f a product · 2020. 4. 3. · Total fixed cost is $20. At what level of...
Transcript of The margin a l utilit y o f a product · 2020. 4. 3. · Total fixed cost is $20. At what level of...
The marginal utility of a product 1 . - -I, l o a consum •
What d0es t 1is indicate? ' er 1s zero.
A Tota.I utili ty is also zero B Total utility is maximised C The product is free
D The consumer is in equilibrium w·tl 1 _ 1 1 t 1e product A person allocates her t:A'nenditure betw h i -~ . ~t~ products, X, Y and Z. The table below sh , h . ..
d d h , ows t e pnces ot
the pro ucts an t e marginal utilities ti , . ,. 1e person gams.
Product X y Z
Price($)
Marginal utility (units)
10
so l
8
2
10
How should the person's spending alter in order to maximise her utility?
X A More B More C Less
y
Less Less More
z More Less More
D Less More Less
3. Basic food products such as rice and bread are cheaper
than diamonds. This is despite basic food products
being more essential to people's lives than diamonds.
What could explain this paradox of value?
A Basic food products are a necessity whereas
diamonds are a want B Diamonds are in greater supply than basic food
products C There is a difference in market structures
D There is a difference between total and marginal
utility
4. In Figure 13.12 the consumer's initial budget line is MN
Quantity of V GoodY p
M
s
0
Figure 13.12
T U Quantity of Good X
·the con~umcr 's mnncv i r,rlifilc decrt.t.:-t't. tht:rr ,~ '
no chungl' in the prier ()f gonJ X hut ~od Y heconic.,
cheaper. Wh.,t could lw the consumer's nt·w bud~ct line?
A PR B ST CUT 0 MV
S. The table shows the short run marginal cost of .. producing product X.
Units of X Margin.ii cost (S)
2
3
4
5
40
30
30
60
80
Total fixed cost is $20. At what level of output is short
run average total cost lowest? A 2 units B 3 units C 4 units D 5 units
6. When a firm produces five units of a product. its
average fixed cost is $20 and its average variable cost is
$90. When it increases its output to sLx units, its average
fixed cost falls to $18 and its average variable cost falls
to $80. What is the marginal cost of-producing the
sixth unit? A -$12 B $8 C $30 D $38
7. A firm's total fixed cost is $8,000. Its average total cost is
$10 and its average variable cost is $8. What is the firm's
output? A 800 units B 1,000 units C 4,000 units D 8,000 units
8. When do diminishing returns occur? A Adding extra units of a variable factor of production
to a fixed factor causes a fall in marginal output
B Changing all the factors of production employed
results in a less than proportionate increase in output
C Increasing demand starts to slow down D Increasing output results in costs rising more rapidly
than revenue
4, Whot dnes the law o( diminiqhing returns Imply: the A All factor~"( production ubed can be va ried m
,.hnrt nm . H At least one factor of production used is ftxed m the
c;hort run C 'lotal fixed cost increases at an increasing rate D Tota l variable cost increases at a decreasing rate
IO. The table below shows what happens to the output of apples as a farm takes on more workers.
:'\o. of ''°rf..cr~ Output (tonne~ of apple, per week)
]
2
3
4.
5
100
250
450
600
700
Between which levels of output do diminishing returns set in? A 100 and 250 tonnes B 250 and 450 units C 450 and 600 units D 600 and 700 units
I J. What would cause the demand curve for labour to shift to the right? A A decrease in demand for the final product B A decrease in labour mobility C An increase in labour productivity D An increase in wages
12. The table below shows the output of handbags of a firm in relation to the number of workers it employs.
No. of ,rnrkcr, Total output Output per per day worker
20 20 2 50 25 3 90 30 4 120 30 5 140 28
What i.s the marginal product of the third worker employed? A 5 units B 10 uniu C 30 units D 40 units
13. A firm employs two varinble factors of production, Y and Z. Factor Y costs $5 per unit and fac tor z $S per unit The marginal product of factor y is 35 unit s and the marginal product of factor z is 40 uni ts. What should the firm do to minimise its costs of production?
A Fm ploy more of fa l tor y ;:i nd lcciq qf f B Employ more of fa ctor '/, and le~<. f act,,r 'I.
E I I f b O fa ct,,r y
C mp oy css o oth factor y ,ind r ~ , il Ctor '/
D Employ more of both fa ctor y an J r_ , ( rt1ct11r '/
14. Figure 13. 13 shows a supply curve fr I 1. ' " r atJou r.
Wage rate s
w~--- - -------
s
l
0 Quantity of labo;;-1
Figure 13.13
What happens when the wage rate rises from W to W,? A Capital is substituted for labour · B Hours of leisure become more highly valued C The occupational mobility of labour decreases D The substitution effect becomes stronger relative to
the income effect
15. Figure 13.14 shows a labour market in which a trade union has successfully negotiated a wage rise from W to Wt·
Wage rate D / s W1 T
w u V
/ //
// j s
l " s ~
0 X y z
Figure 13.14
h, dil\i.l f\\1\\ indk,\h' " 'ill hl' th,· n',ult 01 11 , f ('f~ I l l"I I I l
,,~'.',.ht' "~,,~t· , .. ,td ri~" 11\
1 ,n,if rfl\l (' ll i'-')'Cd by w,wk,·r~ wi II in~ re ,I Sl' h,· r,"'n' .
