6

If
a consumer purchases a combination of commodities x and y such that MU_x/P_x
= 20 and MU_y/P_y = 10, to maximize utility, the
consumers should buy.

a)

less
of x and more of y.

b)

more
of x and less of y.

c)

more
of both x and y.

d)

less
of both x and y.

Utility

Units

0

1

2

3

4

5

6

7

Total
Utility

0

20

35

45

50

50

45

35

7.

(Exhibit:
Utility) Marginal utility first becomes negative at the _______ unit.

a)

first

b)

second

c)

fifth

d)

sixth

8.

A
variable factor of production is defined in the text as one:

a)

that
can perform several different functions.

b)

that
is able to produce more or less during some time period.

c)

whose
quantity can be changed in a particular time period.

d)

a
and c are true, but not b.

9.

(Exhibit:
Perfectly Competitive Firm) The exhibit shows a perfectly competitive firm
that faces demand curve d, has the cost curves shown, and maximizes profit.
The firm’s total revenue per day is:

a)

$475.

b)

$600.

c)

$900.

d)

$1,200.

10.

The
market failure of external cost is most likely to result if Peanuts ‘R’ Us:

a)

keeps
secret a discovery that excessive consumption of peanut butter causes
nearsightedness.

b)

discards
broken peanut shells onto an adjacent recreational area in its production of
peanut butter.

c)

is
subject to performance standard regulations by the PBRC (Peanut Butter
Regulatory Commission).

d)

develops
a new peanut butter processing machine that enhances competition.

11.

A
copper mining operation discharges waste products into a river and causes
higher costs and discomfort to downstream users of the water. In this case:

a)

too
few of society’s resources are being used to produce copper.

b)

too
many of society’s resources are being used to produce copper.

c)

the
ideal amount of society’s resources are being used to produce copper.

d)

there
is an external benefit to society from copper production.