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MPE_AMI2: Sample test
Jméno a příjmení – pište do okénka UČO Číslo zadání
1
1 The inverse demand function for grapes is described
by the equation p = 518−5q, where p is the
price in dollars per crate and q is the number
of crates of grapes demanded per week. When
p = $38 per crate, what is the price elasticity of
demand for grapes?
A -190/96
B -5/518
C -5/96
D -96/38
*E -38/480
2 All ﬁrms in a perfectly competitive industry have
the same cost functions and increasing marginal
cost functions. If the price is above the
average variable costs (at the optimal quantity)
in the short-run, than in the long run
*A both the quantity produced by each ﬁrm and the
market price decrease.
B both the quantity produced by each ﬁrm and the
market price increase.
C the quantity produced by each ﬁrm increases
and the market price decreases.
D the quantity produced by each ﬁrm decreases
and the market price increases.
E will be no change in the quantity produced by
each ﬁrm and in the market price.
3 Edmund must pay $6 each for punk rock video
cassettes, V . If Edmund is paid $24 per sack for
accepting garbage, G, and if his relatives send
him an allowance of $96, then his budget line is
described by the equation
A 6V = 24G.
B 6V + 24G = 96.
C 6V = 96 − G.
*D 6V − 24G = 96.
E None of the above.
4 The inverse demand for rides of one visitor of an
amusement park (with only this one attraction)
is p = 50 − q and marginal cost of one ride is
10 CZK. If the amusement park uses a two-part
tariﬀ, then apart from the price for each ride the
consumer will pay an entry fee of
A 200 CZK.
B 450 CZK.
*C 800 CZK.
D 0 CZK.
E 1250 CZK.
5 If a ﬁrm moves from one point on a production
isoquant to another point on the same isoquant,
which of the following will certainly not happen?
*A A change in the level of output
B A change in the ratio in which the inputs are
combined
C A change in the marginal products of the inputs
D A change in the rate of technical substitution
E A change in proﬁtability
6 If there are only two goods, if more of good 1
is always preferred to less, and if less of good
2 is always preferred to more, then indiﬀerence
curves
A slope downward.
*B slope upward.
C may cross.
D could take the form of ellipses.
E None of the above.
7 Martin consumes apples A and pears P. If we
draw pears on the vertical axis, what is the slope
of the indiﬀerence curve P = 4/
√
A in the
point (A, P) = (4, 4)?
A -1/8
B -1/6
*C -1/4
D -1/2
E -1
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MPE_AMI2: Sample test Zadání č. 1
8 An industry has 100 ﬁrms. These ﬁrms have
identical production functions. In the short run,
each ﬁrm has ﬁxed costs of $200. There are two
variable factors in the short run and output is
given by y = (min{x1, 4x2})1/2
. The cost of factor
1 is $5 per unit and the cost of factor 2 is $5
per unit. In the short run, the industry supply
curve is given by
*A Q = 8p.
B Q = 10p.
C Q = 580p1/2
.
D the part of the line Q = 50(min{5, 20}) for which
pQ > 200/Q.
E None of the above.
9 Miss Muﬀet insists on consuming 2 units of whey
per 1 unit of curds. If the price of curds is $5 and
the price of whey is $6, then if Miss Muﬀet's income
is m, her demand for curds will be
A 5c + 6w = m.
B 6m/5.
C 5m.
D m/5.
*E m/17.
10 Ike's utility function is U(x, y) = 25xy. He
has 12 units of good x and 8 units of good y.
Ben's utility function for the same two goods is
U(x, y) = 4x + 4y. Ben has 9 units of x and 13
units of y.
*A Ike prefers Ben's bundle to his own bundle, but
Ben prefers his own bundle to Ike's.
B Ben prefers Ike's bundle to his own, but Ike prefers
his own bundle to Ben's.
C Each prefers the other's bundle to his own.
D Neither prefers the other's bundle to his own.
E Since they have diﬀerent preferences, there is
not enough information to determine who envies
whom.
11 Charlie has a utility function U(xA, xB) =
xAxB, the price of apples is $1, and the price
of bananas is $2. If Charlie's income were $200,
how many units of bananas would he consume if
he chose the bundle that maximized his utility
subject to his budget constraint?
A 25
*B 50
C 10
D 100
E 150
12 A monopoly has the demand curve q = 10, 000−
100p. Its total cost function is c(q) = 1, 000+10q.
The government plans to tax the monopoly's
proﬁts at a rate of 50%. If it does so, the monopoly
will
A increase its price by 50%.
B increase its price by more than 50%.
C recover some but not all of the tax it pays by
increasing its price.
*D not change its price or the quantity it sells.
E None of the above.
13 Bella's budget line for x and y depends on all of
the following except
A the amount of money she has to spend on x and
y.
B the price of x.
*C her preferences between x and y.
D the price of y.
E None of the above.
14 The production function is given by f(x) =
4x1/2
. If the price of the commodity produced
is $80 per unit and the cost of the input is $40
per unit, how much proﬁts will the ﬁrm make if
it maximizes proﬁts?
A $318
B $1,284
*C $640
D $625
E $323
15 The following relationship must hold between
the average total cost (ATC) curve and the marginal
cost curve (MC):
A If MC is rising, ATC must be rising.
B If MC is rising, ATC must be greater than MC.
C If MC is rising, ATC must be less than MC.
*D If ATC is rising, MC must be greater than ATC.
E If ATC is rising, MC must be less than ATC.
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MPE_AMI2: Sample test Zadání č. 1
16 Choose the true statement. If more statements
are true, choose the answer marked by (P).
A consumer buys two goods. Good X is measured
at the horizontal and good Y at the vertical
axis. If the budget line has a slope lower than -1
(e.g. -2), then
A the consumer has a higher utility from good X
than from good Y .
