EBC 101 / ECO 1 - Module 2

Hypothesis of eventual decrease in marginal product as units of the variable factors

"law of diminishing returns"

True or False - "Surpluses drive prices up, shortages drive them down."

False

True or False - A market supply curve is derived by horizontally summing the upward sloping portion of all firms marginal cost curves.

False

True or False - AVC = ATC + AFC

False

True or False - According to the law of supply and demand, an increase in demand causes ceteris paribus, equilibrium price and quantity to fall.

False

True or False - All cost curves assume the most technically efficient use of resources.

False

True or False - All firms experience economies and diseconomies of scale to the same/degree.

False

True or False - An increase in fixed costs will cause a firm to cut back on its output level.

False

True or False - If demand decreases and supply increases, equilibrium price will remain unchanged.

False

True or False - If the marginal product of labor per last penny spent is greater for workers than for machines, then the firm should employ more machines and fewer workers.

False

True or False - In the long run, fixed costs are zero.

False

True or False - Marginal cost at first rises, then falls.

False

True or False - Marginal cost equals the change in total cost multiplied by the change in output.

False

True or False - Marginal cost equals the change in total revenue divided by the change in output.

False

True or False - A firm is both a buyer and a seller but in different markets.

True

True or False - A foregone opportunity is an implicit cost.

True

True or False - At equilibrium, the quantity demanded is equal to the quantity supplied.

True

True or False - Diminishing returns permeate every facet of life.

True

True or False - Economists assume firms attempt to maximize profits or minimize losses.

True

True or False - Excess demand for a commodity is ordinarily eliminated through market forces by price rising, quantity demanded decreasing and quantity supplied increasing.

True

True or False - If MPL/PL= MPk/Pk then the firm is minimizing the cost of producing that output level.

True

True or False - If at some quantity the marginal benefits exceed the marginal costs of acquiring some product, then the rational consumer will purchase that quantity.

True

True or False - If goods X and Y are complementary goods, an increase in the price of X will, ceteris paribus, decrease the demand for Y.

True

True or False - If marginal product is rising, then marginal costs are rising.

True

True or False - Implicit costs may exceed explicit costs.

True

True or False - Marginal cost curve always interest the average variable cost and the average total cost curves at their minimum points.

True

True or False - Marginal cost measures the amount incurred by the producers when adding additional unit of a community in the production.

True

True or False - Sunk costs should be considered when making a current decision.

True

An improvement in production technology will result in: a. a lower equilibrium price and larger equilibrium quantity for a particular good. b. a lower equilibrium price and quantity for a particular good. c. a higher equilibrium price and quantity for a particular good. d. a higher equilibrium price and a smaller equilibrium quantity for a particular good.

a. a lower equilibrium price and larger equilibrium quantity for a particular good.

When, the price of Good X is cut in half, the amount purchased more than doubles. The demand for Good X: a. is elastic. b. is inelastic. c. is unitary (or unit) elastic. d. none of the above.

a. is elastic.

The fact that both the demand for farm products and the supply of farm products are relatively inelastic suggests that: a. small changes in the size of the harvest will generate large changes in prices and farm income. b. small changes in the size of the harvest will generate small changes in prices and farm income. c. large changes in the size of the harvest will generate small changes in prices and farm income. d. small changes in price will bring large changes in the quantity supplied and the quantity demanded.

a. small changes in the size of the harvest will generate large changes in prices and farm income.

If an increase in the price of A causes an increase in the demand for B, A and B are: a. substitutes b. complements c. normal goods d. inferior goods

a. substitutes

The supply curve slopes upward to the right because: a. the marginal opportunity cost of producing additional output eventually rises. b. the demand curve slopes downward and equilibrium requires that the supply and demand curve cross. c. once a cheaper production method is discovered, suppliers will adopt it in an effort to stay competitive. d. price and quantity supplied are inversely related.

a. the marginal opportunity cost of producing additional output eventually rises.

In economics, an inferior good is a good: a. whose demand decreases when income increases. b. that consumers do not decline. c. that is of low quality. d. all of the above.

a. whose demand decreases when income increases.

Economic production

an economic process where revenues, cost and profit can be measured

Which of the following will not cause the demand for product K to change: a. change in consumer tastes. b. change in the price of K. c. increase in consumer Y.

b. change in the price of K.

