1.The price elasticity of demand is larger (more elastic), everything else equal, if. . . (2 points)

. . . the demand curve has a steeper slope

. . . the demand curve has a flatter slope

. . . the demand curve is upward sloping

. . . it is independent of the slope of the demand curve and only depends on the price and quantity at which we evaluate the elasticity

2.The marginal rate of substitution (MRS) of pens for pencils. . . (2 points)

. . . tells us how many pens I have to give up to be able to purchase one additional pencil

. . . tells us how many pencils I have to give up to be able to purchase one additional pen

. . . tells us how many pens I am willing to give up for one additional pencil

. . . tells us how many pencils I am willing to give up for one additional pen

3.Only when utility is maximized, the slope of the budget line equals. . . (2 points)

. . . the price ratio of the goods times -1 (i.e the negative price ratio)

. . . the marginal rate of substitution between the two goods times -1 (i.e the negative MRS)

. . . the price ratio of the goods

. . . the marginal rate of substitution between the two goods

4.What is true about an isoquant? (2 points)

An isoquant shows how different products can be combined to consumption bundles that produce the same level of utility

An isoquant shows how different factors of production can be combined to produce the same level of output

The marginal rate of technical substitution (MRTS) increases as we move down and to the right along an isoquant

The marginal rate of substitution (MRS) decreases as we move down and to the right along an isoquant

5.Which of the following statements about the average product of labor (APL) and the marginal product of labor (MPL) is correct? (2 points)

MPL equals total production (q) divided by APL (MPL = q/APL)

APL equals the change in total production (q) divided by labor (L) (APL = q/L)

If MPL is larger than APL (MPL > APL), APL is increasing

If MPL is equal to APL, MPL is at is maximum

6.A firm's long-run average cost curve is U-shaped. Which of these conclusions can be reached regarding the firm's returns to scale? (2 points)

The firm experiences increasing returns to scale.

The firm experiences increasing, constant, and decreasing returns in that order.

The firm experiences first decreasing, then increasing returns to scale.

The long-run average cost curve reveals nothing regarding returns to scale.

7.Suppose a plant manager ignores some implicit marginal costs of production so that the perceived MC curve is below the actual MC curve. What is the likely outcome from this error? (2 points)

The firm produces less than optimal quantity and earns lower profits.

The firm produces less than optimal quantity and earns higher profits.

The firm produces more than optimal quantity and earns lower profits.

The firm produces more than optimal quantity and earns higher profits.

8.In long-run competitive equilibrium, a firm that owns factors of production will have an:

(2 points)

Economic profit = $0 and accounting profit > $0.

Economic profit > $0 and accounting profit = $0.

Economic and accounting profit = $0.

Economic and accounting profit > $0.

9.Governments may successfully intervene in competitive markets in order to achieve economic efficiency ... (2 points)

... at no time as competitive markets are always efficient without government intervention.

... when the equilibrium price makes the product unaffordable for most consumers.

... using minimum prices only because they do not create deadweight loss.

... when the market is subject to market failures such as the presence of externalities or lack of information.

10.When a per unit tax is imposed on the sale of a product of a monopolist, the resulting price increase will ... (2 points)

... always be smaller than the amount of the tax.

... always be larger than the amount of the tax.

... always be smaller than if a similar tax were imposed on firms in a competitive market.

... not always be smaller than the amount of the tax.