0. Mark ‘d’ as the answer to question 27 on your answer sheet. Otherwise your exam will be graded according to the key that gives the minimum score for your answers. 1. If marginal cost is greater than average total cost then a. profits are increasing. b. economies of scale are becoming greater. c. average total cost remains constant. d. average total cost is increasing. 2. Miller Technologies has average variable costs of €6 and average total costs of €10 when it produces 1,000 units of output. The firm's total fixed costs equal a. €2,000. b. €3,000. c. €4,000. d. €5,000. 3. Refer to the table below (left). This table describes the relationship between output, marginal revenue, and marginal cost. If the firm is currently producing 14 units, what would you advise them to do? a. decrease quantity to 13 b. increase quantity to 15 c. remain at 14 units d. increase quantity to 16 units 4.When the marginal product of labour falls, the marginal cost of output a. falls, then rises. b. becomes negative. c. rises. d. remains constant. 5. George sells chickens and faces the demand curve given in the Table below (right). George has marginal cost of €0.50 per chicken. What is George's profit-maximizing level of output? a. 1 b. 2 c. 3 d. 4 6. If a monopolist has zero marginal costs it will produce a. the output at which total revenue is maximized. b. in the range in which marginal revenue is still increasing. c. at the point at which marginal revenue is at a maximum. d. in the range in which marginal revenue is negative. 7.An economy produces only two goods, oranges and DVD players. The quantities and prices for the years 2004 and 2005 are shown in the table. The base year is 2004. 2004 2005 Price Quantity Price Quantity Oranges €2 5,000 €3 4,000

DVD players €400 1,000 €300 2,000

Real GDP in 2005 is: a. €6,000. b. €410,000. c. €612,000. d. €808,000.

Unit Marginal Marginal Quantity Cost Reve ue

12 €5.00 €9.00 13 €6.00 €9.00 14 €7.00 €9.00 15 €8.00 €9.00 16 €9.00 €9.00 17 €10.00 €9.00

Price Quantity €5.00 1 €4.00 2 €3.00 3 €2.00 4 €1.00 5

8.In producing a sweater, a man who cuts sheep wool pays a farmer €4 for a sheep’s wool. He sells the wool to a knitting factory for €7. The knitting factory buys the wool and makes it into a fabric and sells it to a sweater-making firm for €13. The sweater-making firm sells the sweater to a clothing store for €20, and the clothing store sells the sweater, in a gift box for €50. What is the contribution to GDP of the previous sales transactions? a. €4 b. €44 c. €50 d. €94 9. Refer to the figure below (left). The firm in this figure is monopolistically competitive. It illustrates a. the shut-down case. b. a long-run economic profit. c. a short-run economic profit. d. a short-run loss. 10. The good that receives the most weight in the CPI is the good that a. consumers buy most frequently. b. has experienced the greatest price increase. c. has the highest price. d. consumers spend the largest fraction of their income on. 11.Which of the following answers would accurately describe the bias in the CPI resulting from the fact that taxi fares suddenly increase? (fare: ücret) a. The CPI would underestimate the cost of living. b. The CPI would overestimate the cost of living. c. The CPI would not be biased as a result of a sudden rise in taxi fares. d. The CPI could overestimate or underestimate the cost of living, depending upon the quantity of taxi rides purchased in that year. 12.When borrowing money to purchase a car, Roberto has the choice between a fixed nominal interest rate (i.e. constant over time) or adjustable nominal interest rate (tied to inflation, for example inflation rate plus 2%) loan. Typically the adjustable rate loans start with a lower rate than the fixed rate loan. Given that, Roberto would probably want to borrow money at the higher fixed rate when he expects the a. inflation rate to rise. b. inflation rate to fall. c. inflation rate to remain unchanged. d. government to take action to lower the inflation rate in the near future. 13. Refer to the Table of demand and cost information for a monopoly given below (right). The maximum profit this monopolist can earn is a. €40 b. €30 c. €20 d. €15

