BECO Test 2

The section of the demand curve at point B represents the

unit elastic section of the demand curve

Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of muffins for cake?

The MRS is greater between bundles E and C than between bundles C and A

On a 250-acre farm, a farmer is able to produce 4,500 bushels of wheat when he hires 2 workers. He is able to produce 6,300 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

The farmer is able to produce 7,560 bushels of wheat when he hires 4 workers.

At levels of output less than K, the firm experiences

economies of scale

If the price falls from $160 to $120, the price elasticity of demand is (please use the Midpoint formula)

elastic

Between point A and point B on the graph, demand is (please use the Midpoint formula)

elastic, but not perfectly elastic

The minimum average cost of producing alternative levels of output, allowing for optimal selection of all variables of production, is defined by the

ong-run average total cost curve

A consumer consumes two normal goods, popcorn and Pepsi. The price of Pepsi rises. The substitution effect, by itself, suggets that the consumer will consume

more popcorn and less Pepsi

Lemonade, a good with many close substitutes, should have an own price elasticity that is

relatively elastic

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40, the firm

should use more L and less K to cost minimize

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease total revenue?

0.8

When the price of good A is $2, the quantity demanded of good A is 25 units. When the price of good A rises to $3, the quantity demanded of good A falls to 15 units. Using the midpoint method, the price elasticity of demand for good A is

1.25, and an increase in price will result in a decrease in total revenue for good A

Moving from point A to point B, price elasticity of demand is equal to (please use the Midpoint formula and insert your solution as a positive number)

1.5

Assume that the consumer depicted in the figure has an income of $10. The price of Twizzlers is $1 and the price of M&M's is $2. The consumer will choose a consumption bundle where the marginal rate of substitution is

1/2

Suppose a certain firm is able to produce 125 units of output per day when 19 workers are hired. The firm is able to produce 137 units of output per day when 20 workers are hired, holding other inputs fixed. The marginal product of the 20th worker is

12

If the consumer's income is $221, then what is the price of a CD? (Please insert your solution without a dollar sign)

13

Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker?

15 Chairs per hour

At which number of workers does diminishing marginal product begin?

2

What is the consumer's marginal rate of substitution as she moves from A to B? (Please insert your solution as a positive number)

2

If the price falls from $160 to $120, the price elasticity of demand is (please use the Midpoint formula and insert your solution as a positive number)

2.33

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase total revenue?

2.6

Moving from a price of $70 to a price of $80, price elasticity of demand is about (please use the Midpoint formula and insert your solution as a positive number)

3.0 or 3

What is total output when 1 worker is hired?

30

What is the marginal product of the first worker?

300

A consumer likes two goods: magazines and plays. The two bundles shown in Table 21-1 lie on the same indifference curve for the consumer. Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

4 plays and 4 magazines

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst. The price of a pint of beer is $5, and the price of a bratwurst is $4. Which of the following combinations of beers and bratwursts represents a point that would lie to the interior of the consumer's budget constraint?

40 beers and 50 bratwursts

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a (please use the Algebraic Point formula)

50.00 percent decrease in the quantity demanded

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 130). Then the marginal product of the 13th worker is

8

If the price elasticity of demand for steak is 0.4, an increase in price will lead to

an increase in total revenue

An income elasticity less than zero tells us that the good is

an inferior good

When marginal cost is less than average total cost,

average total cost is falling

If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost.

diminishing marginal product

Goods with many close substitutes tend to have

more elastic demands

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that the average total cost when 5 units of output are produced is $80, and the marginal cost of the sixth unit of output is $150. What is the average total cost when six units are produced?

$91.67

Zaid's Tent Company has fixed costs of $300,000 per year. The firm's average variable cost is $65 for 10,000 tents. At that level of output, the firm's average total costs equal

$95

If a 16 percent increase in price for a good results in a 7 percent decrease in quantity demanded, the price elasticity of demand is (please use the Algebraic Point formula and insert your solution as a positive number)

0.44

Suppose a consumer spends her income on two goods: music CDs and DVDs. The price of a CD is $8, and the price of a DVD is $20. If we graph the budget constraint by measuring the quantity of CDs purchased on the vertical axis and the quantity of DVDs on the horizontal axis, what is the slope of the budget constraint?

-2.5

What is the value of B?

$100

What is the value of K?

$110

Using the algebraic point method, the price elasticity of demand for a good is computed to be approximately 0.55. Which of the following events is consistent with a 20 percent decrease in the quantity of the good demanded?

An increase of 36.36 percent in the price of the good

Why doesn't the total cost curve begin at the origin (the point 0,0)?

Because fixed costs are positive when output is zero

You have $36 to spend on good X and good Y. If good X costs $6 and good Y costs $12, your budget constraint is

DE

As the consumer moves from A to B to C, the marginal rate of substitution

Decrease

A consumer who chooses to spend all of her income could be at which point(s) on the figure?

E, A, or B only

If apples have an own price elasticity of 1.2 we know the demand is

Elastic

Which of the graphs in the figure could reflect an increase in income?

Graph B

Which of the graphs in the figure reflects a decrease in the price of good X only?

Graph B

Which of the graphs in the figure could reflect a simultaneous increase in the price of good X and decrease in the price of good Y?

Graph D

The quantity consumed of a good is relatively unresponsive to changes in price whenever demand is

Inelastic

When the price of candy bars is $1, the quantity demanded is 5,000 per day. When the price rises to $3, the quantity demanded decreases to 4,500. Given this information and using the midpoint method, we know that the demand for candy bars is

Inelastic

When the price of candy bars is $1.20, the quantity demanded is 490 per day. When the price falls to $1.00, the quantity demanded increases to 500. Given this information, we know that the demand for candy bars is (please use the Midpoint formula)

Inelastic

Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods?

None of the graphs in the figure can reflect this

If the last unit of an input increases total product, we know that the marginal product is

Positive

Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

c

If the cross-price elasticity between goods A and B is negative, we know the goods are

complements

Assume that the price elasticity of demand is 2 for a certain firm's product. If the firm raises price, the firm's managers can expect total revenue to

decrease

If the price increases in the region of the demand curve between points C to B, we can expect total revenue to

decrease

If the price increases in the region of the demand curve between points B to A, we can expect total revenue to

increase

When large changes in price lead to no changes in quantity demanded, demand is perfectly

inelastic, and the demand curve will be vertical

When comparing bundle C to bundle A, the consumer

is indifferent between the two bundles.

The minimum points of the average variable cost and average total cost curves occur where the

marginal cost curve intersects those curves

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

the equilibrium price increases, and the equilibrium quantity is unchanged

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

the mayor thinks demand is inelastic, and the city manager thinks demand is elastic

Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes.