ECON 528 Midterm

d.her total cost equals her total variable cost

5) If Melissa owns a software company that incurs no fixed costs, then Select one: a.her marginal cost must equal zero. b.her total cost equals zero. c.her total variable cost is less than her total cost. d.her total cost equals her total variable cost. e.she will earn an economic profit.

Answer: B

5) If the cross-price elasticity of demand for computers and software is negative, this means the two goods are A) substitutes. B) complements. C) inferior. D) normal.

c.The maximum amount that buyers are willing to pay for each unit.

First (Perfect) degree price discrimination means that a firm charge: Select one: a.One single price—the maximum possible—to all of its buyers. b.Different prices to different groups of buyers. c.The maximum amount that buyers are willing to pay for each unit. d.Different prices to people of different racial or ethnic backgrounds.

.True

For a price discriminating airline, if the demand for business travelers were to expand, a proactive price discriminator would expand the number of seat assignments to business travelers and likely raise business traveler ticket prices. Select one: a.True b.It could be true or false c.False d.It is neither false nor true

The demand for Seiko watches is more price elastic than demand for watches in general. Narrowly defined markets (such as the Seiko watch market) have many substitutes.

For each pair of item below determine which product would have the higher price elasticity of demand (in absolute value): A Seiko watch or watches in general.

The demand for a new car is more price elastic than the demand for a tank of gas for your current car. The Ford Fusion: (a) has many substitutes, including your current car and (b) will consume a relatively large portion of your budget. Gasoline for the car you own is more necessity than luxury.

For each pair of item below determine which product would have the higher price elasticity of demand (in absolute value): A new Ford Fusion or a tank of gas for your current car.

The demand for the hair product is more price elastic (its elasticity has a higher absolute value) than the demand for blood pressure medicine. The latter is more necessity than luxury and has virtually no substitutes. There are substitutes for the Clairol hair coloring product and it is not a necessity.

For each pair of item below determine which product would have the higher price elasticity of demand (in absolute value): Blood pressure medicine for someone who has high blood pressure and the purchase of Clairol hair coloring product.

b. $41,500 Implicit Cost include lost opportunity $40,000 salary $30,000*5%=$1,500 lost interest $40,000+1500= $41,500

Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up asalary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed$10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to renta salon, hired a part-time assistant for $12,000 and incurred another $15,000 on equipment and hairdressingmaterial. Based on this information, what is the amount of her implicit costs? Select one: a.$80,000 b.$41,500 c.$70,000 d.$42,000

.a luxury.

If a 5 percent increase in income leads to a 10 percent increase in quantity demanded for airline travel, then airline travel is Select one: a.an inferior good. b.a necessity. c.a substitute for another good. d.a luxury.

d.Second-degree price discrimination

If a firm charges customers $ 200 per unit of the first unit purchased, and $160 per unit for each additional unitpurchased in excess of one unit. Then, what is the economic term of this strategy? Select one: a.Profit maximization pricing b.First-degree price discrimination c.Third -degree price discrimination d.Second-degree price discrimination

True

If a firm has increasing returns to scale, then increasing all inputs by 1% will increase output bymore than 1%. Select one: True False

d.Charging different prices for the same good or service.

If an economist says that firm practices price discrimination, that firm is: Select one: a.Exploiting the poor. b.Making great efforts to keep its costs as low as possible. c.Producing two products, one with decreasing returns to scale and the other with increasing returns d.Charging different prices for the same good or service.

c.an inferior good.

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is Select one: a.a necessity. b.a normal good. c.an inferior good. d.a neutral good.

a.choices made by individuals and businesses.

Microeconomics includes the study of the; Select one: a.choices made by individuals and businesses. b.nationwide unemployment rate. c.reasons why the government changes interest rates. d.recessions and inflation in the global economy. e.aggregate effects on the national economy.

c.substitutes in consumption.

Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are Select one: a.both inferior goods. b.both luxury goods. c.substitutes in consumption. d.complements in consumption.

c.the preference rankings of vacationers travelling together are negatively correlated.

Vacation tours to Europe invariably package visits to disparate regions: cities, mountains, and the seaside. Bundling, a type of second degree price discrimination, is most profitable when: Select one: a.preference for the seaside is always higher than preferences for city excursions b.preference rankings of vacationers traveling together are positively correlated. c.the preference rankings of vacationers travelling together are negatively correlated. d.a preference for cities is always higher than preferences for mountain vistas.

False

We should use relatively more labor if we learn that the marginal product per dollar of labor expenditures is less than a marginal product per dollar of capital expenditures. Select one: True False

d.False

harging a different price for tickets to movies at twilight than after 6 o'clock is an example of bundling. Select one: a.It is impossible to determine the validity of the statement based on the given information. b.True c.It can be true or false d.False

D) All of the above.

1) A firm's managers are constrained by A) consumers. B) workers. C) government. D) All of the above.

Answer: B Explanation: Explicit Cost = Out of Pocket cost = Actual Money spent = Rent + Wage for the assistant +material cost + Interest paid on the borrowing = 18,000 + 12,000 + 15,000 + (10,000x0.05) = $45,500

1) Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 on equipment and hairdressing material. Based on this information, what is the amount of her explicit costs? A) $45,000 B) $45,500 C) $47,000 D) $87,000

Answer: B

1) If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is A) a neutral good. B) a normal good. C) a necessity. D) a complement.

B) scarce resources.

1) Microeconomics studies the allocation of A) decision makers. B) scarce resources. C) models. D) unlimited resources.

b.replacement - bc they measure lost opportunity vs new opportunity

1) Unlike an accountant, an economist measures costs on a(n) ________ basis. Select one: a.historical b.replacement c.explicit d.conservative

A) customers who have an elastic demand for the product

10) For a firm that can effectively price discriminate, who will be charged a lower price? A) customers who have an elastic demand for the product B) customers who have an inelastic demand for the product C) buyers that are members of the largest market segment D) buyers that are members of the smallest market segment

True

10) Suppose a used-car salesman asks you the most you would be able to pay for a car and, unthinkingly, you answer truthfully, $4,800. Suppose, amazingly, that $4,800 is exactly the price for the car that you are presently examining. Then, the used-car salesman has effectively used perfect price discrimination on you. True or False

a.opportunity cost of producing a good or service, which includes both implicit and explicit cost

10) When an economist uses the term "cost" referring to a firm, the economist refers to the Select one: a.opportunity cost of producing a good or service, which includes both implicit and explicit cost b.cost that can be actually verified and measured. c.implicit cost of producing a good or service but not the explicit cost of producing a good or service. d.explicit cost of producing a good or service but not the implicit cost of producing a good or service. e.price of the good to the consumer.

Answer: C

10) Which of the following is a factor of production that generally is fixed in the short run? A) raw materials B) labor C) a factory building D) water

Answer: A

11) A sale on men's slacks at T.J. Maxx, where if you buy the first pair at full price, you can buy the second pair at half price, is an example of differential pricing. a. True b. False

Answer: D

11) Which of the following is an example of a long run adjustment? A) Your university offers Saturday morning classes next fall. B) Ford Motor Company lays off 2,000 assembly line workers. C) A soybean farmer turns on the irrigation system after a month long dry spell. D) Wal-Mart builds another Supercenter.

Answer: D

12) Academic book publishers hire editors, designers, and production and marketing managers who help prepare books for publication. Because these employees work on several books simultaneously, the number of people the company hires will not go up and down with the quantity of books the company publishes during any particular year. The salaries and benefits of people in these job categories will be included in A) fixed cost and marginal cost but not variable cost. B) fixed cost but not variable cost and total cost. C) marginal cost and total cost but not fixed cost. D) fixed cost and total cost but not variable cost.