B the price of good X is lower than the price of
good Y .
C the consumer has a lower utility from good X
than from good Y .
*D the price of good X is higher than the price of
good Y .
E (P) More than one of the other statements are
true.
17 According to the ﬁrst theorem of welfare econo-
mics:
A every competitive equilibrium is fair.
B if the economy is in a competitive equilibrium,
there is no way to make anyone better oﬀ.
C a competitive equilibrium always exists.
D at a Pareto optimum, all consumers must be
equally wealthy.
*E None of the above.
18 A competitive ﬁrm produces output using three
ﬁxed factors and one variable factor. The ﬁrm's
short-run production function is q = 305x−2x2
,
where x is the amount of variable factor used.
The price of the output is $2 per unit and the
price of the variable factor is $10 per unit. In the
short run, how many units of x should the ﬁrm
use?
A 37
B 150
C 21
*D 75
E None of the above.
19 An industry has two ﬁrms - a Stackelberg leader
and a follower. The price of the industry output
is given by P = 84 − Q, where Q is the total
output of the two ﬁrms. The follower has a marginal
cost of $0. The leader has a marginal cost
of $21. How much should the leader produce in
order to maximize proﬁts?
*A 21
B 24
C 42
D 19
E None of the above.
20 In Gas Pump, South Dakota, every Buick owner's
demand for gasoline is 20 − 5p for p less
than or equal to 4 and 0 for p > 4. Every Dodge
owner's demand is 15−3p for p less than or equal
to 5 and 0 for p > 5. Suppose that Gas Pump
has 100 Buick owners and 100 Dodge owners. If
the price of gasoline is $4,50, what is the total
amount of gasoline demanded in Gas Pump?
A 300 gallons
B 75 gallons
C 225 gallons
*D 150 gallons
E none of the above.
21 The conclusion that the indiﬀerence curves representing
distinct levels of preference cannot
cross follows from the assumption of
A reﬂexivity.
B convexity.
C equality.
D monotonicity.
*E transitivity.
22 The short run market supply curve in a competitive
market
A is decreasing if there are increasing returns to
scale.
B corresponds to a horizontal line at the level of
the minimum of average costs.
C is inﬂuenced by the possibility of entry.
*D is a horizontal sum of the short run supply curves
of individual ﬁrms.
E More than one of the above answers is correct.
23 The income elasticity of demand is equal to the
*A percentage change in quantity divided by the
percentage change in income.
B percentage change in income by the percentage
change in quantity.
C measures the slope of the Engel curve.
D depends on the units that measure the quantity
and income of the given good.
E More than one above answer is correct.
24 Goods 1 and 2 are perfect complements and a
consumer always consumes them in the ratio of
2 units of good 2 to 1 unit of good 1. If a consumer
has an income of $300 and if the price of
good 2 changes from $5 to $6, while the price of
good 1 stays at $1, then the income eﬀect of the
price change
A is 6 times as strong as the substitution eﬀect.
B does not change the demand for good 1.
*C accounts for the entire change in demand.
D is exactly twice as strong as the substitution ef-
fect.
E is 5 times as strong as the substitution eﬀect.
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MPE_AMI2: Sample test Zadání č. 1
25 A ﬁrm has the long-run cost function C(q) =
3q2
+ 27. In the long run, it will supply a positive
amount of output, so long as the price is
greater than
A $36.
B $44.
C $9.
*D $18.
E $23.
26 Harley's current wealth is $600, but there is a
.25 probability that he will lose $100. Harley is
risk neutral. He has an opportunity to buy insurance
that
would restore his $100 if he lost it.
A Harley would be willing to pay a bit more than
$25 for this insurance.
*B Harley would be willing to pay up to $25 for this
insurance.
C Since Harley is risk neutral, he wouldn't be willing
to pay anything for this insurance.
D Since Harley's utility function is not speciﬁed,
we can't tell how much he would be willing to
pay for this insurance.
E Harley would not be willing to pay more than
$16.66 for this insurance.
27 Dr. Erasmus needs for production of a study material
S always 1 hour of work time and 2 hours
of photocopier time. One hour of work W costs
300 CZK and one hour of photocopier C costs
200 CZK. At the current input prices the cost
function is
A c(S) = 200S.
B c(S) = 300S.
C c(S) = 500S.
*D c(S) = 700S.
E c(S) = 800S.
28 An orange grower has discovered a process for
producing oranges that requires two inputs. The
production function is Q = min{2x1, x2}, where
x1 and x2 are the amounts of inputs 1 and 2
that he uses. The prices of these two inputs are
w1 = $5 and w2 = $10, respectively. The minimum
cost of producing 160 units is therefore
*A $2,000.
B $2,400.
C $800.
D $8,000.
E $1,600.
29 A monopolist has decreasing average costs as
output increases. If the monopolist sets price
equal to average cost, it will
A produce too much output from the standpoint
of eﬃciency.
B lose money.
*C produce too little output from the standpoint of
eﬃciency.
D maximize its proﬁts.
E face excess demand.
30 Suppose that in Enigma, Ohio, klutzes have a
productivity of $1,000 and kandos have a productivity
of $5,000 per month. You can't tell klutzes
from kandos by looking at them or asking
them, and it is too expensive to monitor individual
productivity. Kandos, however, have more
patience than klutzes. Listening to an hour of
dull lectures is as bad as losing $250 for a klutz
and $100 for a kando. There will be a separating
equilibrium in which anybody who attends
a course of H hours of lectures is paid $5,000 per
month and anybody who does not is paid $1,000
per month
A if 16 < H < 80.
*B if 16 < H < 40.
C only in the limit as H approaches inﬁnity.
D for all positive values of H.
E if 14 < H < 35.