Economics Exam 1

In the market for a normal good, what is the ultimate market reaction of suppliers to an increase in the incomes of consumers? A. Quantity supplied increases as the equilibrium moves along the supply curve due to a rise in the demand. B. Suppliers do not react, because a change in income shifts the demand curve, not the supply curve. C. The supply curve shifts to the left. D. The supply curve shifts to the right.

A

Marginal product equals 0 when: A. total product reaches its maximum value. B. average product equals zero. C. average product reached its minimum value. D. total product equals average product.

A

Assume a factory that currently employs 25 workers and owns a factory with 10,000 square feet of floor space is considering doubling the size of its factory. Economists would classify this as: A. neither a short-run nor a long-run decision. B. a long-run decision. C. both a short-run and a long-run decision. D. a short-run decision.

B

Assume there is an improvement in the technology used to produce Blu-ray disc players. What could be expected to happen to the equilibrium price and quantity in the market for Blu-ray disc players? A. Equilibrium price and quantity would both increase. B. Equilibrium price would decrease and equilibrium quantity would increase. C. Equilibrium price would increase and equilibrium quantity would decrease. D. Equilibrium price and quantity would both decrease.

B

If the percentage change in quantity demanded is less than the percentage change in price, we would say that over this range, demand is: A. elastic. B. inelastic. C. perfectly elastic. D. unit elastic.

B

Data collected on a sample of individuals with different characteristics at a specific point in time are called: A. time series data. B. none of the above. C. panel data. D. cross-section data.

D

An implicit cost is defined as: A) the opportunity cost of using a resource that is not explicitly paid out by the firm. B) the amount by which the money spent on an input to production exceeds its opportunity cost. C) the difference between an input's explicit cost and its actual cost. D) the amount by which economic profit exceeds accounting profit.

A

As the price of milk increases, what happens at the original equilibrium in the market for cereal that signals market participants that the original equilibrium must change? (Milk and cereal are complements.) A. A surplus is created by a decrease in demand. B. A shortage is created by an increase in demand. C. A surplus is created by an increase in supply. D. A shortage is created by a decrease in supply.

A

Assume the auto market is initially in equilibrium with imports from Japan taking up a significant share of the market. Now assume a quota on imports of Japanese cars is established. What will occur at the initial equilibrium price to signal market participants regarding the change that has taken place? A. A shortage is created by a decrease in supply. B. A surplus is created by an increase in supply. C. A surplus is created by a decrease in demand. D. A shortage is created by an increase in demand.

A

Assume the demand for a good is price inelastic, i.e., ed < 1 (in absolute value). This means that if price decreases by 50 percent, quantity demanded will: A. increase by less than 50 percent. B. decrease by less than 50 percent. C. decrease by more than 50 percent. D. increase by more than 50 percent.

A

Fred is considering opening a ski shop in Colorado. Assume Fred will incur the following costs: building rent = $100,000/year, inventory = $250,000/year, energy = $50,000/year, and labor (one clerk) = $10,000/year. In addition, Fred's current income as a computer programmer is $40,000 per year. Assuming Fred would earn $460,000 in revenues, he could expect to earn: A. an economic profit of $10,000 per year. B. an accounting profit of $60,000 per year. C. an accounting profit of $10,000 per year. D. an economic profit of $50,000 per year.

A

If the cross-price elasticity of demand between two goods is positive, we can assume that the two goods in question are: A. substitutes. B. complements. C. totally unrelated to one another. D. inferior goods.

A

If the price of salmon increases relative to the price of cod, the demand for: A. cod will increase B. salmon will increase. C. salmon will decrease. D. cod will decrease.

A

The test statistic used to test the hypothesis of whether a regression coefficient is significantly different from zero, holding all other independent variables constant, is called a(n): A. multicollinearity test. B. t-test. C. F-test. D. autocorrelation test.

B

Which of the following is a plausible reason that restaurants offer "Senior Citizen Discounts"? A. Senior citizens tend to have relatively more inelastic demands for restaurant meals. than other consumer groups. B. Senior citizens tend to have relatively more elastic demands for restaurant meals than other consumer groups. C. Senior citizens are easily fooled by "come-ons" and are therefore frequently victims of price discrimination. D. Senior citizens are not very sensitive to changes in prices.

B

Which of the following is not considered to be a determinant of the price elasticity of demand for a particular good? A. The cost of the good relative to total income. B. The quantity of the good that is supplied to the market. C. The number of available substitutes. D. The time period under consideration.