The law of supply suggests that: a. consumers will purchase more goods and services at low prices than at high prices. b. producers will supply a larger quantity of goods and services at high prices than they will at low prices. c. producers will supply a smaller quantity of goods and services at high prices than they will at low prices.

b. producers will supply a larger quantity of goods and services at high prices than they will at low prices.

If the price of K declines, the demand curve for the complementary a. remain unchanged b. shift to the right c. decreases

b. shift to the right

Which of the following will shift the supply curve for palay rice to the right (change in supply)? a. Increase in price of corn rice b. Decrease of subsidy/help from government on palay rice farms c. Increase in number of farmers planting palay rice d. Farmers used old/obsolete method in palay rice production

c. Increase in number of farmers planting palay rice

The price elasticity of demand is computed by: a. multiplying the price by the quantity purchased. b. dividing the price by the quantity demanded. c. dividing the percentage change in the amount purchased by the percentage change in the price of the good. d. averaging the effects of changes in the quantity demanded over an extended interval of time.

c. dividing the percentage change in the amount purchased by the percentage change in the price of the good.

The short-run coefficient of elasticity for gasoline is likely to be: a. greater than one. b. equal to one. c. less than one. d. none of the above.

c. less than one.

Total fixed cost

cost curve that is horizontal as output increases.

Variable costs

costs whose total changes with output

A price floor. a. is the minimum price that producers will accept to supply a good or service. b. sets the price below equilibrium, resulting in a market shortage. c. results from low-cost suppliers entering the market in an attempt to drive out high-cost producers. d. sets the price above equilibrium, resulting in a market surplus.

d. sets the price above equilibrium, resulting in a market surplus.

A supply schedule: a. is the time table that producers meet in supplying their customers b. is the daily quota that is required of workers who are paid under a "piecework" contract c. provides an estimates of costs for a project yet to be undertaken, thus providing a basis that allows a firm to bid on the project d. shows the various quantities of a good the firm is willing to supply at different prices.

d. shows the various quantities of a good the firm is willing to supply at different prices.

The income elasticity of demand defined as: a. the percentage change in quantity demanded resulting from a given percentage change in price. b. the percentage change in income divided by the percentage change in quantity demanded. c. a rightward shift of the demand curve resulting from an income. d. the percentage change in the amount purchased divided, by the percentage change in income.

d. the percentage change in the amount purchased divided, by the percentage change in income.

the disparity between quantities demanded and supplied at a price higher than equilibrium

excess supply

excess demand

greater quantity demanded than quantity supplied at a given price

ceteris paribus

holding all other variables constant

Period of time in which all inputs can be varied

long run

Increase in total cost when output increases by one unit

marginal cost

Complementary goods

negative cross elasticity of demand

Inferior goods

negative income elasticity of demand

Independent goods

no change in demand, the cross-elasticity is zero

Unit elasticity of demand

no change in revenue when price changes

Income elasticity of demand

percentage change in quantity divided by percentage change income.

Elastic demand

percentage decrease in price exceeds the percentage increase in quantity demanded

Inelastic demand

percentage decrease in price greater than percentage increase in quantity demanded

Very long run

period during which technology available to firm changes.

Short run

period of the time over which some inputs cannot be varied.

Level of output of which short-run average total

plant capacity

Substitute goods

positive cross elasticity of demand

amount actually bought and sold

quantity exchanged

desired sales

quantity supplied

relative price

ratio of two absolute prices

the fall in equilibrium price and quantity following an increase in supply

results of "law" of supply and demand

results of "Law" supply

rise in equilibrium price and quantity following an increase in demand

Production function

set of all technologically efficient

Average total cost, ATC

the ratio of total cost, TC and quantity, Q

True or False - Marginal product is maximized at the output at which marginal costs are maximized.

False

True or False - The law of diminishing returns explains why supply curves slope upward.

False

True or False - The market clearing price is achieved when the quantity demanded is greater than the quantity supplied.

False

True or False - When the price is below the equilibrium price, quantity supplied exceeds quantity demanded.

False

True or False - The equilibrium price is the price that clears the market, both excess demand and excess supply are zero in equilibrium.

True

True or False - The marginal product of any variable resource equals the change in total output divided by the change in the amount of that resource used.

True

True or False - The price of a product will be established where the supply decisions of producers and demand decisions of buyers are mutually consistent.