Answer: B

13) If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, the firm A) is earning a profit. B) should shut down. C) should increase output. D) should increase price.

Answer: C

14) Which of the following statements best describes the economic short run? A) It is a period of one year or less. B) It is a period during which firms are free to vary all of their inputs. C) It is a period during which at least one of the firm's inputs is fixed. D) It is a period during which fixed inputs become variable inputs because of depreciation.

D) The demand curve shifts to the left.

16) In June, buyers of titanium expect that the price of titanium will fall in July. What happens in the titanium market in June, holding everything else constant? A) The demand curve shifts to the right. B) The quantity demanded increases. C) The quantity demanded decreases D) The demand curve shifts to the left.

A) A 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption.

17) Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately -6. What does this mean? A) A 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption. B) A 6 percent increase in the price of grapefruit juice leads to a 1 percent increase in orange juice consumption. C) If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. D) The demand for orange juice is 6 times more than the demand for grapefruit juice.

a.are historical costs - bc they measure actual costs

2) Accounting costs Select one: a.are historical costs. b.usually include normal profits. c.are replacements costs. d.usually include implicit costs

Answer: FALSE (it includes BOTH - Accounting costs only include explicit costs); implicit costs (lost opportunity)

2) Economic costs include implicit costs but not explicit costs. True or False

Answer: C

2) Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are A) substitutes in consumption. B) both inferior goods. C) complements in consumption. D) both luxury goods.

C) helps managers make decisions in the face of scarcity

2) Managerial economics A) describes how pay for managers is set. B) ensures managers always make good decisions. C) helps managers make decisions in the face of scarcity. D) explains which products consumers will buy.

a. not being able to spend your $10,000 savings if you sink the money in your business

2) Which of the following would be categorized as an opportunity cost? a. not being able to spend your $10,000 savings if you sink the money in your business b. the cost of purchasing supplies for your house-cleaning business c. the cost of purchasing auto insurance for your dry-cleaning delivery business A) a only B) a and c only C) b and c only D) all of the above

A) buyers of steel are more sensitive to a price change if they have more time to adjust to the price change.

21) If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because A) buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. B) buyers of steel are less sensitive to a price change if they have more time to adjust to the price change. C) sales revenue in the building industry will fall sharply. D) profits will fall by a greater amount in the long run than in the short run.

Answer: B

3) A change in which variable will change the market demand for a product? A) the price of the product B) population C) technology D) the prices of substitutes in production

a.accounting; opportunity Normal profit is a profit metric that takes into consideration both explicit and implicit costs. It may be viewed in conjunction with economic profit. Normal profit occurs when the difference between a company's total revenue and combined explicit and implicit costs are equal to zero.

3) A firm earns a normal profit when its total revenues just offset both the ________ cost and ________ cost. Select one: a.accounting; opportunity b.accounting; replacement c.historical; replacement d.explicit; accounting

D) All of the above.

4) Microeconomic models are used to A) make predictions. B) explain real-life phenomena. C) evaluate production alternatives. D) All of the above.

Answer: B

4) Suppose the value of the price elasticity of demand is -3. What does this mean? A) A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. B) A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. C) A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. D) A $1 increase in price causes quantity demanded to fall by 3 units.

b. Provide logic and methodology to find solutions to business problems

5) Managerial Economics as a specialized branch of Economics a. Provide ready-made solutions to business problems b. Provide logic and methodology to find solutions to business problems c. provide alternative answers to specific business problems. d. Provide theoretical background to analyze business problem

Answer: B

6) Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that A) an increase in the price of beer will increase the quantity demanded of beer and beer is a normal good. B) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good. C) a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good. D) an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a necessity.

d.fixed cost.

6) In the short run, a firm cannot change the amount of capital it uses. Therefore the cost of capital is a Select one: a.marginal cost. b.variable cost. c.productivity cost. d.fixed cost. e.short-run cost.

c.variable cost.