B

Which of the following is true of the typical relationship between marginal product (MP) and average product (AP)? A. The AP curve intersects the MP curve at minimum MP B. The MP curve intersects the AP curve at maximum AP. C. If MP is greater than AP, then AP is falling. D. If MP is less than AP, then AP is increasing.

B

Which of the following statements is true of the relationship among the average cost functions? A. AFC = ATC + AVC B. AFC = ATC - AVC C. AVC = AFC + ATC D. ATC = AFC - AVC

B

"Demand" is best defined as the relationship between: A. The amount of income someone has and the price he willing to pay for a good B. The current price of a good and the quantity demanded at that price C. The price of a good and the quantity consumers are willing and able to buy at each price level D. The quantity supplied and the price people are willing to pay for a good

C

For a normal good, the income elasticity of demand is: A. always equal to 1. B. positive or negative depending on the share of income accounted for by the good. C. always positive. D. positive if income increases and negative when income declines.

C

For a particular product, a demand elasticity is a quantitative measure that shows: A. the absolute change in quantity demanded relative to the absolute change in any of the other variables included in the demand function for that product. B. the absolute change in quantity demanded relative to the percentage change in any of the other variables included in the demand function for that product. C. the percentage change in quantity demanded relative to the percentage change in any of the other variables included in the demand function for that product. D. the percentage change in quantity demanded relative to the absolute change in any of the other variables included in the demand function for that product.

C

Gross Domestic Product (GDP) is defined as the market value of: A. all intermediate goods produced during the year by domestic and foreign suppliers. B. all goods and services sold during the year by domestic and foreign producers. C. all final goods and services produced within the boundaries of an economy during the year by domestic and foreign-supplied resources. D. all final consumer goods produced during the year by domestic and foreign suppliers.

C

Regression analysis that analyzes the relationship between one dependent variable and several independent variables is called: A) simple regression analysis. B) correlation analysis. C) multiple regression analysis. D) cluster analysis.

C

The market structure that is characterized by a small number of large firms that have some market power is called: A. perfect competition. B. monopoly. C. oligopoly. D. monopolistic competition.

C

The price elasticity of demand is calculated as: A. the change in quantity demanded divided by the change in price. B. the change in price divided by the change in quantity demanded. C. the percentage change in quantity demanded divided by the percentage change in price. D. the percentage change in price divided by the percentage change in quantity demanded.

C

When demand is inelastic and price decreases: A. the effect of the increase in quantity demanded on total revenue dominates the effect of the decrease in price on total revenue; overall total revenue increases. B. the effects of the decrease in price on total revenue and the corresponding increase in quantity demanded on total revenue perfectly offset one another; overall total revenue remains unchanged. C. quantity demanded and total revenue fall to zero. D. the effect of the decrease in price on total revenue dominates the effect of the increase in quantity demanded on total revenue; overall total revenue declines.

D

A strong Japanese yen: A. had no meaningful impact on Japanese auto manufacturers. B. made Japanese exports more price competitive globally. C. induced Japanese auto manufacturers to increase their production of cars in Japan. D. induced Japanese auto manufacturers to shift their production of cars to the U.S.

D

In a multiple regression problem involving two independent variables, if b1 is computed to be +2.0, it means that: A. the estimated average value of Y is 2 when X1 equals zero. B. the estimated value of Y increases by an average of 2 units for each increase of 1 unit of X1, without regard to X2. C. the relationship between X1 and Y is significant. D. the estimated value of Y increases by an average of 2 units for each increase of 1 unit of X1, holding X2 constant.

D

The amount of output produced with an additional unit of variable input is referred to as: A. average fixed product. B. total product. C. average variable product. D. marginal product.

D

The assumed goal of the firms that operate in each of the four market structures discussed in the text is to maximize: A. price. B. sales. C. revenue. D. profits.

D

The term "fixed input" refers to: A. inputs to production that do not vary with respect to quality. B. inputs to production that yield a constant or "fixed" marginal product. C. inputs to production that do not vary in price. D. inputs to production, the quantity of which cannot be varied in the short run.

D

Which of the following approaches to understanding and predicting consumer behavior provides the most insight into how consumers can be expected to respond in an actual market setting? A. Expert opinion. B. Analysis of historical data. C. Conjoint analysis. D. Test marketing.

D

Which of the following is not a characteristic of a perfectly competitive market? A. Ease of entry into the market. B. Outputs of the firms are perfect substitutes for one another. C. Large number of firms in the industry. D. Limited information is available to all market participants.

D