True

True or False - The shape of the marginal cost, average total cost, and average variable cost curves is determined by the law of diminishing returns.

True

An increase in the quantity supplied would be indicated by: a. a movement along the supply curve. b. a rightward shift of the supply curve. c. a leftward shift of the supply curve. d. a drop in the cost of production.

a. a movement along the supply curve.

Which of the following cannot be responsible for the shift in the supply curve? a. a reduction in the price of the good. b. a reduction in the cost of an input used in the production of the good. c. an increase in the number of business firms in the industry. d. an improvement in the technology of production.

a. a reduction in the price of the good.

If the number of suppliers of a particular good increased, this would result in: a. a rightward shift in the supply curve and a decrease in the equilibrium price. b. a rightward shift in the supply curve and an increase in the equilibrium price. c. a leftward shift in the supply curve and a decrease in the equilibrium price. d. a rightward shift in the supply curve and an increase in the equilibrium price.

a. a rightward shift in the supply curve and a decrease in the equilibrium price.

Shortage and surpluses can be prevented by: a. allowing the market to respond to the forces of supply and demand. b. allowing government to allocate the good to those who desire it most, regardless of their ability to pay. c. producers maintaining adequate supplies that allow them to adjust quickly to changing circumstances. d. none of the above.

a. allowing the market to respond to the forces of supply and demand.

The Law of Diminishing Return implies that as additional units of a variable input are combined with a fixed resource: a. at some point output begins to decline. b. total cost begins to rise. c. at some point the additions to output begin to decline. d. at some point average fixed cost begins to decline.

a. at some point output begins to decline.

The fact that the law of diminishing returns eventually causes output to increase at a diminishing rate suggests that: a. attempts to keep output growing at a constant rate will become increasingly costly to accomplish. b. business firms never produce as much output as they would like to produce. c. it is impossible to increase the level of output beyond the first few units. d. consumers value the last units of a product consumed less than they value the first units consumed.

a. attempts to keep output growing at a constant rate will become increasingly costly to accomplish.

The price elasticity of demand for a good is an attempt to measure: a. consumer response to a price change. b. the change in the amount purchased resulting from a change in consumer income. c. the change in the price of a good resulting from a change in the cost of production. d. the variability of price (for any good) over a period of one year.

a. consumer response to a price change.

Coke and Pepsi are substitute goods. This means that a reduction in the price of Coke would: a. increase the demand for Coke b. decrease the demand for Pepsi c. increase the demand for Pepsi, d. decrease the demand for Coke.

a. increase the demand for Coke

If diet soft drinks and non-diet soft drinks are substitutes for some people, then a large increase in the price of sugar should: a. increase the price of both the regular and the diet soft drinks. b. increase the price of regular soft drinks, but have no effect on the diet drinks. c. increase the price of regular soft drinks and reduce the price of diet soft drinks. d. increase the price of diet soft drinks, but have no effect on the regular soft drinks.

a. increase the price of both the regular and the diet soft drinks.

If the price of an item decreased by 5 percent, and this change resulted in a decrease in the quantity supplied of 3 percent, we would say that the elasticity of supply was: a. inelastic. b. elastic c. related to the coefficient of demand. d. more elastic in the short run than in the long run.

a. inelastic.

The total market demand curve: a. is derived from the horizontal summation of all the individual demands at a given price. b. is derived from the vertical summation of all the individual demands at a given price. c. is derived from the horizontal summation of all the individual demands at a given quantity. d. is unrelated to individual demand curves.

a. is derived from the horizontal summation of all the individual demands at a given price.

In general accounting costs represent: a. only explicit costs. b. only implicit costs. c. both explicit and implicit costs. d. both private and social costs.

a. only explicit costs.

Which of the following best illustrates an implicit cost of home ownership? a. paying your monthly mortgage payment by check rather than in cash. b. maintenance and repair costs that arise suddenly and unexpectedly. c. interest foregone on the down payment that you made when you purchased the house. d. property tax and insurance which pay in one lump sum annually.

a. paying your monthly mortgage payment by check rather than in cash.

If the demand for a good is highly inelastic, the imposition of an excise tax on that good: a. permits the seller to pass most of the cost increase resulting from the tax on the customer in the form of a higher price. b. the burden of the tax is shared about equally between buyer s who now pay a higher price and sellers who must now accept a smaller profit. c. causes the seller to bear most of the burden, since the demand does not permit much of an increase in price. d. will have none of the above effects.

a. permits the seller to pass most of the cost increase resulting from the tax on the customer in the form of a higher price.

