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EC 201 FINAL

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A business firm's marginal cost is

(a) and (b) only.

Marginal cost is

(a) and (b) only.

Average total cost is equal to

(a) and (b).

Which of the following would be expected to shift the supply curve for hand sanitizer to the right?

(a) and (c) only.

Joe's Place sells fish tacos. In an attempt to increase the total revenue that it receives from selling fish tacos, Joe's increases the price of fish tacos. What does this imply about Joe's beliefs, regarding the own-price elasticity of demand for its fish tacos?

Demand is inelastic.

Buyers come to believe that the price of microwave ovens will decrease one week from today. What will this do to the market for microwave ovens this week?

Demand will decrease (i.e., the demand curve will shift to the left)

For Company A, when Q=0, total variable cost (TVC) is $zero. When Q=1, TVC=$2. When Q=2, TVC=$6. When Q=3, TVC=$12. What is the marginal cost of the third unit of output (i.e., the additional cost associated with increasing the quantity of output from Q=2 to Q=3)?

$ 6

This table includes Ronald's total utility from pad thai specials: Quantity Total Utility 0 $ 0 1 $ 10 2 $ 19 3 $ 27 4 $ 34 What is the marginal utility of the fourth pad thai special (i.e., the marginal utility of going from Q=3 to Q=4)?

$ 7

For Company B, total fixed cost is $12. When Q=0, total variable cost (TVC) is $zero. When Q=1, TVC=$2. When Q=2, TVC=$6. When Q=3, TVC=$12. When the quantity of output is 3 units, what is average total cost?

$ 8

Consumer surplus is

all of the above

The price of good A increases. As a results the demand for good B increases (i.e., the demand curve for good B shifts to the right). Based on this information, what can we say about good A and good B?

Good A and good B are substitutes.

The price of good A decreases. As a result, the demand for good B increases (i.e., the demand curve for good B shifts to the right). On the basis of this information, what can we say about good A and good B?

Good A is an input in the production of good B.

The income elasticity of demand for good B is 0.5. Based on this information, which of the following is true?

Good B is a normal good.

The income elasticity of demand for good B is 1.3. Based on this information, which of the following is true?

Good B is a normal good.

The cross-price elasticity of demand for good C and good D is -0.2. On the basis of this information, which of the following is true?

Good C and good D are complements.

The cross-price elasticity of demand for good C with respect to the price of good D is 1.0. On the basis of this information, which of the following is true?

Good C and good D are substitutes

A hurricane damages many farms that grow rice. We would say that this is a deterioration of the technology of producing rice. As a result, what will happen to the equilibrium price and equilibrium quantity of rice?

Price will increase; quantity will decrease.

Low-fat milk is an input in the production of skinny lattes. There is an increase in the price of low-fat milk. As a result, what will happen to the equilibrium price and equilibrium quantity of skinny lattes?

Price will increase; quantity will decrease.

Samantha has already decided to buy one pound of surbeks. Her marginal utility from consuming a second pound of surbeks is $3. The price of surbeks is $5 per pound. Based on this information, what can we say?

Samantha should not buy any more surbeks.

There is a decrease in consumer incomes. As a result of this decrease in consumer incomes, the demand curve for smart phones shifts to the left. In other words, there is a decrease in the demand for smart phones. On the basis of this information, what can we say about the market for smart phones?

Smart phones are a normal good.

Silk is an important input in the production of silk neckties. There is an increase in the price of silk. As a result of the increase in the price of silk, what happens in the market for silk neckties?

Supply will decrease (i.e., the supply curve will shift to the left).

A new technology makes it possible to produce more ballpoint pens, without using any more inputs. Due to this technological improvement, what will happen in the market for ballpoint pens?

Supply will increase (i.e, the supply curve will shift to the right).

Apples and bananas are substitutes. On the basis of this information, what can we say?

The cross-price elasticity of demand for apples with respect to the price of bananas is greater than zero.

Peanut butter and jelly are complements. On the basis of this information, what can we say?

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is less than zero.

Assume that apples and bananas are substitutes. There is an increase in the price of apples. As a result, what will happen in the market for bananas?

The demand curve for bananas will shift to the right (i.e., there will be an increase in the demand for bananas).

Assume that peanut butter and jelly are complements. The price of peanut butter decreases. As a result of the decrease in the price of peanut butter, what will happen in the market for jelly?

The demand for jelly will increase (i.e., the demand curve for jelly will shift to the right).

Assume that the demand curve for good E is a straight line. As we move upward and to the left along the demand curve, what happens to the own-price elasticity of demand?

The elasticity increases

The price of flibboos goes down from $4.50 to $3.50. As a result, the quantity demanded increases from 95 to 105. What is the own-price elasticity of demand?

0.4

The price of Good X decreases from $1.10 per unit to $0.90 per unit. As a result, the quantity demanded increases from 800 units per week to 1200 units per week. What is the own-price elasticity of demand for Good X?

2.0

This table includes Jason's total utility from tacos gigantes: Quantity Total Utility 0 $ 0 1 $ 5 2 $ 9 3 $12 4 $14 The price of a taco gigante is $3. How many tacos gigantes should Jason buy?

