ECON Exam 2

To produce 150 units of output, a firm must use 3 employee-hours. To produce 300 units of output, the firm must use 8 employee-hours. Apparently, the firm is:

experiencing diminishing returns.

For which of the following products is demand likely to be least elastic with respect to price?

food

An imperfectly competitive firm is one that:

has at least some ability to influence the market price

It takes many years to train to become an orthopedic surgeon. This suggests that, in the short run, a sudden increase in the demand for orthopedic surgeons will:

have little effect on the number of trained orthopedic surgeons.

One reason that variable factors of production tend to show diminishing returns in the short run is that:

there is only so much that can be produced using additional variable inputs when some factors of production are fixed.

Individual supply curves generally slope _______ because _________.

upward; of increasing opportunity costs

The long run is best defined as:

a period of time sufficiently long that all factors of production are variable

The table below describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. What is the total cost of making 6 calls an hour?

$65

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is measured as:

(P/Q) x (1/slope)

Refer to the figure below. What is the slope of the supply curve?

1/2

If your income elasticity of demand for hot dogs is negative, than:

Hot dogs are an inferior good for you

The price equals marginal cost rule for profit maximization is a specific example of which core principle?

The Cost-Benefit Principle

Which of the following statements is true for both Microsoft and a locally owned restaurant?

both seek to maximize profits.

marginal cost formula

change in total cost / change in quantity (output)

If cross-price elasticity of demand between blueberries and yogurt is negative, then the two goods are:

complements

Which of the following is NOT a characteristic of a perfectly competitive market?

each firm in the market sells a somewhat different variant of the good.

At the midpoint of a straight-line demand curve, the price elasticity of demand is:

equal to 1

If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be:

inelastic

In general, perfectly competitive firms maximize profit if they produce a level of output at which:

marginal cost equals price

If the demand curve for fitness training is vertical for people in show business, then the demand for fitness training is _________ with respect to price.

perfectly inelastic

The price elasticity if demand for a good measures the responsiveness of:

quantity demanded to a one percent change in price of that good.

If the demand for electricity is inelastic, then if the local utility wants to increase its total revenue, it should ______ its price.

raise

At a price of $20 each, the demand for t-shirts from a group's fundraising activity is unit elastic. Thus, the group's total revenue from selling t-shirts _______ at a price of $20 each.

reaches its maximum

Marginal cost is calculated as:

the change in total costs divided by the change in output.

Which of the following is the most likely to be a fixed factor of production at a farm?

the land on which the farm is located.

All else equal, the price elasticity of demand for small-budget items such as soap tends to be ______ than the price elasticity of demand for big ticket items such as flat-screen TVs.

the same

If percentage change in the price of a good is equal to the percentage change in the quantity demanded of that good, then demand for that good is:

unit elastic

Suppose that total expenditures for coffee reach a maximum at a price of $5 per pound. At this price, the demand for coffee is:

unit elastic

The table below describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. Given the information in the table above, what is the call center's marginal cost when it goes from making 6 to 16 calls an hour?

$2

If 20% increase in the price of a good leads to a 60% decrease in the quantity demanded, then what is the price elasticity of demand?

3

If a one percent increase in the price of oranges leads to a five percent increase in the quantity supplied, the price elasticity of supply for oranges is ______.

5 The price elasticity of supply at a point is the percentage change in quantity supplied divided by the percentage change in price.

If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demand will fall by:

5.5 percent

The table below describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. Average variable cost is minimized when output is approximately:

6 units

The inputs used to produce cupcakes (e.g. flour, sugar, butter, and labor) are also used to produce cookies, cakes, muffins, pies and many other goods. When price of cupcakes falls, producer can easily switch to production of cookies. This suggests that:

The elasticity of supply of cupcakes is relatively high.

The short run is best defined as:

a period of time sufficiently short that at least one factor of production is fixed.

Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is

inelastic

If a demand curve is horizontal at P = $5, then the price elasticity of demand is:

infinite

Demand tends to be _______ in the short run than in the long run.

less elastic

jeans in general have few close substitutes than any specific brand of jeans. therefore the demand for jeans in general will be _____ than the demand for a specific brand of jeans

less elastic

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. If they then still sell almost the same number of sodas per day, this suggests:

there are few other places to soda on campus