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WorksheetsMidterm 3 Review
Total questions: 36
Worksheet time: 18mins
A lighthouse located on a coastal cliff provides navigational aid to all passing ships without reducing the benefit to others. The lighthouse is an example of a:
Private good
Common resource
Club good
Public good
When a firm increases its number of workers from 3 to 4, output rises from 150 to 170 units. What is the marginal product of the fourth worker?
20 units
40 units
10 units
170 units
In the town of Oakville, residents contribute to a public fireworks display. If the cost is $100 per firework and total willingness to pay by residents decreases with each additional firework, how many fireworks should the town purchase to maximize total surplus?
The number where total willingness to pay ≥ total cost
Until marginal willingness to pay is zero
As many as possible
One less than the amount residents request
A firm's average total cost is $40 when producing 4 units. If the marginal cost of the fifth unit is $60, what is the average total cost after producing 5 units?
$45
$50
$60
$48
A firm is operating in a competitive market where the price is $12. At its current production level, its average total cost is $10 and marginal cost is also $12. What is its short-run economic profit?
Zero
Positive
Negative
Cannot be determined
A firm increases output from 300 to 320 units when hiring an additional worker. The marginal product of that worker is:
20
320
300
40
A bag of fertilizer increases harvest as follows: 1 bag → 10 crops, 2 bags → 25 crops, 3 bags → 36 crops. The production function shows:
Constant marginal returns
Increasing marginal returns
Diminishing marginal returns
Negative marginal returns
Which of the following is most likely operating in a perfectly competitive market?
A local bookstore
A soybean farmer in Iowa
Tesla Motors
A luxury hotel chain
A firm is producing 10 units, where marginal cost is $20 and marginal revenue is $25. To maximize profit, the firm should:
Decrease output
Shut down
Maintain current output
Increase output
If a tax system imposes the same dollar amount on all individuals regardless of income, the tax is considered:
Proportional
Progressive
Regressive
Lump-sum
A firm's total cost increases from $80 to $120 when output increases from 4 to 6 units. What is the average variable cost of producing the 6th unit, assuming fixed costs are $20?
$10
$20
$25
$30
If a firm’s long-run average total cost increases as output increases, the firm is experiencing:
Economies of scale
Diseconomies of scale
Constant returns to scale
Efficient production
When price equals average variable cost and is below average total cost, a competitive firm in the short run will:
Shut down
Continue operating at a loss
Earn positive economic profit
Increase production
The government provides street lighting because:
It generates more tax revenue
It is a private good
It is excludable and rival
It is a public good with free-rider issues
An opportunity cost is:
The same as a sunk cost
Only included in accounting profit
The value of the next-best alternative foregone
Always a monetary cost
What is a public good?
excludable and rival
excludable and non-rival
non-excludable and non-rival
non-excludable and rival
What is a common resource?
excludable and rival
excludable and non-rival
non-excludable and non-rival
non-excludable and rival
What is a club good?
excludable and rival
excludable and non-rival
non-excludable and non-rival
non-excludable and rival
What is a private good?
excludable and rival
excludable and non-rival
non-excludable and non-rival
non-excludable and rival
What is a marginal tax rate?
total taxes paid divided by income
the tax rate applied to the first dollar earned
the average of all tax brackets
the rate applied to the last dollar of income earned
Which of the following is an example of diminishing marginal product?
total output decreases with each new worker
each additional worker contributes more than the last
each additional worker contributes less than the last
output remains constant as more workers are added
What does it mean for a firm to be a price taker?
it sets prices to maximize profits
it negotiates prices with suppliers
it must accept the market price for its product
it can influence market price due to its size
A regressive tax system means:
Everyone pays the same amount in dollars
Higher-income earners pay a higher % of income
Lower-income earners pay a higher % of income
Taxes are based on spending instead of income
In a progressive tax system, which is true?
Everyone pays the same flat rate
The marginal tax rate decreases as income increases
High-income earners pay a larger % of their income
Low-income earners are exempt from all taxes
Which type of tax is sales tax considered?
progressive
proportional
regressive
variable
A tax with a flat rate across all incomes is:
proportional
regressive
progressive
lump-sum
If marginal cost is below average total cost, then average total cost is:
Increasing
Decreasing
Constant
Equal to marginal cost
Which of the following costs always decreases as output increases?
Marginal cost
Total cost
Average fixed cost
Variable cost
Economies of scale occur when:
Marginal cost is rising
Long-run average total cost falls as output increases
Total revenue exceeds total cost
Firms exit the market due to losses
Which of the following is a variable cost?
Rent for a factory
Salaries of permanent staff
Electricity used in production
Loan payments
When marginal cost equals marginal revenue, a firm in a competitive market:
Is maximizing total cost
Is maximizing profit
Should shut down
Is experiencing losses
What is the marginal cost of producing the 2nd unit?
$20
$30
$50
$80
What is the average total cost at Q = 4?
$65
$70
$60
$52
What is the profit-maximizing output?
2
3
4
5
Anna earns $20,000 and Ben earns $100,000. A flat tax rate of 15% is proposed.
How much tax does Ben pay?
$7,500
$15,000
$20,000
$25,000
A public park is non-excludable and rival in consumption. This results in:
Free rider problem
Positive externality
Tragedy of the commons
Monopoly inefficiency
