econ test 1 3020

The total earnings of a worker are represented by E = 150 + $12(24 − L), where E is earnings and L is the number of hours of leisure. How much will the worker earn if he takes 16 hours of leisure per day?

$246

What is the horizontal intercept of the budget line, given that M = $1,000, PX = $50, and PY = $40?

20

Suppose that three consumers are in the market for good X. Consumer 1's (inverse) demand is PX = 40 − 5QX; Consumer 2's (inverse) demand is PX = 10 − QX; and Consumer 3's (inverse) demand is PX = 30 − 2QX. When PX = $5, the market will demand

24.5 units.

Suppose that three consumers are in the market for good X. Consumer 1's (inverse) demand is PX = 20 − QX; Consumer 2's (inverse) demand is PX = 60 − 2QX; and Consumer 3's (inverse) demand is PX = 40 − 3QX. When PX = $10, the market will demand for good X will be

45 units.

Which of the following is true?

An indifference curve represents combinations of consumption bundles that yield the same utility.

Suppose that Linda receives a fixed payment of $20 and consumes 14 hours of leisure. If her total earnings for the entire day is $100, we know her hourly wage rate must be (there are 24 hours in a day)

Answer- Linda's total earnings for the entire day = $ 100 Fixed payment = $ 20 Total working hours in a day = 10 hours ( Since 14 hours are of leisure ) So the variable Payment = $80 Therefore hourly wage rate for Linda is, 8

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and she can use 24 hours per day. What is the equation for the worker's opportunity set? (E is total earnings and L is leisure.)

E = 292 − 8L.

Suppose the income elasticity for transportation is 1.8. Which of the following is an incorrect statement?

Expenditures on transportation will fall less rapidly than income falls.

Which is the correct statement about the relationship between government and the market?

Government often plays a role in disciplining the market process.

Suppose that the price of good Y falls. How will this change the market rate of substitution between goods X and Y?

It increases.

If the price of good X increases, what will happen to the budget line?

It will become steeper.

Joe consumes 48 units of food and 12 units of clothing. If food is an inferior good,

Joe would strictly prefer receiving $10 in cash to receiving a $10 gift certificate at a clothing store.

Suppose a consumer has M = $200 to spend on two goods, X and Y. If the per-unit prices of X and Y are respectively given by PX = $2 and PY = $4, then utility maximization subject to a budget constraint can be found from which of the following Lagrangians?

Lagrangians = U(X,Y) + λ(200 − 2X − 4Y)

The horizontal intercept of the budget line is

M/PX.

Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 (completeness, more is better, diminishing marginal rate of substitution, and transitivity) are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good, and the price of good Y decreases. Then, which of the following effects is known with certainty?

The income and substitution effects will have competing effects, leading to an indeterminate impact on the consumption of good Y.

In general, what happens to the level of consumer surplus as the price of a good falls?

The level of consumer surplus increases as the price of a good falls.

Changes in the price of other goods lead to

a change in demand.

If you sell an inferior good, offering to sell gift certificates to those looking for a gift may result in

a greater quantity sold than if the customer resorts to giving a cash gift.

Which of the following measures of fit penalizes a researcher for estimating many coefficients with relatively little data?

adjusted R-square

Generally when calculating profits as total revenue minus total costs, accounting profits are larger than economic profits because economists take into account

both explicit and implicit costs.

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

complements.

What is/are the important things that must be developed when characterizing consumer behavior?

consumer preferences and consumer opportunities

The behavior of bidders in an auction is an example of

consumer-consumer rivalry.

Consider a two-good world, with commodities X and Y. If X is an inferior good, then an increase in consumer income cannot

decrease the demand for Y.

When the own price elasticity of good X is −3.5, total revenue can be increased by

decreasing the price.

If supply increases, then the

equilibrium price goes down.

The demand for which of the following commodities is likely to be most price inelastic?

food

Which of the following is an implicit cost to a firm that produces a good or service?

foregone profits of producing a different good or service

The manager can be 95 percent confident that the true value of the underlying parameters in a regression is not zero if the absolute value of the t-statistic is

greater than 2.

Demand is more inelastic in the short term because consumers

have no time to find available substitutes.

According to research, in-kind gifts are less preferred by gift-givers primarily because

in-kind gifts often create a dead weight loss as the recipient values it less

A price decrease causes a consumer's "real" income to

increase.

If the cross-price elasticity between goods X and Y is zero, we know the goods are

independent.

Maximizing the present value of all future profits is the same as maximizing current profits if the growth rate in profits is

less than the interest rate.

To maximize profits, a firm should continue to increase production of a good until

marginal revenue equals marginal cost.

To an economist, maximizing profit is

maximizing the value of the firm.

New firms have incentive to enter an industry when there is(are)

positive economic profits.

The primary inducement for new firms to enter an industry is

presence of economic profits.

Which of the following are signals to the owners of scarce resources about the best uses of those resources?

profits of businesses

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

relatively elastic.

If consumers expect future prices to be higher,

stockpiling will happen when the products are durable in nature.

If the cross-price elasticity between goods X and Y is positive, we know the goods are

substitutes.

The seller side of the market is known as the

supply side.

Which of the following is least likely to be a constraint facing a hair salon?

the ability to purchase new land

The substitution effect isolates the change in the consumption of a good caused by

the change in the relative prices of two goods.

When the price of corn was "low," consumers in the United States spent a total of $8 billion annually on its consumption. When the price halved, consumer expenditures actually decreased to $6 billion annually. This indicates that

the demand for corn is inelastic.

Other things being held constant, the lower the price of a good,

the greater the consumer surplus.

The higher the interest rate,

the smaller the present value of a future amount.

Which of the following is the main goal of a continuing company?

to maximize the value of the firm

Economic profits are

total revenue minus total opportunity cost.

When marginal revenue is zero, demand will be

unitary elastic.

The economic principle that producers are willing to produce more output when price is high is depicted by the

upward slope of the supply curve.

The opportunity cost of an action is the

value of the most highly valued alternative action given up.

A price elasticity of zero corresponds to a demand curve that is

vertical.