The shape of the total product curve: a. reflects the fact that the last factors of production employed are not of the same quality as those factors employed first. b. is the result of the fact that in the long run the amount of all factors of production employed by the firm can be varied. c. reflects the eventually diminishing marginal returns to a variable factor of production when it is combined with a fixed factor of production. d. is the result of the fact that total fixed costs remain constant throughout the entire range of production.

a. reflects the fact that the last factors of production employed are not of the same quality as those factors employed first.

Average fixed costs: a. remain constant as the level of output increases. b. at first fall with rising output, but then, as diminishing return comes into play, they will rise with additional output levels. c. at first rise with rising output, but then as economies of scale come into play, they will fall with additional output. d. fall continuously as output is expanded.

a. remain constant as the level of output increases.

If A and B are substitute goods, an increase in the price of A will cause the demand curve for B to: a. shift to the right, resulting in an increase in the equilibrium price and a decrease in the equilibrium quantity. b. shift to the left, resulting in a decrease in the equilibrium quantity. c. shift to the left, resulting in an increase in the equilibrium quantity. d. shift to the right, resulting in an increase in the equilibrium price and an increase in the equilibrium quantity.

a. shift to the right, resulting in an increase in the equilibrium price and a decrease in the equilibrium quantity.

If the price of product L increase, the demand curve for close substitute product M will: a. shift to the right. b. shift to the left. c. shift downward toward the horizontal axis.

a. shift to the right.

The difference between average total cost and average fixed cost

average variable cost, AVC

Which of the following inputs can be considered a variable input for Mapagmahal Business Farm-Palay Mill? a. 3 hectares of palay farmland b. 5 additional seasonal farm workers c. 2 units of milling equipment d. 4 units of harvest tractors

b. 5 additional seasonal farm workers

If the demand curve for product B increase as the price of product A declines, it can be concluded that: a. A and B are substitute goods. b. A and B are complementary goods. c. Both A and B are inferior goods.

b. A and B are complementary goods.

Which of the following will cause the supply curve of luxury cars to the left (change in supply)? a. Increase in the number of sellers for luxury cars b. Decrease on prices (factor inputs) producing luxury cars c. Sellers expect that the price of luxury cars will increase next month d. Improved technology used in producing luxury cars

b. Decrease on prices (factor inputs) producing luxury cars

Which of the following will cause the demand curve for product A to shift to the left? a. an increase in the price of substitute product B. b. an increase in money income if A is an inferior good. c. a decrease in the price of complementary product C.

b. an increase in money income if A is an inferior good.

If A and B are complementary goods, a decrease in the price of A will result in: a. a decrease in the equilibrium price and quantity of B. b. an increase in the equilibrium price and quantity of B. c. a decrease in the equilibrium price and a decrease in the equilibrium quantity of B. d. an increase in the equilibrium price and a decrease in the equilibrium quantity of B.

b. an increase in the equilibrium price and quantity of B.

The relationship between cost curve and the average total cost curve is such that: the marginal cost curve is always above the average total. If the price of a resource requires in the production process should increase, then: a. the marginal cost curve would shift upward by the amount of the price increase. b. both the marginal cost curve and the average total cost curve would shift upward the amount of the price increase. c. the average total cost curve would shift upward by the amount of the price increase. d. neither the marginal nor the average total cost curve would be affected by a change in a resource price.

b. both the marginal cost curve and the average total cost curve would shift upward the amount of the price increase.

As the price of A rises, the demand for B falls. Goods A and B are: a. unrelated b. complements c. substitutes d. inferior

b. complements

The law of demand suggests that if the price of new Ford Mustangs increases, a. more Mustangs will be produced. b. fewer Mustangs will be sold. c. the price of Chevrolet Camaros will remain the same. d. none of the above.

b. fewer Mustangs will be sold.

Only the construction of a new office building is completed, the resources that went into its construction no longer have any alternative uses. Thus the monthly mortgage payment being made by the owner represents, from society's point of view, a sunk cost. However, from the owner's perspective, the monthly mortgage payment represents: a. part of his average variable costs of production. b. his total resource costs for producing a given level of output. c. a marginal cost that is necessary to retain possession of the office building. d. a sunk cost that he should ignore.

b. his total resource costs for producing a given level of output.

