Question 1

The marginal rate of transformation between two goods indicates the rate at which an efficient economy would have to give up one good to obtain more of the other.

Accepted Answer

A) True 
 B)False

Question 2

If there are constant returns to scale in an industry,then in competitive equilibrium,profits in that industry must necessarily be zero.

Accepted Answer

A) True 
 B)False

Question 3

A small company produces two goods,swords and plowshares.The company has 100 type alpha employees and 100 type beta employees.If an alpha devotes all his time to producing swords,he can make 2 swords per week.If he devotes all his time to producing plowshares,he can make 4 plowshares per week.A beta can produce either 1 plowshare per week or 1 sword per week.The company wants to produce 218 swords and as many plowshares as it can.How many type betas should it employ at making swords?

Accepted Answer

A)  100 
B)  18 
C)  90 
D)  0 
E)  None of the above. 
A)  100 
B)  18 
C)  90 
D)  0 
E)  None of the above.

Question 4

On a certain island there are only two goods,wheat and milk.The only scarce resource is land.There are 1,000 acres of land.An acre of land will produce either 3 units of milk or 32 units of wheat.Some citizens have lots of land;some have just a little bit.The citizens of the island all have utility functions of the form U(M,W)= MW.At every Pareto optimal allocation,

Accepted Answer

A)  the number of units of milk produced equals the number of units of wheat produced. 
B)  all citizens consume the same commodity bundle. 
C)  every consumer's marginal rate of substitution between milk and wheat is -1. 
D)  total milk production is 1,500 units. 
E)  None of the above is true at every Pareto optimal allocation. 
A)  the number of units of milk produced equals the number of units of wheat produced. 
B)  all citizens consume the same commodity bundle. 
C)  every consumer's marginal rate of substitution between milk and wheat is -1. 
D)  total milk production is 1,500 units. 
E)  None of the above is true at every Pareto optimal allocation.

Question 5

When there is production,a competitive equilibrium is not Pareto optimal unless there are increasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 6

Tip can write 3 pages of term paper or solve 9 workbook problems in an hour,while Spot can write 4 pages of term paper or solve 4 workbook problems in an hour.If they each decide to work a total of 7 hours and to share their output,then if they produce as many pages of term paper as possible given that they produce 18 workbook problems,

Accepted Answer

A)  Spot will spend all of his time writing term papers and Tip will spend some time at each task. 
B)  Tip will spend all of his time writing term papers and Spot will spend some time at each task. 
C)  both students will spend some time at each task. 
D)  Spot will write term papers only and Tip will do workbook problems only. 
E)  Tip will write term papers only and Spot will do workbook problems only. 
A)  Spot will spend all of his time writing term papers and Tip will spend some time at each task. 
B)  Tip will spend all of his time writing term papers and Spot will spend some time at each task. 
C)  both students will spend some time at each task. 
D)  Spot will write term papers only and Tip will do workbook problems only. 
E)  Tip will write term papers only and Spot will do workbook problems only.

Question 7

Al and Bill are the only workers in a small factory which makes geegaws and doodads.Al can make 4 geegaws per hour or 12 doodads per hour.Bill can make 2 geegaws per hour or 8 doodads per hour.Assuming that neither of them finds one task more odious than the other,

Accepted Answer

A)  Al has a comparative advantage in producing geegaws and Bill has a comparative advantage in producing doodads. 
B)  Bill has a comparative advantage in producing geegaws and Al has a comparative advantage in producing doodads. 
C)  Al has a comparative advantage in producing both geegaws and doodads. 
D)  Bill has a comparative advantage in producing both geegaws and doodads. 
E)  both have a comparative advantage in producing doodads. 
A)  Al has a comparative advantage in producing geegaws and Bill has a comparative advantage in producing doodads. 
B)  Bill has a comparative advantage in producing geegaws and Al has a comparative advantage in producing doodads. 
C)  Al has a comparative advantage in producing both geegaws and doodads. 
D)  Bill has a comparative advantage in producing both geegaws and doodads. 
E)  both have a comparative advantage in producing doodads.

