Econ 380

It is profitable to hire units of labor as long as the value of marginal product

exceeds wage.

When a profit-maximizing firm undertakes production in more than one plant, it will allocate a fixed level of inputs such that _____ is equal across plants.

the marginal product

In managerial economics, managers are assumed to maximize:

the value of their firm

You buy your child a $100 savings bond that matures in 10 years and pays an annual interest rate of 10 percent. At maturity the bond will be worth:

$259.37

If quantity demanded for sneakers falls by 6% when price increases 20% we know that the absolute value of the own-price elasticity of sneakers is

0.3

What is the average product of labor, given that the level of labor equals 10, total output equals 1200 and the marginal product of labor equals 200?

120

Your mortgage requires that you pay $12,000 at the end of each of the next 30 years. If the annual interest rate is 12 percent, then you must have borrowed approximately:

$96,660

Suppose Q x d = 10,000 - 2 P x + 3 P y - 4.5M, where P x = $100, P y = $50, and M = $2,000. What is the own-price elasticity of demand?

-0.21

The demand for textbooks is Q = 200 - P + 25 U - 50 P beer. Assume that the unemployment rate U is 8 and the price of beer P beer is $2. When the average price of a textbook is P = $100, the price elasticity of demand is:

-0.5

If the marginal cost of brewing beer is 40¢ and the profit-maximizing price is 60¢, then the price elasticity of demand is:

-3

In Russia, as per capita income rises from $1,980 to $2,020, everything else remaining constant, annual per capita consumption of vodka falls from 525 to 475 liters; this implies an income elasticity of demand for vodka of:

-5.0

Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed?

7

Managerial economics draws upon all of the following EXCEPT: a. accounting b. finance c. sociology d. microeconomics e. marketing

C. sociology

What is the relationship between economic and accounting profit?

Economic profit may be equal to or less than accounting profit.

A television station reports that more people are purchasing personal computers. A likely explanation for this event would be a(n):

Increase in the demand for and the supply of computers

Total product begins to fall when:

Marginal product is zero.

An isosost line

Represents the combinations of K and L that cost the firm the same amount of money

An increase in the price of product G will result in a(n):

Smaller quantity of G demanded

The demand for good X is estimated to be Q x d = 10, 000 - 4P X + 5P Y + 2M + A X, where P X is the price of X, P Y is the price of good Y, M is income and A X is the amount of advertising on X. Suppose the present price of good X is $50, P Y = $100, M = $25,000, and A X = 1,000 units. Based on this information, good X is

a normal good.

When the marginal product of a variable input is zero, it implies that the firm is at the point where the total product is:

at its maximum

Economic profits may result from:a. innovation b. risk taking c. exploiting market inefficiencies d. all the above e. a and b

d. all the above

Which statement is not correct?a. If demand increases and supply decreases, price will rise and the quantity exchanged may either rise or fall b. If supply increases and demand decreases, price will fall and the quantity exchanged may either rise or fall c. If supply declines and demand remains constant, price will rise and the quantity exchanged will fall d. If demand decreases and supply increases, price will fall and the quantity exchanged will fall

d. If demand decreases and supply increases, price will fall and the quantity exchanged will fall

Which of the following production functions displays decreasing returns to scale? a. Q = aL + bK2 b. Q = aL + bK c. Q = bLK d. Q = cL.2K.5

d. Q = cL.2K.5

If the sum of the exponents of a Cobb-Douglas production function is equal to 1.2, the production function exhibits:

increasing returns to scale.

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

relatively elastic.

When marginal revenue is zero, demand will be

unit elastic

The demand for video recorders has been estimated to linear and given by the demand relation Q v = 145 - 3.2P v + 7M - 0.95P f - 39P m, where Q v is the quantity of video recorders, P f denotes the price of video recorder film, P m is the price of attending a movie, P v is the price of video recorders, and M is income. Based on the estimated demand equation we can conclude:

video recorders are normal goods and video recorder film is a complement for video recorders.