FINAL EXAM in ECONOMICS for TOURISM and HOTEL MANAGEMENT DEPARTMENT (06.01.2015) Ast. Prof. Dr. Serap ÇOBAN
A. Fill the blanks with related term (3 points).
A1. Microeconomics is the study of how individual households and firms make decisions and how they interact with one another in markets. Macroeconomics is the study of the economy as a whole. A2. GDP is the market value of all final goods and services produced within a country in a given period of time. A3. Consumption is the spending by households on goods and services, with the exception of purchases of new housing. A4. Government purchases do not include transfer payments because they are not made in exchange for currently produced goods or services. A5. Nominal GDP values the production of goods and services at current prices. Real GDP values the production of goods and services at constant prices. A6. The budget constraint shows the various combinations of goods the consumer can afford given his or her income and the prices of the two goods. A7. An indifference curve is a curve that shows consumption bundles that give the consumer the same level of satisfaction. A8. The income effect is the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve. A9. Marginal revenue is the change in total revenue from an additional unit sold. A10. A shutdown refers to a short-run decision not to produce anything during a specific period of time because of current market conditions. B. TRUE or FALSE (2 points) B1. Exit refers to a long-run decision to leave the market. a. True b. False B2. The firm shuts down P >AVC a. True b. False B3. The portion of the marginal-revenue curve that lies above average variable cost is the competitive firm’s shortrun supply curve. a. True b. False B4. In the long run, the firm exits if the revenue it would get from producing is less than its total cost. a. True b. False B5. A firm will exit the industry if TR > TC. a. True b. False B6. Long-Run Supply Curve is the marginal cost curve above the minimum point of its average total cost curve. a. True b. False B7. For any given price, each firm supplies a quantity of output so that its marginal cost equals price. a. True b. False B8At the end of the process of entry and exit, firms that remain must be making excess economic profit. a. True b. False B9. Long-run equilibrium must have firms operating at their efficient scale. a. True b. False B10. Profit equals total revenue plus total cost a. True b. False B11. The marginal firm is the firm that would exit the market if the price were any lower a. True b. False B12. The GDP is a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100. a. True b. False B13. Nominal GDP values the production of goods and services at constant prices. a. True b. False B14. Investment is the spending on capital equipment, inventories, and structures, including new housing. a. True b. False B15. This income elasticity of demand must be greater than 1.0 to conclude that the good is an inferior good. a. True b. False
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C. The following table contains information about an economy that produces only pens and books, calculate the nominal GDP, reel GDP and GDP deflator for each year (the base year is 2009). (18 points) Year 2009 2010 2011
Price of Pen ($) 2 4 6
Price of Book ($) 3 6 9
Quantity of Pen 2000 3000 4000
Quantity of Book 1500 2500 2700
2009 nominal GDP: 2010 nominal GDP: 2011 nominal GDP: 2009 real GDP: 2010 real GDP: 2011 real GDP: 2009 GDP deflator: 2010 GDP deflator: 2011 GDP deflator:
D. Choose the correct answer (2 points) 1. The value of plant and equipment worn out in the process of manufacturing goods and services is measured by: a. intermediate production b. investment c. consumption d. depreciation 2. Gross Domestic Product is the sum of the market value of the: a. final goods and services b. manufactured goods c. inferior goods and services d. normal goods and services. 3. The slope at any point on an indifference curve is known as: a. the marginal rate of substitution. b. the marginal rate of trade-off. c. the trade-off rate. d. the marginal rate of indifference. 4. The consumer's optimal purchase of any two goods is the point where a. the budget constraint crosses the indifference curve. b. the two highest indifference curves cross. c. the consumer reaches the highest indifference curve subject to remaining on the budget constraint. d. the consumer has reached the highest indifference curve. 5. Suppose a consumer must choose between the consumption of sandwiches and pizza. If we measure the quantity of pizza on the horizontal axis and the quantity of sandwiches on the vertical axis, and if the price of a pizza is €10 and the price of a sandwich is €5, then the slope of the budget constraint is: a.2 b. 10 c. ½ d.5 6. If an increase in a consumer's income causes the consumer to decrease her quantity demanded of a good, then the good is a. a substitute good. b. a normal good. c. a complementary good. d. an inferior good. 7. If there are implicit costs of production, a. accounting profit will exceed economic profit. b. economic profit will always be zero. c. economic profit will exceed accounting profit. d. accounting profit will always be zero. 8. The efficient scale of production is the quantity of output that minimizes: a. average fixed cost. b. average total cost. c. average variable cost. d. marginal cost 9. For a competitive firm, marginal revenue is: a. total revenue divided by the quantity sold. b. equal to the quantity of the good sold. c. average revenue divided by the quantity sold. d. equal to the price of the good sold. 10. Which of the following is not a characteristic of a competitive market? a. All of these answers are characteristics of a competitive market. b. There are many buyers and sellers in the market. c. The goods offered for sale are largely the same. d. Firms generate small but positive economic profits in the long run. 11. In the long-run, some firms will exit the market if the price of the good offered for sale is less than: a. marginal revenue. b. marginal cost. c. average total cost. d. average revenue. Write down your answers here… 1 2 3 4 5 6 7 8 9 10 11