Question 8

Robinson Crusoe has exactly 8 hours per day to spend gathering coconuts or catching fish.He can catch 3 fish per hour or he can pick 6 coconuts per hour.His utility function is U(F,C)= FC,where F is his consumption of fish and C is his consumption of coconuts.If he allocates his time in the best possible way between catching fish and picking coconuts,his consumption will be the same as it would be if he could buy fish and coconuts in a competitive market where the price of coconuts is $1.

Accepted Answer

A)  His income is $24 and the price of fish is $3. 
B)  His income is $48 and the price of fish is $2. 
C)  His income is $72 and the price of fish is $3. 
D)  His income is $48 and the price of fish is $.33. 
E)  His income is $36 and the price of fish is $.33. 
A)  His income is $24 and the price of fish is $3. 
B)  His income is $48 and the price of fish is $2. 
C)  His income is $72 and the price of fish is $3. 
D)  His income is $48 and the price of fish is $.33. 
E)  His income is $36 and the price of fish is $.33.

Question 9

On a certain island there are only two goods,wheat and milk.The only scarce resource is land.There are 1,000 acres of land.An acre of land will produce either 14 units of milk or 15 units of wheat.Some citizens have lots of land;some have just a little bit.The citizens of the island all have utility functions of the form U(M,W)= MW.At every Pareto optimal allocation,

Accepted Answer

A)  the number of units of milk produced equals the number of units of wheat produced. 
B)  total milk production is 7,000 units. 
C)  all citizens consume the same commodity bundle. 
D)  every consumer's marginal rate of substitution between milk and wheat is -1. 
E)  None of the above is true at every Pareto optimal allocation. 
A)  the number of units of milk produced equals the number of units of wheat produced. 
B)  total milk production is 7,000 units. 
C)  all citizens consume the same commodity bundle. 
D)  every consumer's marginal rate of substitution between milk and wheat is -1. 
E)  None of the above is true at every Pareto optimal allocation.

Question 10

For each carload of ore removed from the Matchless Mine,1 pound of lead and 1 ounce of silver is smelted.The cost of mining and processing 1 carload of ore is C(Q)= 400 + 2Q + 0.04Q2.The demand for silver (per ounce)is Ps= 30 -0.30Qs and the demand for lead (per pound)is Pl =6 -0.02Ql.What should the owners of the Matchless Mine do to maximize profits (in the long run)?

Accepted Answer

A)  Mine and process 47.22 carloads of ore,sell 47.22 ounces of silver,and sell 47.22 pounds of lead. 
B)  Mine and process 50 carloads of ore,sell 50 ounces of silver,and sell 33.33 pounds of lead. 
C)  Mine and process 150 carloads of ore,sell 41.18 ounces of silver,and sell 150 pounds of lead. 
D)  Mine and process 150 carloads of ore,sell 50 ounces of silver,and sell 150 pounds of lead. 
E)  Shut down the mine. 
A)  Mine and process 47.22 carloads of ore,sell 47.22 ounces of silver,and sell 47.22 pounds of lead. 
B)  Mine and process 50 carloads of ore,sell 50 ounces of silver,and sell 33.33 pounds of lead. 
C)  Mine and process 150 carloads of ore,sell 41.18 ounces of silver,and sell 150 pounds of lead. 
D)  Mine and process 150 carloads of ore,sell 50 ounces of silver,and sell 150 pounds of lead. 
E)  Shut down the mine.

Question 11

Robinson Crusoe spends 4 hours a day catching fish and picking coconuts.He can always catch 2 fish per hour and he can always gather 3 coconuts per hour.His utility function is CF,where C is the number of coconuts he eats per day and F is the number of fish he eats per day.How many fish will he choose to eat per day?

