Mirco final
Which of the following is not a factor of production?
$1,000 in cash
If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.
$12 Variable cost is $(1000-700)=$300. Divide it by quantity]
The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?
$2.40 Total fixed cost divided by output, so, $120/50]
Suppose the value of the price elasticity of supply is 4. What does this mean?
A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent.
Which of the following would result in a higher absolute value of the price elasticity of demand for a product?
A wide variety of substitutes are available for the good.
Which of the following equations is correct?
AFC + AVC = ATC
What is the difference between an "increase in supply" and an "increase in quantity supplied"?
An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.
What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower bad levels of cholesterol?
D increases, S no change, P and Q increase
A decrease in population shifts the production possibility frontier outwards over time.
FALSE
A decrease in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point outside the frontier.
FALSE
Any output combination outside a production possibility frontier is associated with unused or underutilized resources.
FALSE
As output increases, the distance between average total cost and average variable cost increases.
FALSE
Average total cost is equal to average variable cost minus average fixed cost.
FALSE
Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1. Increasing ticket prices will increase the total revenue from ticket sales.
FALSE
Which of the following statements about a simple circular flow model is false?
Households are neither buyers nor sellers in the input market.
Which of the following is NOT a direct determinant of supply of corn?
People's Tastes
Which of the following is NOT a direct determinant of demand for ice-cream?
Price of milk
A surplus occurs when the actual selling price is above the market equilibrium price.
TRUE
If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now.
TRUE
If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price.
TRUE
The basis for trade is comparative advantage, not absolute advantage.
TRUE
The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.
TRUE
When there are few substitutes available for a good, demand tends to be relatively inelastic.
TRUE
In January, buyers of gold expect that the price of gold will rise in February. What happens in the gold market in January, holding all else constant?
The demand curve shifts to the right.
The production possibilities frontier model assumes which of the following?
The economy produces only two products.
Which of the following is evidence of a shortage of walnuts?
The quantity demanded of walnuts is greater than the quantity supplied.
In October, market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant?
The supply curve shifts to the right.
An increase in the quantity of a product supplied is caused by an increase in the price of the product.
True
Supply curve shifts to the left if any one of the determinants of supply (except its own price) falls.
True
A movement along the demand curve for toothpaste would be caused by
a change in the price of toothpaste.
Which of the following will shift the demand curve for a good?
a decrease in the price of a complementary good
Holding everything else constant, an increase in the price of MP3 players will result in
a decrease in the quantity of MP3 players demanded.
Which of the following items is likely to have the highest income elasticity of demand?
a vacation home in the Swiss Alps
Which of the following products comes closest to having a perfectly inelastic demand?
cholesterol medication in general
When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays
constant returns to scale.
Which of the following is a fixed cost?
contractual payment to hire a security worker
In order to prove that Motrin and Ibuprofen are substitutes, one should measure the ________ and get a ________.
cross-price elasticity; positive number
If tablet computers are considered substitutes for e-readers, the decline in the price of tablet computers would, all else equal
decrease the demand for e-readers.
If, when a firm doubles all its inputs, its average cost of production increases, then production displays
diseconomies of scale.
Marginal cost is calculated for a particular increase in output by
dividing the change in total cost by the change in output.
when production displays economies of scale, the long-run average cost curve is
downward-sloping.
An outward shift of a nation's production possibilities frontier represents
economic growth.
If an 8 percent decrease in the price of lobster leads to a 15 percent decrease in the quantity supplied of lobster, then the supply of lobster is
elastic.
The average total cost of production
equals total cost of production divided by the level of output.
The natural resources used in production are made available in the
factor market.
Average fixed costs of production
fall as long as output is increased.
If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0, and the good is ________ good.
greater; a normal
Suppose that when the price of hamburgers decreases, the Ruiz family increases their purchases of ketchup. To the Ruiz family,
hamburgers and ketchup are complements.
The demand curve for an individual seller's product in perfect competition is
horizontal.
Income elasticity measures
how a good's quantity demanded responds to change in buyers' incomes.
The Price Elasticity of Demand and Its Measurement
how responsive quantity demanded is to a change in price.
The production possibilities frontier model shows that
if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.
