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Unformatted text preview: 1 University of Illinois at Urbana-Champaign ECON302 Intermediate Microeconomics Practice Final Exam Spring 2011 Solution Part I. Multiple Choice Questions (48 points) 1.Government intervention can increase total welfare when a. there are costs or benefits that are external to the market. b. consumers do not have perfect information about product quality. c. a high price makes the product unaffordable for most consumers. d. all of the above. e . (a) and (b) only . 2.A country's government would like to raise the price of one of its most important agricultural crops, coffee beans. Which of the following government programs will result in higher prices for coffee beans? a. An import quota on coffee beans. b. An acreage limitation program which provides coffee bean farmers financial incentives to leave some of their acreage idle. c. An import tariff on coffee beans. d . All of t h e abov e . e. (a) and (c) only. 3.A specific tax will be imposed on a good. The supply and demand curves for the good are shown in the diagram below. Given this information, the burden of the tax: a. is shared about evenly between consumers and producers. b . fall s mo st ly on c on s um e r s . c. falls mostly on producers. d. cannot be determined without more information on the price elasticities of supply and demand. 2 4.Which of the following is NOT true for monopoly? a. The profit maximizing output is the one at which marginal revenue and marginal cost are equal. b. Average revenue equals price. c. The profit maximizing output is the one at which the difference between total revenue and total cost is largest. d. The monopolist's demand curve is the same as the market demand curve. e . A t t h e profi t maximizing ou t pu t , pri ce e qual s marginal c o st . 5.The more elastic the demand facing a firm, a. the higher the value of the Lerner index. b . t h e low e r t h e valu e of t h e L e rn e r ind e x . c. the less monopoly power it has. d. the higher its profit. 6.Which of the following statements about natural monopolies is true? a. Natural monopolies are in the markets for natural resources (like crude oil and coal). b . For na t ural monopoli e s , marginal c o st i s alway s b e low av e rag e c o st . c. For natural monopolies, average cost is always increasing. d. Natural monopolies cannot be regulated. 7. Suppose that the marginal cost of an additional ton of steel produced by the Japanese is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct? a. The Japanese will sell more steel abroad than they will sell in Japan....
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This note was uploaded on 05/25/2011 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.
- Spring '08