The law of demand states that the quantity demanded of any good is: a. directly related to its price. b. inversely related to its price. c. conversely related to its price. d. indirectly related to its price.

b. inversely related to its price.

Marginal cost is: a. directly related to the marginal product. b. inversely related to the marginal product. c. directly related to the total product. d. inversely related to the total product.

b. inversely related to the marginal product.

Equilibrium is a situation in which: a. there is enough of the good available for everyone to have an equal share. b. neither buyers nor sellers have any tendency to change their behavior. c. consumers' wishes are satisfied, although some producers may be dissatisfied with the outcome. d. producers earn maximum profits.

b. neither buyers nor sellers have any tendency to change their behavior.

Suppose that you own a small grocery store. You have been selling a particular brand of cola in 16-ounce bottles for P2.00 each. Your weekly revenue from this cola has been about P400. You now increase the price of this brand to P2.50, and your weekly income falls to P350. The demand for this brand of cola is: a. income elastic. b. price elastic. c. income inelastic. d. price inelastic.

b. price elastic.

Which of the following represents an example of a long-run adjustment for the owner of small hamburger stand? a. having to hire additional counter help to reduce the length of the lines that form each day at noon. b. reducing the size of her regular monthly order of ground beef from her supplier based on the decision to decrease the size of each hamburger. c. building an addition on the present structure to allow for expansion and the utilization of the most modern restaurant equipment. d. cutting her prices to match the price of the new hamburger chain located down the block.

b. reducing the size of her regular monthly order of ground beef from her supplier based on the decision to decrease the size of each hamburger.

Marginal cost is defined as: a. total cost is divided by quantity b. the change in total cost resulting from the production of one additional unit of output c. total variable cost divided by the number of units produced d. averaged fixed cost times the number of units produced

b. the change in total cost resulting from the production of one additional unit of output

If large change in the price of a particular good causes a relatively small change in the quantity a. the demand for that good (for the price change given) is said to be elastic. b. the demand for that good (for the price change given) is said to be inelastic. c. it will be difficult to make a profit from the good. d. we can conclude that consumers are not acting rationally, as defined by economics.

b. the demand for that good (for the price change given) is said to be inelastic.

At any price below the equilibrium price: a. the quantity supplied exceeds the quantity demanded. b. the quantity supplied is less than the quantity demanded. c. the quantity supplied is equal to the quantity demanded. d. additional suppliers will be attracted into the market.

b. the quantity supplied is less than the quantity demanded.

An increase in the price of a resource used in the production of good Y would cause: a. the demand curve for Y to shift to the left, resulting in a higher equilibrium price and a lower equilibrium quantity. b. the supply curve for Y to shift to the left, resulting in a higher equilibrium price and a lower equilibrium quantity. c. the supply curve for Y to shift to the right, resulting in a lower equilibrium price and quantity. d. the supply curve for y to shift to the left, resulting in a higher equilibrium price and quantity.

b. the supply curve for Y to shift to the left, resulting in a higher equilibrium price and a lower equilibrium quantity.

An effective price ceiling: a. will result in a surplus. b. will result in a shortage. c. results in prices that are above equilibrium. d. is the market response to the forces of supply and demand.

b. will result in a shortage.

Which of the following statements is correct? a. The decline in the price of X will increase the demand for substitute product Y. b. The increase in Y will reduce the demand for a normal good. c. The increase in the price of C will decrease the demand for complementary product D.

c. The increase in the price of C will decrease the demand for complementary product D.

Which of the following would cause a shift in the cost curve of a firm? a. a change in the market price of the firm's output. b. a change in the demand for the firm's output. c. a change in the technology employed by the firm. d. all of the above.

c. a change in the technology employed by the firm.

Which of the following will cause a decrease in the market demand for pork? a. an increase in the price of beef b. a decrease in the price of pork c. a decrease in the price of beef d. an increase in the price of pork

c. a decrease in the price of beef

If L and M are complementary goods, an increase in the price of L will result in: a. an increase in the price of M b. an increase in the sales of M c. a decrease in the sales of M

c. a decrease in the sales of M

Assume the demand schedule for C is downward-sloping. If the price of C falls from P2.00 to P 1.75: a. the demand of C will fall. b. the demand of C will rise. c. a large quantity of C will be demanded.

c. a large quantity of C will be demanded

Which of the following is not a property of the demand curve? a. a shift in the curve when one of the ceteris paburis variables change b. an inverse relationship between price and quantity c. a positive slope

c. a positive slope

When some variable other than price affects supply, it will be indicated by: a. a larger quantity being supplied. b. a movement along the supply curve. c. a shift in the supply curve. d. a smaller quantity being supplied.

c. a shift in the supply curve.