Accepted Answer

A)  8 
B)  6 
C)  4 
D)  2 
E)  1 
A)  8 
B)  6 
C)  4 
D)  2 
E)  1

Question 12

Tip can write 2 pages of term paper or solve 2 workbook problems in an hour,while Spot can write 2 pages of term paper or solve 6 workbook problems in an hour.If they each decide to work a total of 8 hours and to share their output,then if they produce as many pages of term paper as possible given that they produce 14 workbook problems,

Accepted Answer

A)  Tip will spend all of his time writing term papers and Spot will spend some time at each task. 
B)  Spot will spend all of his time writing term papers and Tip will spend some time at each task. 
C)  Spot will write term papers only and Tip will do workbook problems only. 
D)  both students will spend some time at each task. 
E)  Tip will write term papers only and Spot will do workbook problems only. 
A)  Tip will spend all of his time writing term papers and Spot will spend some time at each task. 
B)  Spot will spend all of his time writing term papers and Tip will spend some time at each task. 
C)  Spot will write term papers only and Tip will do workbook problems only. 
D)  both students will spend some time at each task. 
E)  Tip will write term papers only and Spot will do workbook problems only.

Question 13

In the process of producing 1 hormone-free,stress-free,happy cow,the New Age Cattle Ranch produces 1 ton of natural,organic plant fertilizer.Demand for the ranch's cattle is given by Pc= 2,000 -5Qc,and demand for fertilizer is given by Pf = 500 -2Qf.The cost of producing Q cow-fertilizer bundles is C =5,000+200Q.To maximize profits,the ranch should

Accepted Answer

A)  produce 164.29 cow-fertilizer units,sell 164.29 cattle,and sell 164.29 tons of fertilizer. 
B)  produce 180 cow-fertilizer units,sell 180 cattle,and sell 125 tons of fertilizer. 
C)  produce 180 cow-fertilizer units,sell 180 cattle,and sell 75 tons of fertilizer. 
D)  produce 180 cow-fertilizer units,sell 180 cattle,and sell 180 tons of fertilizer. 
E)  produce 200 cow-fertilizer units,sell 200 cattle,and dispose of all the fertilizer in an environmentally friendly manner. 
A)  produce 164.29 cow-fertilizer units,sell 164.29 cattle,and sell 164.29 tons of fertilizer. 
B)  produce 180 cow-fertilizer units,sell 180 cattle,and sell 125 tons of fertilizer. 
C)  produce 180 cow-fertilizer units,sell 180 cattle,and sell 75 tons of fertilizer. 
D)  produce 180 cow-fertilizer units,sell 180 cattle,and sell 180 tons of fertilizer. 
E)  produce 200 cow-fertilizer units,sell 200 cattle,and dispose of all the fertilizer in an environmentally friendly manner.

Question 14

Mandy is a master wood-carver and Jerry is her apprentice.They will each work the same number of hours making toy cars.Each car requires 4 wheels and 1 body.Mandy makes wheels at the rate of 25 per hour and bodies at the rate of 10 per hour.Jerry makes wheels at the rate of 10 per hour and bodies at the rate of 10 per hour.If they wish to maximize output,how many wheels should Jerry make per hour?

Accepted Answer

A)  3 
B)  2 
C)  10 
D)  6 
E)  There is not enough information to determine the answer. 
A)  3 
B)  2 
C)  10 
D)  6 
E)  There is not enough information to determine the answer.

Exam 33:Production-Part A

The marginal rate of transformation between two goods indicates the rate at which an efficient economy would have to give up one good to obtain more of the other.

If there are constant returns to scale in an industry,then in competitive equilibrium,profits in that industry must necessarily be zero.

When there is production,a competitive equilibrium is not Pareto optimal unless there are increasing returns to scale.

Al and Bill are the only workers in a small factory which makes geegaws and doodads.Al can make 4 geegaws per hour or 12 doodads per hour.Bill can make 2 geegaws per hour or 8 doodads per hour.Assuming that neither of them finds one task more odious than the other,

Demand-Part A

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics-Part A

Exchange-Part A

Exchange-Part B

Production-Part B

Welfare-Part A

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Asymmetric Information-Part A

Asymmetric Information-Part B

Filters