The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumer's purchasing power/real income.
income
A production possibilities frontier with a bowed outward shape indicates
increasing opportunity costs as more and more of one good is produced.
In a production possibilities frontier model, a point ________ the frontier is productively inefficient
inside
The price a perfectly competitive firm receives for its output
is determined by the interaction of all sellers and all buyers in the firm's market.
Opera Estate Girls' School is considering increasing its tuition to raise revenue. If the school believes that raising tuition will increase revenue
it is assuming that the demand for attending the school is inelastic.
The resource income earned by those who supply ________ is called wages.
labor
If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.
linear
The demand by all the consumers of a given good or service is the ________ for the good or service.
market demand
The production possibilities frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources.
maximum attainable
Long-run cost curves are U-shaped because
of economies and diseconomies of scale.
Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand?
pancakes and syrup
At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised her price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is
perfectly inelastic.
A change in which variable will directly change the market demand for a product?
population
Total revenue equals
price per unit times quantity sold.
Suppose a decrease in the supply of wheat results in an increase in revenue. This indicates that
the resulting increase in price is proportionately greater than decrease in quantity sold.
Average total cost is equal to
total cost divided by the level of output.
The points outside the production possibilities frontier are
unattainable.
If demand is perfectly inelastic, the absolute value of the price elasticity of demand is
zero.
A characteristic of the long run is
all inputs can be varied.
An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in
an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.
Vineyards can grow either red wine grapes or white wine grapes on their land. Which of the following would cause the supply of red wine grapes to decrease?
an increase in the price of white wine grapes
Which of the following is a factor of production?
an oven in a bakery
The law of demand implies, holding everything else constant, that
as the price of bagels increases, the quantity of bagels demanded will decrease.
The law of supply implies, holding everything else constant, that
as the price of bagels increases, the quantity of bagels supplied will increase.
Marginal cost is equal to the
change in total cost divided by the change in output.
The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's total variable cost per day when she produces 50 gyros using two workers?
$220 [Hint: total Variable cost is the cost of ingredients for making 50 Gyros plus cost of hiring 2 workers for that = $(2 time 50 + 60 times 2) = $220]
The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's total cost per day when she produces 50 gyros using two workers?
$340 [Hint: Total cost =total variable cost +total fixed cost. Total variable cost is $220 from above. Total fixed cost is $120. So add them up. ]
If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is
$700. [Hint: average variable cost = $50-$15=$35. So the total variable cost for 20 units is 20 times $35].
Suppose Tinsel Town Videos lowers the price of its movie club membership by 10 percent and as a result, CineArts Videos experienced a 16 percent decline in its movie club membership. What is the value of the cross-price elasticity between the two movie club memberships?
1.6
If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula
1.62
Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing an additional 15 neckties?
15 bow ties
Which of the following is the correct way to describe equilibrium in a market?
At equilibrium, quantity demanded equals quantity supplied.
Households ________ final goods and services in the ________ market.
purchase; product
If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until
quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.
The price elasticity of supply is usually a positive number because
quantity supplied increases in response to price increases.
If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is
relatively elastic.
Households
sell resources in the factor market.
Economic decline (negative growth) is represented on a production possibilities frontier model by the production possibility frontier
shifting inward.
Scarcity
stems from the incompatibility between limited resources and unlimited wants.
The smart phones introduced to compete with the iPhone would be considered
substitutes for the iPhone.
All of the following cost curves are U-shaped except one. Which curve is not U-shaped?
the average fixed cost curve
If the absolute value of the price elasticity of demand for aspirin equals 0.8 then
the demand for aspirin is inelastic.
If the price of automobiles was to increase, then
the demand for gasoline would decrease.
The principle of opportunity cost is that
the economic cost of using a factor of production is the alternative use of that factor that is given up.
Which of the following is a flow in the circular flow model?
the flow of revenue received by firms and the flow of payments to resource owners
The production function shows
the maximum output that can be produced from each possible quantity of inputs.
The price elasticity of demand is equal to
the percentage change in quantity demanded divided by the percentage change in price.
The attainable production points on a production possibility curve are
the points along and inside the production possibility frontier.