Market is best described as: a. a particular geographic location. b. a large grocery store. c. an area over which price tends towards equality. d. a stock exchange.

c. an area over which price tends towards equality.

As a business increases its level of production, which of the following cannot rise? a. marginal cost b. average total cost c. average fixed cost d. average variable cost

c. average fixed cost

A shortage: a. can be prevented by allowing the price to fall. b. results when the quantity demanded is less than the quantity supplied at the prevailing price. c. can only persist if price is prevented from performing its rationing function. d. illustrates that markets are unable to satisfy the needs of both suppliers and demanders.

c. can only persist if price is prevented from performing its rationing function.

If hot dogs and hot dog rolls are complementary goods, then an increase in the price of hot dog rolls would: a. cause the demand curve for hot dogs to shift to the right. b. cause consumers to slide down the demand curve for hot dogs and increase the quantity demanded. c. cause the demand curve for hot dogs to shift to the left. d. cause consumers to slide up the demand curve for hot dogs and decrease the quantity demanded.

c. cause the demand curve for hot dogs to shift to the left.

Phonographs and records are: a. independent goods. b. substitute goods. c. complement goods.

c. complement goods.

When the economist says that demand or a product has increased, he means that: a. demand curve has shifted to the left b. the product has become particularly scarce c. consumers are now willing to purchase more of this product at each possible price

c. consumers are now willing to purchase more of this product at each possible price

When the price of movie tickets increases from P3 to P4 the number of tickets sold decreases from 400 per week to 290 per week. The demand curve for movie tickets, over the price range given, is: a. inelastic. b. unit elastic. c. elastic. d. not able to be determined from the information given.

c. elastic.

What is the principal distinction between explicit costs and implicit costs? a. implicit costs must be paid immediately, but explicit costs need only be paid in the long run. b. there is no real difference between explicit and implicit costs. c. explicit costs are costs which must be paid for directly, while implicit costs usually represent foregone opportunities. d. implicit costs are usually larger than explicit costs.

c. explicit costs are costs which must be paid for directly, while implicit costs usually represent foregone opportunities.

Given the coefficient of elasticity of -0.4, if the price of all airline seats was reduced by 50 percent, then the sale of seats would be expected to: a. increase by 50 percent. b. decrease by 50 percent. c. increase by 200 percent. d. decrease by 25 percent.

c. increase by 200 percent.

The law of demand states that: a. price and quantity are directly related. b. the larger the number of buyers in a market, the lower will be the product price. c. price and quantity are inversely related.

c. price and quantity are inversely related.

A surplus will exist whenever: a. producers bring less to market than consumers wish to purchase. b. there are too many producers in the market. c. price is above equilibrium. d. the market price is prevented from rising to its equilibrium value.

c. price is above equilibrium.

If good X and good Y are substitutes, then an increase in the price of good Y will cause: a. the demand for good Y to fall b. the demand for good X to fall c. the price of good X to rise d. the quantity demanded of goods Y to increase.

c. the price of good X to rise

Before a new plant is built, the relevant cost to consider in designing the plant is: a. the short-run average total cost curve. b. the long-run average total 'cost curve. c. the short-run average variable cost curve. d. the long-run average fixed cost curve.

c. the short-run average variable cost curve.

If the price of IBM personal computers falls from P28,000 to P21,000 and, as a result, the number of personal computers purchased increases, then: a. an increase in demand has occurred. b. a leftward shift of the demand curve will result. c. there has been an increase in the quantity demanded. d. there has been a decrease in demand.

c. there has been an increase in the quantity demanded.

If X is an inferior good, an increase in consumer income will shift the demand curve for X: a. to the left and increase the equilibrium price. b. to the right and increase the equilibrium price. c. to the left and decrease the equilibrium price. d. to the right and decrease the equilibrium price.

c. to the left and decrease the equilibrium price.