7) Because the amount of labor a firm employs can be changed, the cost of labor is known as Select one: a.an unavoidable cost. b.minimum cost. c.variable cost. d.fixed cost. e.maximum cost.

Answer: C

7)Which of the following statements about the price elasticity of demand is correct? A) The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. B) The absolute value of the elasticity of demand ranges from zero to one. C) Demand is more elastic in the long run than it is in the short run. D) Demand is more elastic the smaller the percentage of the consumer's budget the item takes up.

Answer: B Explanation: This does not group units. It is an example of third degree price discrimination, however.

8) Charging a different price for tickets to movies at twilight than after 6 o'clock is an example of bundling. A. True B. False

a.the change in total cost that results from a one-unit increase in output.

8) Marginal cost equals Select one: a.the change in total cost that results from a one-unit increase in output. b.total cost minus total variable cost. c.total variable cost divided by total output. d.total fixed cost divided by total output. e.the change in fixed cost that results from a one-unit increase in output.

ANS: C

8) Third-degree price discrimination exists whenever: a. the seller knows exactly how much each potential customer is willing to pay and will charge accordingly. b. different prices are charged by blocks of services. c. the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups. d. the seller will bargain with buyers in each of the markets to obtain the best possible price.

b.$50,000. implicit cost is lost opportunity - she could have worked as biologist but didn't

9) Lauren runs a chili restaurant in San Francisco. Her total revenue last year was $110,000. The rent on herrestaurant was $48,000, her labor costs were $42,000, and her materials, food and other variable costs were $20,000.Lauren could have worked as a biologist and earned $50,000 per year. An economist calculates her implicit costs as Select one: a.$0 because Lauren did not work as a biologist. b.$50,000. c.$150,000. d.$110,000. e.$63,000.

b.variable input.

A factor of production that can be easily changed in the relevant time period is called a: Select one: a.temporary input. b.variable input. c.substitution input. d.fixed input.

d.it increases costs more than revenue

A managerial decision is not profitable if Select one: a.it increases some revenues more than it decreases others. b.it increases revenue more than costs. c.it decreases some cost more than it increases others. d.it increases costs more than revenue

d.bundling

A restaurant in an isolated spot on the coast of Maine sells only complete meals at a fixed price (called prix fixe), with the opportunity to select à la carte choices. Which type of price discrimination is being practiced? Select one: a.universal access b.first-degree price discrimination c.two part tariffs d.bundling

d.True

A sale on men's slacks at T.J. Maxx, where if you buy the first pair at full price, you can buy the second pair at half price, is an example of differential pricing. Select one: a.False b.The validity of the statement cannot be determined based on the given information. c.The statement can be either true or false d.True

False

According to the profit-maximization goal, the firm should attempt to maximize short-run profits since there is too much uncertainty associated with long-run profits. Select one: a.False b.True

b.True

Accounting costs exclude implicit costs. Select one: a.False b.True

c.The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost.

Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitnesscenter is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of thefollowing is true? Select one: a.The variable cost of running the studio is $22,000. b.The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need tocontinue operations is a marginal cost. c.The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continueoperations is a variable cost. d.The fixed cost of running the studio is $22,000.

c. positive, and the good is a normal good. 2%/4%=.5% (increase in income, resulted in increase in demand so good is normal

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is a. negative, and the good is an inferior good. b. negative, and the good is a normal good. c. positive, and the good is a normal good. d. positive, and the good is an inferior good.

The profit-maximizing level of production is 3 units, which can be determined by the greatest difference between total revenue and total cost, which is equal to profit, and can also be determined where marginal revenue is equal to marginal cost (or marginal revenue is the closest to marginal cost, without being below marginal cost).

Assuming a market price of $4, fill in the columns in the following table. What is the profit-maximizing level of production? What are the two ways to determine the profit-maximizing level of production?

b.maximizing firm profits.