Quantity Price Total Cost 0 €40 €10 1 €30 €15 2 €20 €25 3 €10 €40 4 € 0 €60

14. Metro North Railway is trying to decide whether or not to run an additional train into London from Milton Keynes station at 8:15 a.m. The total cost of running trains between 8:00 a.m. and 9:00 a.m. is €45,000 and the expected revenues on any given day are €100,000 during this time period. The cost of running the additional train is €4,000 and it is expected that revenues will rise to €103,500. Metro North should a. run the train because the total revenues are greater than the total costs. b. run the train because the firm's revenues will rise. c. not run the train because the total costs are already too high. d. not run the train because the marginal cost of €4000 is greater than the marginal revenue of €3,500. 15. As AB Radiator Co. continues to add workers, while keeping the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, AB Radiator Co. encounters a. economies of scale. b. diseconomies of scale. c. increasing marginal returns. d. diminishing marginal returns. 16. José sells 200 cups of coffee each day in a perfectly competitive market at the market price of €1.00 per cup. If José independently decreased his price per cup to €0.75, a. sales would rise to 250 cups. b. revenues would decrease. c. revenues would remain constant at €200. d. the market price would fall to €0.75 as other sellers match José's price. 17. Who of the following would be included in the Official Statistics “unemployed” category? a. Tuuli, who is waiting for her new job to start b. Jyri, who worked only 15 hours last week c. Panu, who neither has a job nor is looking for one d. None of the above is correct. 18. Suppose that a large number of men who used to work or seek work now no longer do either. Other things the same, this makes a. the number of people unemployed rise but does not change the labor force. b. the number of people unemployed rise but makes the labor force fall. c. both the number of people unemployed and the labor force fall. d. the number of people unemployed fall but does not change the labor force. 19. The labor-force participation rate tells us the fraction of the population that a. is able to participate in the labor market. b. has ever been employed. c. has chosen to participate in the labor market. d. has chosen not to participate in the labor market. 20. In 2004, the Swedish adult non-institutionalized population (not in prisons, mental hospitals etc.) was 6.712 million, the labor force was 4.576 million, and the number of people employed was 4.276 million. According to these numbers, the Swedish labor-force participation rate and unemployment rate were about a. 63.7% and 4.5%. b. 63.7% and 6.6%. c. 68.2% and 4.5%. d. 68.2% and 6.6%. 21. The CPI differs from the GDP deflator in that the CPI includes a. raw material prices whereas the GDP deflator does not. b. only goods whereas the GDP deflator includes both goods and services. c. only services whereas the GDP deflator includes both goods and services. d. only items the typical household buys, whereas the GDP deflator includes all goods and services produced in the economy.

22. If private investment increased by €50 billion while GDP remained the same, which of the following could have occurred, all else being the same? a. Consumption spending decreased by €50 billion. b. Exports increased by €50 billion. c. Imports decreased by €50 billion. d. Net exports increased by €50 billion. 23. Suppose that population grows by 2 per cent. For the standard of living to rise, which of the following must occur? a. Nominal GDP must grow by more than 2 per cent. b. Real GDP must grow by more than 2 per cent. c. Real GDP per capita must grow by more than 2 per cent. d. consumption spending must grow by more than 2 per cent. 24. Which of the following best describes the idea of excess capacity in monopolistic competition? a. Firms produce more output than is socially desirable. b. The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve. c. Due to product differentiation, firms choose output levels where P > ATC. d. Firms keep some surplus output on hand in case there is a shift in the demand for their product. 25. There are a large number potato farmers in Europe. If the price elasticity of demand for potatoes in the whole EU market is -0.3, then the price elasticity of demand for an individual farmer's potatoes a. is also -0.3. b. depends on how large a crop she produces. c. will range between -0.3 and -1.0. d. will be infinite. 26. If Franco's Pizza Parlour knows that the marginal cost of the 500th pizza is €3.00 and that the average total cost of making 499 pizzas is €3.30, then a. average costs are rising at Q = 500. b. average costs are falling at Q = 500. c. total costs are falling at Q = 500. d. average variable costs must be falling. 27. Mark ‘d’ as the answer to 27. Otherwise your exam will be graded according to the key that gives the minimum score for your answers.