Exam 3

1. What kind of capital is oil?

A. cultural

B. financial

C. intellectual

D. physical

2. What is an innovation?

A. an idea that becomes an invention

B. an economically successful invention

C. the marginal utility of wages

D. discrimination by entrepreneurs

3. What converted oil from a liability to an asset?

A. intellectual capital and innovation

B. compensating differentials

C. MENA

D. price discrimination

4. Name the four market structures.

A. differentiation, competition, duopoly, monopoly

B. marginal, average, total, variable

C. monopoly, perfect competition, oligopoly, monopolistic competition

D. steep, flat, elastic, inelastic

5. What happens to average fixed costs as quantity increases?

A. increases

B. decreases

C. does not change

D. increases then decreases

6. Where are profits maximized?

A. where marginal revenue equals variable costs

B. where marginal revenue equals average total costs

C. where marginal revenue equals marginal costs

D. where marginal revenue equals demand

7. What economic concept is used to analyze oligopolies?

A. MC=MR

B. marginal analysis

C. game theory

D. ATC = Q

8. If fixed costs are 2000 and variable costs are 10 and the sale price is 20, what is the breakeven point?

A. 200

B. 100

C. 20

D. 1542

9. Without a barrier to entry, how many firms does it require in order for there to be competition?

A. one

B. two

C. three or more

D. 10 or more

10. Which product is most likely sold under perfect competition?

A. mobile phone service

B. Snicker candy bar

C. cucumbers

D. Apple iPhone

11. How long is a patent good for?

A. 20 years

B. 70 years

C. life of the author

D. life of the author plus 70 years

12. Will increasing the marginal tax rate always increase tax revenue?

A. yes

B. no

13. If I have to pay 1000 riyals in taxes regardless of my income, what kind of tax am I paying?

A. lump-sum

B. proportional

C. progressive

D. regressive 

14. If the tax rate increases as income increases, what kind of tax am I paying?

A. lump-sum

B. proportional

C. progressive

D. regressive 

15. If Ali thinks that you should pay for the services you receive from the government, he is following what principle?

A. ability-to-pay

B. proportional

C. regressive

D. benefits

16. What is the most important kind of capital?

A. financial

B. physical

C. human

D. cultural

17. What happens to the demand curve in monopolistic competition in the long run?

A. becomes more elastic

B. becomes more inelastic

C. no change

D. inverts

18. What can a company do to avoid demand squeeze?

A. raise prices

B. lower prices

C. innovate

D. differentiate

19. What benefits do customers enjoy when a market moves from perfect competition to monopolistic competition?

A. variety

B. inelasticity

C. tariffs

D. diminishing marginal utility

20. What method do economists use to analyze an oligopoly?

A. game theory

B. mc=mr

C. price inelasticity of demand

D. deadweight loss prevention

21. What are the two elements of tension in oligopoly?

A. inelasticity and cartel

B. profits and losses

C. corporations and insurance

D. cooperation and self-interest

22. _________ make ideas into inventions and ____________ make inventions into innovations.

A. entrepreneurs, capitalists

B. competitors, monopolists

C. inventors, entrepreneurs

D. economists, inventors

23. What percent of inventions become innovations?

A. 50%

B. 10%

C. 5%

D. 3%

24. What kind of capital are you creating when you come up with a new idea that becomes an invention?

A. intellectual

B. human

C. cultural

D. technology

25. What two objectives should be considered in designing a tax system?

A. equity and debt

B. fairness and equity

C. efficiency and fairness

D. equality and economy

26. What two principles are considered under tax equity?

A. ability-to-pay and equity

B. ability-to-pay and benefits

C. benefits and costs

D. equity and efficiency

27. What does the Laffer curve illustrate?

A. the relationship between tax rates and tax revenues

B. the relationship between tax rates and equity

C. the relationship between equity and debt

D. the relationship between fairness and efficiency

Assume the following progressive tax brackets:

Income         Rate
0-1000           0%
1001-2000    10%
2001-3000    20%
Above 3001   30%

28. If you earn 5000, how much will you pay in taxes?

A. 1500

B. 900

C. 500

D. 300

For questions 29 and 30, assume the following:

Fixed Costs = 875
Variable costs = 50
Price = 75

29. What is the breakeven quantity?

A. 17.5

B. 35

C. 50

D. 11.67

30. What would the profit or loss be if I sold 25 units?

A. -250

B. 250

C. -875

D. 2125

31. What are four barriers to entry in monopoly?

A. government protection, key resource, network externalities, natural monopoly

B. government protection, anti-trust regulation, oligopoly, marginal cost pricing

C. low tariffs, high marginal tax rates, Laffer curve maximization, equity principle

D. differentiation, economies of scale, equity investment, marginal cost pricing

Use the following graph to answer questions 32-36

32. To maximize profit, what quantity should be sold?

A. 3

B. 4

C. 5

D. 6

33.  To maximize profit, what price should be charged?

A. 40

B. 50

C. 60

D. 70

34. To maximize profit, what will be the total revenue?

A. 160

B. 180

C. 280

D. 300

35. To maximize profit, what will be the total cost?

A. 160

B. 180

C. 200

D. 300

36. What will the total profit be if you are maximizing?

A. 60

B. 80

C. 120

D. 180

37. Use the following table. What is the marginal cost of the 4^th unit?

Unit      Average Cost

1          10

2          12

3          13

4          14

5          15

A. 14

B. 75

C. 17

D. 20

38. If a monopolist sells 10 units at 50 SAR and 11 units at 49 SAR, what is the marginal revenue when they go from 10 to 11 units?

A. 50

B. 49

C. 39

D. 59

Use the following graph to answer questions 39-40

39. To maximize profit, what quantity should be sold?

A. 4

B. 5

C. 6

D. 7

40. What will the total profit be if you are maximizing?

A. 60

B. 80

C. 120

D. 140

5 short answer questions. Each question is worth 4 points. 20 points potential

1. What are the five capitals?

Cultural

Human

Physical

Financial

Intellectual

2. What are the five economic ages?

Hunter-Gatherer

Agricultural

Industrial

Information

Mobile

3. What key innovation started the industrial revolution?

 The Steam Engine

 4. Where did the industrial revolution begin and why?

 England - good cultural capital  and access to coal

5. Name five things included in human capital.

trust

knowledge

skills

personality

health

relationships