CEOs should focus on Select one: a.getting the best pay package for the senior management team. b.maximizing firm profits. c.minimizing costs. d.beating their competitors.

b.a and b only

Consider the following pairs of items: a. shampoo and conditioner b. iPhones and earbuds c. a laptop computer and a desktop computer d. beef and pork e. air-travel and weed killer Which of the pairs listed will have a negative cross-price elasticity? Select one: a.c and d only b.a and b only c.a, b, and c only d.e only

When firms earn no economic profit but earn a normal profit, they earn precisely as much as they could have earned by investing their time and money elsewhere. In other words, each producer is able to earn sufficient accounting profits to cover the opportunity cost of invested factors (time and money) and to continue operating. The source of the confusion stems from the difference between accounting and economic profits.

If firms do not earn economic profits in a competitive equilibrium, why would the firms choose to stay in business?

c. downward-sloping.

If production displays economies of scale, the long-run average cost curve is Select one or more: a. below the long-run marginal cost curve. b. above the short-run average total cost curve. c. downward-sloping. d. upward sloping.

a.will decrease by 45 percent. ε_D=(% Change in Quanity Demanded)/(% Change in Price)=(%ΔQ_D)/(%ΔP) -------------(1) -3=QD/15% QD=(-3%)15% QD= -45%

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded Select one: a.will decrease by 45 percent. b.will decrease by 5 percent. c.will increase by 5 percent. d.will increase by 45 percent.

a.the demand for MP3 players would increase.

If the price of music downloads was to decrease, then Select one: a.the demand for MP3 players would increase. b.the demand for MP3 players would decrease. c.the quantity demanded of MP3 players would decrease. d.the supply of MP3 players would increase.

b.buyers of steel are more sensitive to a price change if they have more time to adjust to the price change.

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because Select one: a.buyers of steel are less sensitive to a price change if they have more time to adjust to the price change. b.buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. c.sales revenue in the building industry will fall sharply. d.profits will fall by a greater amount in the long run than in the short run.

c.negative, so Sefton considers potatoes to be an inferior good.

Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000.This year, his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes. All else constant,Sefton's income elasticity of demand for potatoes is Select one: a.positive, so Sefton considers potatoes to be an inferior good. b.negative so Sefton considers potatoes to be a normal good. c.negative, so Sefton considers potatoes to be an inferior good. d.positive, so Sefton considers potatoes to be a normal good and a necessity.

c.Blu-ray discs are normal goods and DVDs are inferior goods

Linesha, a college student working part-time receives a wage increase. An avid movie buff, she increased herpurchases of Blu-ray discs and reduced her purchases of DVDs. Based on this information Select one: a.the cross-price elasticity between DVDs and Blu-ray discs is negative. b.DVDs and Blu-ray discs are substitutes. c.Blu-ray discs are normal goods and DVDs are inferior goods. d.DVDs and Blu-ray discs are normal goods.

a.Practice

Managerial economics generally refers to the integration of economic theory with business Select one: a.Practice b.Ethics c.Management d.All of the above

a.how businesses can decide on the best use of scarce resources.

Managerial economics is best defined as the economic study of: Select one: a.how businesses can decide on the best use of scarce resources. b.how businesses can sell the most products. c.how businesses can operate at the lowest costs. d.how businesses can make the most profits.

c.helps managers make decisions in the face of scarcity.

Managerial economics: Select one: a.ensures managers always make good decisions. b.describes how pay for managers is set. c.helps managers make decisions in the face of scarcity. d.explains which products consumers will buy.

False

Over time, more experienced workers will demand higher wage and therefore, will lead to an increase in the cost of production for the producers. Select one: True False

C) is the practice of charging different prices to different customers when the price differences cannot be attributed to variations in cost.