This table includes Ronald's total utility from pad thai specials: Quantity Total Utility 0 $ 0 1 $ 10 2 $ 19 3 $ 27 4 $ 34 The price of a pad thai special is $8. How many pad thai specials should Ronald buy?

Which of the following will lead to an increase in the demand for peanut butter (i.e., a rightward shift in the demand curve for peanut butter)?

A change in beliefs about he future price of peanut butter, so that buyers of peanut butter come to believe that the price will be much higher in the future than previously expected.

Which of the following will lead to an increase in the demand for ibuprofen (i.e., a rightward shift in the demand curve for ibuprofen)?

A decrease in the price of boxing gloves, which are a complement for ibuprofen.

Which of the following is true for BOTH the own-price elasticity of demand and the elasticity of supply?

All of the above.

Which of the following will lead to a decrease in the demand for print cartridges (i.e., a leftward shift in the demand curve for print cartridges)?

All of the above.

Angela has already decided to buy one pound of apples. Her marginal utility from consuming a second pound of apples is $3. The price of apples is $2 per pound. On the basis of this information, what can we say?

Angela should buy at least one more pound of apples, and maybe more.

If the marginal cost of the next unit is less than the average total cost of all previous units, what can be said about average total cost?

Average total cost will decrease

If the marginal cost of the next unit is greater than the average total cost of all previous units, what can be said about average total cost?

Average total cost will increase.

The demand curve for gwickdoops is given by P = 20 - Qd. Another way to write exactly the same demand curve for gwickdoops is Qd = 20 - P. Because of a leftward shift in the supply curve for gwickdoops, the price of a gwickdoop increases from $10 to $16. As a result of this increase in price, what happens to the consumer surplus of consumers of gwickdoops? (Hint: To solve this problem, you may find it useful to draw a diagram with a straight-line demand curve, and draw a price line at $10 and another price line at $16, and then calculate the areas of some triangles.)

Consumer surplus decreases by $42.

The price of good A increases. As a result of the price increase, there is a decrease in the total revenue received by sellers of good A. What does this imply about the own-price elasticity of demand for good A?

Demand is elastic

There is an increase in consumer incomes. Due to this increase in consumer incomes, the demand curve for motorcycles shifts to the right. In other words, there is an increase in the demand for motorcycles. Based on this information, what can we say about the market for motorcycles?

Motorcycles are a normal good.

The demand for good Y is inelastic. Due to a new technology, there is an increase in the supply of good Y (i.e., the supply curve shifts to the right). What will happen to the total revenues of sellers of good Y?

Total revenue will decrease

The own-price elasticity of demand for toothpicks is 0.6. The price of toothpicks falls by 10%. As a result, what will happen to the total revenue received by sellers of toothpicks?

Total revenue will decrease.

The demand for good Y is inelastic. Due to an earthquake, there is a decrease in the supply of good Y (i.e., the supply curve shifts to the left). What will happen to the total revenues of sellers of good Y?

Total revenue will increase.

As quantity increases, average fixed cost

decreases

In Lower Slobbovia, the government imposes a price floor in the market for zbisznys. The price floor is above the equilibrium price of zbisnys, and the law is enforced. As a result, the quantity that is actually bought and sold will decrease. The decrease in the quantity bought and sold will be larger if

the elasticity of demand is larger.

For Company X, total fixed cost is $20. When Q=0, total variable cost (TVC) is $zero. When Q=1, TVC=$4. When Q=2, TVC=$10. When Q=3, TVC=$19. When the quantity of output is 3 units, what is average total cost?

$13

For good A, the demand curve is given by Qd = 40 - P. The supply curve is given by Qs = P. When the market is at equilibrium, what is the value of consumer surplus? (Hint: To solve this problem, you will need to calculate the area of a triangle.)

$200

This table includes Jason's total utility from tacos gigantes: Quantity Total Utility 0 $ 0 1 $ 5 2 $ 9 3 $12 4 $14 What is the marginal utility of the second taco gigante (.e., the marginal utility of going from Q=1 to Q=2)?

For Company X, total fixed cost is $20. When Q=0, total variable cost (TVC) is $zero. When Q=1, TVC=$4. When Q=2, TVC=$10. When Q=3, TVC=$19. What is the marginal cost of the second unit of output (i.e., the additional cost associated with increasing the quantity of output from Q=1 to Q=2)?

In Lower Slobbovia, the equilibrium price of a zizwomp is $10. But then the government of Lower Slobbovia issues a law saying that it is illegal to buy or sell zizwomps for more than $5. The government of Lower Slobbovia is well known for its brutality, and it is generally believed that anyone caught violating the law will be shot. As a result of this price control, what will happen in the market for zizwomps in Lower Slobbovia?

(a) and (b).

There is a leftward shift in the demand curve for edible fruit arrangements (i.e., there is a decrease in demand for edible fruit arrangements). At the same time, there is a leftward shift in the supply curve for edible fruit arrangements (i.e., there is a decrease in the supply of edible fruit arrangements). As a result, what will happen to the equilibrium price and equilibrium quantity of edible fruit arrangements?