,&. , · ~r · 111· z ,. I' I "ntt•nt '"ill tn t\ ,m . In , fill!' (l~ A 'II ·I . ' ' ll , ,
1,I\' 01 h,hf,ur w, , mngl' tl'\m, SS 10 \\I TS
' l ht' :-\\l ' l . I
, tal ""'~t: 1'il\ will c l ,\l\!,l.l: tn,m OW\'\' lo I l 1nf 10.: c- '
l)\\' 17. .. •\Ire 1\.15 !-how~ s fir~,~ oprrnti_ng In a perfc(tly .
1~ Fl~ ·titi\'~ tmlrket for its produd ~md a monopolistic 8•n'r<' , .. rkt't What will be thr wt,gr rate priid to I b(lltrtl " . . . " ..i •. • i,nJ the qu,mtity ot labour employed? \\'() [l\"t:'n-
MCL
, ACL r--
s-----.ii-----r-;;:~
R
D=MRPL
0 X y z Quantity of labour
Figure 13.15
Wage rate A R B s
Quantity of labour y
z C T y
D s X
Ii . Which of the following may have monopsony power in
a national labour market?
A A national trade union B Thearmy C The sole seller of a particular brand of orange juice
D Workers who possess skills in high demand
1 18· Figure 13.16 shows the effect of an increase in demand
for accountants on the market for accountants.
What is the increase in economic rent earned by accountants? A NPST B QRST C NPSVUT D TSUV
\ 19. In Which . . uld th . troduction of a national circumstance wo e m
I t1
lllinimum wage be accompanied by a rise in emp oymen ·
A. It increases demand for labour B It is at a level below the equilibrium level
~ Demand for labour is elas~ic Supply of labour is inelastic
R
Q .
p
N
M
I
0
I T
_J_ _j_
U V
Supply
o,
Demand
Ouant1ty of labour
Figure 13.16
20. What is the relationship between average cost and
marginal cost of production if average cost is falling?
A Marginal cost must be below average cost
B Marginal cost must be above average cost
C Marginal must be equal to average cost
D Marginal cost may be above or below average cost
21. The owner of a small private beach decides to charge
tourists for its use. There is a fixed cost but no variable
cost in allowing people to use the beach. What should
the owner do to maximise her profits?
A Attract as many tourists as possible B Charge the highest price possible C Minimise total cost D Maximise total revenue
22. In an industry wage rates increased from $10 an hour to
$13 an hour, output per worker increased by 15% and
the number of hours worked decreased from 40 hours
to 38 hours and raw material costs increased by 5%.
What happened to labour costs and total output?
Labour costs Total output
A Decreased Decreased B Decreased Increased C Increased Increased D Increased Decreased
23. A firm's average revenue is less than average cost What
condition is necessary for the firm to continue in
business in the short run?
24.
A Average revenue is greater than average fixed cost
B Averclge revenue is greater than average variable cost
c Average revenue is greater than margin.tl cost
D Average revenue is gr~ater than marginal rewnue
What is the short run suppl)' curve of a perfectly
competitive firm based on~ A Its marginal cost curve noO\-e its an•rage \"ariable
cost curve B Its marginal c~t curve above its avt>rage total c.ost curYe
C Its average variable cost curve
D Its average total cost curve
25. What is a characteristic of monopolistic competition?
A Average revenue exceeds average cost in the long run
B Firms can make supernormal profit in the long run
C High barriers to entry and exit
D Products are differentiated
26. Figure 13.17 shows a firm producing under conditions
of monopolistic competition in the short run. Which
area shows the firm's total cost at the profit maximising
output?
Costs/ Revenue
H t--__ ____,, __ _,,_ ,
G t-----__,,,__,...,.._-+--..,,_-
F t=========::s;::::'.'.~'.,...,E
0 MN
Figure 13.17
A OFKM B FHIK C OECN D EGJL
AC
AR
MR Output
27. If a profitable monopolist changes its objective from
profit maximisation to sales maximisation, what change
will it make to price and output?
Price Output
A Decrease Decrease
B Decrease Increase
C Increase Increase
D Increase Decrease
28. Firms in an industry collude and charge a common
price of P. Each firm agrees to restrict its output to a
production quota determined by the industry cartel.
The firm is given a quota of Q as shown in Figure 13.18.
What is the maximum short run increase in
supernormal profit the firm could receive by cheating
on the agreement?
A JKLM B JKLM-HMNG C JKLM+HMNG D HMNG
costs revenue
p
H
J
M
G L--------,--.
0
Figure 13.18
a
MC AC
OutPUt
29. Figure 13.19 shows the output of a monopolist. If it
produces at the profit maximising output, what is the
gap between its output and the allocatively efficient
output?
Costs/ Revenue
60
Figure 13.19
A VW B VY C XY D XZ
AC
AR
V X Y Z MR
f testable 30. What is a defining characteristic o a con
market? 1 • the
A It is possible to transfer the fixed capita 111
Output
industry to alternative uses ounts on B The firms in the industry spend large arn
advertising C 1bere is only one firm in the indu5lr~ the
entry into d strV D Whilst there are no barriers to the in 11 '
. xit frorn _/ industry, there are barners to e ~