Price discrimination A) is the practice of charging different prices to different customers based on a seller's personal preferences and prejudices. B) is the practice of charging different prices to different customers based on the different costs of supplying the product to different customers. C) is the practice of charging different prices to different customers when the price differences cannot be attributed to variations in cost. D) is the practice of giving preferential treatment to certain groups of customers based on their long-standing relationship to the producer.

b.it should increase its output to maximize profit MC goes down when units over 200 are produced (up to 500) and enough demand in the market exists to sell those units so output should be increased

Refer to Figure 12-1. If the firm is producing 200 units Select one: a.it breaks even. b.it should increase its output to maximize profit. c.it should cut back its output to maximize profit. d.it is making a loss.

a.it should cut back its output to maximize profit. Profit is maximized at 500 units therefore, output should be cut back.

Refer to Figure 12-1. If the firm is producing 700 units Select one: a.it should cut back its output to maximize profit. b.it is making a loss. c.it should increase its output to maximize profit. d.it is making a profit.

c.There is insufficient information to answer the question.

Refer to Figure 12-1. If the firm is producing 700 units, what is the amount of its profit or loss? Select one: a.profit equivalent to the area A b.loss of $280 c.There is insufficient information to answer the question. d.loss equivalent to the area A

c.it is not selling any output. Since the firm faces a fixed price for all of its good it is facing a horizontal demand curve, this means that the firm is a price taker (operating in perfect competetion), market price is $8 at which the profit maximisng output (P=MR=MC) is 500 units, if the firm charges a price of $12 then he is not selling any output as all of the consumers will be willing to purchase the good at a price of $8, as all of the firms in competitive market produce and sell homogenous product so the consumers substitute this sellers good by goods of other sellers and he is not selling any output

Refer to Figure 12-3. If the firm is charging a price of $12 per unit Select one: a.it is making a profit. b.it breaks even. c.it is not selling any output. d.it is selling 700 units.

a.it should maintain its output to maximize profit. 500 units is the sweet spot between the cost to produce the units and the amount of units that well sell, so output should be maintained

Refer to Figure 12-3. If the firm is producing 500 units Select one: a.it should maintain its output to maximize profit. b.it should increase its output to maximize profit. c.it is making a profit. d.it is making a loss.

There is insufficient information to answer the question.

Refer to Figure 12-3. If the firm is producing 500 units, what is the amount of its profit or loss? Select one: a.profit equivalent to the area A b.There is insufficient information to answer the question. c.profit of $280 d.loss equivalent to the area A

b.Yes, because it is covering part of its fixed cost.

Refer to Figure 12-4. If the market price is $30, should the firm represented in the diagram continue to stay in business? Select one: a.No, it should shut down because it is making a loss. b.Yes, because it is covering part of its fixed cost. c.Yes, because it is making a profit. d.No, it should shut down because it cannot cover its variable cost.

d (point at which MC = MR)

Refer to Figure 12-6. To maximize his profit, Jason should produce the rate of output indicated by point Select one or more: a. a b. b c. e d. d

c.D1 to D2.

Refer to Figure 3-1. An increase in population would be represented by a movement from Select one: a.D2 to D1. b.B to A. c.D1 to D2. d.A to B.

No. Although she does not incur a monetary cost for her garage space now, it is an opportunity cost and part of the economic cost of doing business. Sally could just as well rent her space out now, collect the rent and move closer to town

Sally quit her job as an auto mechanic earning $50,000 per year to start her own business. To save money she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10,000 per year. She also invested her $20,000 savings (which earned a market interest rate of 5% per year) in her business.

c.third-degree price discrimination

Selling tickets in the orchestra region of the Metropolitan Opera for $55 and selling tickets in the upper balcony for $28 to listen to Luciano Pavoratti describes which type of price discrimination? Select one: a.bundling b.This is not necessarily price discrimination c.third-degree price discrimination d.first-degree price discrimination

a.third degree price discrimination

Some electric utilities offer one rate to commercial users and a different rate to residential users. This is an exampleof: Select one: a.third degree price discrimination b.universal access pricing c.bundling d.peak load pricing

.True

Suppose a used-car salesman asks you the most you would be able to pay for a car and, unthinkingly, you answer truthfully, $4,800. Suppose, amazingly, that $4,800 is exactly the price for the car that you are presently examining. Then, the used-car salesman has effectively used perfect price discrimination on you. Select one: a.True b.False c.The validity of the statement cannot be determined based on the given information. d.The statement is neither true not false

b.strawberries and whipped cream are complements.

Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simone Select one: a.strawberries and whipped cream are normal goods. b.strawberries and whipped cream are complements. c.strawberries and whipped cream and substitutes. d.strawberries are a normal good and whipped cream is an inferior good.

b.inelastic because there are no good substitutes for gasoline.

The demand for gasoline in the short run is Select one: a.unit-elastic because people tend to consume a stable amount of gasoline per period. b.inelastic because there are no good substitutes for gasoline. c.perfectly inelastic because people have no choice but to buy gasoline d.elastic because people can easily switch to public transportation.

b. microeconomics

The form of economics most relevant to managerial decision-making within the firm is: Select one: a. welfare economics b. microeconomics c. macroeconomics d. free-enterprise economics

False

The law of diminishing marginal returns states that increases in the variable input reduce thetotal product. Select one: True False

d.2.5 percent

The price elasticity of demand for Stork ice cream is -4. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded? Select one: a.40 percent b.25 percent c.0.4 percent d.2.5 percent

The two effects that explain the Law of Demand are the income effect and the substitution effect. The income effect is the change in quantity demanded of a good that results from a change in purchasing power due to a change in the good's price. The substitution effect is the change in quantity demanded of a good that results from the effect of a change in the good's price making the good more or less expensive relative to other goods that are substitutes.

What are the two effects that explain the Law of Demand? Briefly explain each effect.

c.Your local Wal-Mart hires two more associates. Short run adjustments refers to those changes that are made temporarily by the firms or businesses based on the fluctuations in demands and price's as short run is a time period where all the costs are fixed and hence cannot be altered. For example: hiring more labour or removing worker's based on demand is a quick and a temporary adjustment made by the firms in short run. In the above question, Wal-Mart is hiring two more associates probably because of increased demand or to expand the business.

Which of the following is the best example of a short run adjustment? Select one: a.Toyota builds a new assembly plant in Texas. b.Smith University completed negotiations to acquire a large piece of land to build its new library. c.Your local Wal-Mart hires two more associates. d.A local bakery purchases another commercial oven as part of its capacity expansion.

c.Public utilities practice first-degree price discrimination.

Which of the statements about price discrimination is (are) false? Select one: a.It must be possible to segment the market. b.There must be differences in the elasticity of demand from one segment to another. c.Public utilities practice first-degree price discrimination. d.It must be difficult to transfer the seller's product from one market segment to another.

Managerial economics is relevant to nonprofit organizations and government agencies as well as conventional, for-profit businesses. Although the underlying objective may change based on the type of organization, all these organizational types exist for the purpose of creating goods or services for persons or other organizations.

Why can Managerial Economics be applied to any business decision making process, regardless of the industry?

Since the purpose of managerial economics is to apply economics for the improvement of managerial decisions in an organization, most of the subject material in managerial economics has a micro economic focus. However, since managers must consider the state of their environment in making decisions and the environment includes the overall economy, an understanding of how to interpret and forecast macroeconomic measures is useful in making managerial decisions.

Why is it useful to study Managerial Economics?

a.the price of the product. All the other options cause people to demand more at any price. Changes in all except A cause the demand curve to shift outwards or inwards depending on the nature of the change. A change in the price of the good itself will only lead to a movement up or down along the demand curve

change in all of the following variables will change the market demand for a product except Select one: a.the price of the product. b.tastes. c.income. d.population and demographics.