ECON FINAL 3125

The demand for a product is given by P=1,800-20Q. If the firm wishes to sell 70 units , each unit should be priced at :

$400 P= 1800-20(70)

When a perfectly competitive firm maximizes profits, it is :

-making a production decision -maximizing the difference between total revenue (TR) and total cost (TC) -finding the production level at which its marginal revenue equals its marginal cost above average variable costs ( AVC)

What is true of the t-statistic ?

It tells us how many standard errors that coefficient estimate is from the value of zero

Marginal Cost

The change in total cost that results from a 1-unit increase in production

Marginal Revenue

The change in total revenue that results from a 1-unit increase in the quantity sold

Assuming that marginal cost is $60, and the price elasticity is demand -3.5, what is the optimal price a seller should charge to maximize profit ?

84

If the price elasticity is 1.74 and the price of a good increases from $10 to $12, we would expect total revenue to:

Decrease- if the good is price elastic and its price goes up, total revenue decreases

Which of the following production functions displays decreasing returns to scale?

Q=cL^.2 K^.5

In general, if the price or cost of fixed factor of production increases,

marginal costs are unchanged

If a perfect competitor sells additional units, ____________, and if a monopolist sells additional units _______________

marginal revenue stay the same, marginal revenues fall

Total Revenue for the competitive firm is equal :

- P x Q - economic cost + economic profit - MR x Q

Marginal Revenue measures:

- The change in total revenue resulting from a 1 unit change in output -The difference between the revenue gained from increasing output by 1 unit and the revenue lost from the resulting lower price - The slope of the total revenue curve.

In a perfectly competitive market in the long run:

- firms are attempting to maximize profit - economic profits are zero - there are no better uses for the firms resources

A firm can sell as much output as it wishes at the fixed price, P=$10 per unit. Then,

Marginal revenue is constant and equal to $10

Assume that a firm is producing at its profit -maximizing levels level of output. A decrease in fixed cost implies that:

Neither marginal revenue (MR) nor Marginal cost will change

A demand function has been estimated to be Qx=550-5Px+1.5Py-2Y. Based on this information we can conclude that:

Product X us an inferior good & Product y ( py) is a substitute good

Assume the arc price elasticity of demand for movie tickets is 1.6. If the price per ticket increase from $7.5 to 8.5, then using mid point percent formula the number of tickets demanded will

decrease by 20 percent

A good that has highly elastic demand is most likely to:

have a large number of substitute

The fact that a perfectly competitive firms total revenue curve is an upward sloping straight line implies that

product price is constant at all levels

A response bias occurs when:

responses do not reflect the true preferences and attitudes of the respondent

Computing the F statistic allows one to :

test the overall statistical significance of the regression equation

A regression coefficient measures:

the change in the dependent variable due to a unit change in a particular independent variable

Dummy Variables

used to correct for seasonality in time series

law of diminishing returns states :

When one input is increased, with all the other imputs unchanged , the marginal product of the input will eventually decline

True in a competitive market

a firm will always produce where price equals MC, and where price equals ATC only in the long run