ECON 306 Study Guide - Final Guide: Risk Neutral, Fixed Capital, Mp 40

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tealalpaca119

13 Dec 2018

School

University of Maryland

Department

Economics

Course

ECON 306

Professor

Aronfinkle

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Document Summary

Instructions: write your answers in the spaces provided. For multiple choice questions, write the letter to the left of the question in the space provided. Assume preferences are well behaved unless otherwise stated. From this information we can conclude that bob is: risk loving, risk neutral, risk averse, irrational. The returns to scale for this production function are: increasing, decreasing, constant, vary depending on the level of output. 2: suppose a firm"s production function is given by: q = l3/2k1/2. [4 points] elvis are going skydiving for the first time. With probability 0. 1, he will have a minor accident and break his arm. The remainder of the time, he will not be injured. If an injury happens, the medical bills will cost (leaving him with a wealth of ). , where w is his wealth after skydiving: what is his expected utility from skydiving, an insurance company offers full coverage for the accident at a premium of .

Related Questions

1. If marginal utility is negative, total utility is

a. Positive

b. Negative

c. Decreasing

d. Constant

e. Increasing

2. If utility-maximizing consumers face identical prices, they will have identical

a. Marginal utilities for each good

b. Ratio of marginal utilities for each good

c. Preferences

d. Ratios of total utilities for each good

e. Total utilities for each good

3. The substitution effect

a. Always increases quantity demanded of a good whose relative price has fallen

b. Is opposite in sign to the income effect for all normal goods

c. Is opposite in sign to the income effect for all normal goods

d. May cause demand curves to be upward sloping

e. Is always dominated by the income effect for normal goods

4. Demand curves for normal goods slope downward because

a. The substitution effect of a price change is greater than the income effect

b. Substitution and income effects work in the same direction

c. The income effect is always greater than the substitution effect

d. The income effect is always less than the substitution effect

e. None of the above

5. The idea that a consumer derives less additional satisfaction from consuming successive units of a good is called

a. Diminishing consumer surplus

b. The paradox of value

c. Diminishing marginal utility

d. Diminishing total value of consumption

e. Diminishing total utility

indigolocust149

1. Economists use ____________ as a measure of the relative level of satisfaction when someone consumes a good or service.

2. Sue likes brownies. However, Sue notices that the more brownies she eats the less satisfaction she receives from each extra brownie. We can say that Sue is experiencing ___________________ from each extra brownie.

sugar sickness

total utility

diminishing marginal utility

increasing marginal utility

3. When total utility is maximized, the marginal utility will be

4. Consider Dirk and Lee. They are both eating pizza. Which of the following statements is true regarding their satisfaction and utility?

Dirk and Lee both receive 10 utils from eating pizza.

Dirk and Lee both receive the same level of satisfaction from eating pizza.

Dirk gets more twice as much satisfaction as Lee from eating pizza.

It is difficult to determine because the utility is subjective.

5. For many products, the total utility curve is

strictly increasing because of increasing marginal utility.

strictly decreasing because of diminishing marginal utility.

increasing initially because of increasing marginal utility, but eventually decreases.

increasing initially at a decreasing rate because of diminishing marginal utility but eventually decreases.

6. When consumers get the biggest bang for the buck, we say they

used the loudest gun in hunting season.

reached a consumer optimum.

minimized consumer satisfaction.

maximized marginal utility.

7. By choosing to consume at the consumer optimum, consumers will

maximize their total utility.

minimize their total utility.

maximize the amount they spend on each good.

minimize the amount they spend on each good.

8. A consumer is in equilibrium when consuming two goods when which of the following holds?

MU_a/ P_a = MU_b/ P_b

MU_a/ P_h =MU_b/ P_a

P_a/ MU_a = P_b/ MU_b

MU_a x P_a = MU_bxP_b

9. If the marginal utility of good 1 is 15 and its price is $3, and the marginal utility of good 2 is 12, and its price is $4, then the consumer

has achieved a consumer optimum.

should increase his or her consumption of good 1.

should increase his or her consumption of good 2.

should decrease his or her consumption of good 1.

10.Suppose the price of an iPod decrease and the price of HD TVs remains the same; what noticeable effect(s) occur(s)?

the substitution effect only

the real-income effect only

the substitution effect and real-income effect, if there is a noticeable change in purchasing power

the substitution effect and real-income effect, if there isnât a noticeable change in purchasing power

11. The ______________ paradox was described by Adam Smith in 1776.

12. What is the key to solving the diamond-water paradox?

more water and fewer diamonds

marginal utility

total utility

consumer demand

13. When solving the diamond-water paradox we notice that the marginal utility of

diamonds are equal to the marginal utility of water.

diamonds are greater than the marginal utility of water.

diamonds are less than the marginal utility of water.

water is equal to its price, and therefore lower than the marginal utility of diamonds.

14. The consumer surplus for water is

greater than that for diamonds because water is nonessential.

greater than that for diamonds because water is essential.

less than that for diamonds because water is nonessential.

less than that for diamonds because water is essential.

15. Suppose a consumer consumes only diamonds and water, and the price of diamonds increases. All else being equal, a consumerâs marginal utility for diamonds

decreases and the marginal utility for water stays the same.

increases and the marginal utility for water decreases.

decreases and the marginal utility for water increases.

increases and the marginal utility for water stays the same.

tansnake161

Scenario 8.1: Ana used to work for a Advertising agency where she earned a yearly salary of $60,000. She got tired of
working for another company so she opened his own Advertising company. Ana now pays her designer $40,000 per year
and spends $25,000 for rent and utilities. She earns $120,000 in annual revenue.
30) Refer to Scenario 8.1. What is Ana's explicit cost? 30) ______
A) $65,000 B) $35,000 C) $45,000 D) $55,000

31) When a decrease in the price for wine increases Adam's real income, Adam will buy more of all normal goods. If wine
is a normal good, then Adam will buy more wine due to: 31) ______
A) law of supply. B) law of demand.
C) substitution effect. D) income effect.

32) Which of the following is a reason why wage rates may differ among workers? 32) ______
A) differences in skills required B) racial and gender discrimination
C) differences in working conditions D) all of the above

33) Brandon eats four tacos a on a Sunday night but admits each slice of pizza doesn't taste as delicious as the previous
one. This suggests that for Brandon: 33) ______
A) the total utility of slice of pizza is declining by larger and larger increments.
B) the total utility of slice of pizza is increasing by larger and larger increments.
C) the marginal utility of a slice of pizza is positive but decreasing.
D) the marginal utility of a slice of pizza is negative but increasing.

34) The demand for a product of a monopolistically competitive firm is: 34) ______
A) unit elastic. B) price inelastic. C) price elastic. D) undefined.

35) A single firm selling its output in a contestable market will: 35) ______
A) be able to maintain high prices indefinitely.
B) be able to earn high economic profits indefinitely.
C) be threatened constantly the entry of new firms.
D) establish a monopoly.

ECON 306 Study Guide - Final Guide: Risk Neutral, Fixed Capital, Mp 40

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