In the short run, a firm will be able to: a. vary none of its factors of production b. vary all its factors of production. c. vary some of its factors of production d. none of the above

c. vary some of its factors of production

an increase in population

cause of a change in mind

Infinite elasticity of demand

change in quantity demanded from zero to an indefinitely large amount with small price change.

cause of a shift supply

change in technology

Marginal product

change in total product with an increase of one unit of a variable input

Which of the following most likely cause the demand for sugar to increase? a. a decrease in the price of NutraSweet, a substitute good. b. a decrease in consumer prices. c. a decrease in the price of sugar. d. a decrease if the price of coffee, a complementary good.

d. a decrease if the price of coffee, a complementary good.

In a market environment, prices serve as high quality summary bits of information. The information conveyed by a change in price: a. indicates the relative scarcity of the good or service in question b. acts as a signal to resource owners, telling them where their resources can be most profitably employed c. rations the good among all various claimant for that good d. all of the above

d. all of the above

Which of the following is assumed to be fixed when the cost curves of a firm are drawn? a. technology b. taxes c. resource prices d. all of the above

d. all of the above

Government may be able to regulate the effects of negative externalities by: a. restricting production. b. setting and enforcing standards of performance. c. taxing firms generating the externalities. d. all of the above.

d. all of the above.

Supply depends on: a. the cost of production. b. technology. c. the number of firms in the industry.. d. all of the above.

d. all of the above.

Which of the following will cause an increase in the demand for butter? a. a decrease in the price of butter b. an increase in the price of bread c. a decrease in the demand for jelly d. an increase in the price of margarine

d. an increase in the price of margarine

The elasticity of supply is measured by: a. multiplying the price by the quantity sold. b. dividing the supply into the demand. c. computing the ratio of price to quantity produced. d. dividing the percentage change in quantity supplied by the percentage change in price.

d. dividing the percentage change in quantity supplied by the percentage change in price.

Total fixed costs: a. represent the implicit costs to the firm b. will decline continuously as output is expanded c. represent the sum of all implicit and explicit cost of production d. do not vary with output

d. do not vary with output

Total production costs consist of: a. average costs plus variable costs. b. marginal costs plus sunk costs. c. variable costs minus fixed costs. d. explicit costs plus implicit costs.

d. explicit costs plus implicit costs.

As a result of a pay raise of 12 percent, Mr. Sheldon increases his expenditures on steak from P70 per week to P110 per week. Mr. Sheldon's demand for beef is: a. unresponsive to a change in income. b. price elastic. c. price inelastic. d. income elastic.

d. income elastic.

It is a production concept that refers to the cost incurred after adding additional unit of output. It is measured by the ratio of the difference between total cost and the difference between output. a. implicit cost b. Fixed cost c. Explicit cost d. marginal cost

d. marginal cost

A business firm will be earning an economic profit whenever: a. total revenue exceeds total explicit costs. b. price is less than average total costs but greater than marginal cost. c. the market price exceeds average variable cost. d. marginal cost intersects average total cost below the market price.

d. marginal cost intersects average total cost below the market price.

The price of a particular style of shoes increased by 20 percent. One month later, the number of pairs of this style of shoes purchased had fallen by 15 percent. The one-month demand curve for this style of shoe was: a. income elastic. b. price elastic. c. income inelastic. d. price inelastic.

d. price inelastic.

Which of the following variables cannot cause the supply curve to shift? a. a change in the cost of production. b. a technological improvement. c. the expectation of a future price increase d. the price of the good.

d. the price of the good.

Which of the following will not affect an individual's demand curve? a. a shortage b. expectations about future income c. tastes and preferences d. time

d. time

In economics, the long run is considered to be a period of a. at least six months. b. time greater than five years. c. time of sufficient length to require that implicit costs be taken into account in the production process. d. time of sufficient length to allow all factors of production to be varied.

d. time of sufficient length to allow all factors of production to be varied.

A business firm will be earning economic profile if its total revenue exceeds its: a. total fixed costs. b. total variable costs c. average variable costs. d. total costs, including a rate of return to the owner equal to his or her next best opportunity.

d. total costs, including a rate of return to the owner equal to his or her next best opportunity.

Cost curve that declines

variable factors as output

Factors whose quantities may be altered in the short run

variable factors as output

Goods in fixed supply

zero elasticity of supply