(i) Price could increase, decrease, or stay the same, so that we cannot determine the direction of change in price without more precise information; (ii) quantity will decrease.

The demand curve for kumquats shifts to the right (i.e., there is an increase in demand for kumquats). At the same time, the supply curve for kumquats shifts to the left (i.e., there is a decrease in the supply of kumquats). As a result, what will happen to the equilibrium price and equilibrium quantity of kumquats?

(i) Price will increase; (ii) quantity could increase, decrease, or stay the same, so that we cannot determine the direction of change in quantity without more precise information.

The price of Good X decreases from $1.10 per unit to $0.90 per unit. As a result, the quantity demanded increases from 900 units per week to 1100 units per week. What is the own-price elasticity of demand for Good X?

1.0

There is a decrease in the price of a pair of blue jeans. What effect would this have on the demand curve for blue jeans?

A movement downward and to the right along the existing demand curve, without any shift to a new demand curve. (In other words, an increase in quantity demanded.)

Buyers come to believe that the price of kumquats will increase one week from today. What will this do to the market for kumquats this week?

Demand will increase (i.e., the demand curve will shift to the right).

The own-price elasticity of demand for motor oil is 0.4. The quantity of motor oil demanded decreases by 8%. What must have happened to the price of motor oil, to lead to this decrease in quantity demanded?

Price increased by 20%.

Ezekiel's Bar and Grill sells onion rings. In an attempt to increase the total revenue that it receives from selling onion rings, Ezekiel's decreases the price of onion rings. What does this imply about Ezekiel's beliefs, regarding the own-price elasticity of demand for its onion rings?

Demand is elastic.

The price of tarfsnods increases by 20%. As a result of the price increase, the quantity of tarfsnods demanded falls by 20%. Which of the following is true?

Demand is unit elastic; total revenue will be unchanged.

Assume that lard is an inferior good. There is an increase in consumer incomes. Due to the increase in incomes, what will happen in the market for lard?

Demand will decrease (i.e., the demand curve will shift to the left.)

Assume that diamond earrings are a normal good. There is an increase in consumer incomes. As a result of the increase in incomes, what will happen in the market for diamond earrings?

Demand will increase (i.e., the demand curve will shift to the right).

The price for good X increases. As a result, the supply for Good Y decreases (i.e., the supply curve for good Y shifts to the left). Based on this information, what can we say about good X and good Y?)

Good X is an input in the production of good Y.

The price of good X increases. As a result, the supply for good Y decreases (i.e., the supply curve for good Y shifts to the left). On the basis of this information, what can we say about good X and good Y?

Good X is an input in the production of good Y.

The own-price elasticity of demand for asparagus is 1.2. The quantity of asparagus demanded decreases by 24%. What must have happened to the price of asparagus, to lead to this decrease in quantity demanded?

Price increased by 20%.

Assume that coffee and coffee creamer are complements. There is an increase in the price of coffee. As a result, what will happen to the equilibrium price and equilibrium quantity of coffee creamer?

Price will decrease; quantity will decrease

Assume that oranges and grapefruit are substitutes. There is a decrease in the price of oranges. As a result, what will happen to the equilibrium price and equilibrium quantity of grapefruit?

Price will decrease; quantity will decrease.

Assume that pink slime is an inferior good. There is an increase in the incomes of potential buyers of pink slime. As a result, what will happen to the equilibrium price and equilibrium quantity of pink slime?

Price will decrease; quantity will decrease.

Slytherin neckties are an inferior good. There is an increase in the incomes of people who are potential buyers of Slytherin neckties. As a result, what will happen to the equilibrium price and equilibrium quantity of Slytherin neckties?

Price will decrease; quantity will decrease.

The demand curve for gasoline shifts to the left (i.e., there is a decrease in the demand for gasoline). As a result what will happen to the equilibrium price and equilibrium quantity of gasoline?

Price will decrease; quantity will decrease.

The demand curve for soccer balls shifts to the left (i.e., there is a decrease in the demand for soccer balls). As a result, what will happen to the equilibrium price and equilibrium quantity of soccer balls?

Price will decrease; quantity will decrease.

There is an increase in the number of sellers of corn. As a result, what will happen to the equilibrium price and equilibrium quantity of corn?

Price will decrease; quantity will increase

A new technology makes it possible to produce more flash drives, without using any additional resources. As a result, what will happen to the equilibrium price and equilibrium quantity of flash drives?

Price will decrease; quantity will increase.

Hops is an input in the production of beer. There is a decrease in the price of hops. As a result, what will happen to the equilibrium price and quantity of beer?

Price will decrease; quantity will increase.

There is a rightward shift in the supply curve for printer paper (i.e., there is an increase in the supply of printer paper). As a result, what will happen to the equilibrium price and equilibrium quantity of printer paper?

Price will decrease; quantity will increase.

Titanium is an input in the production of dental implants. There is a decrease in the price of titanium. As a result, what will happen to the equilibrium price and equilibrium quantity of dental implants?

Price will decrease; quantity will increase.

There is a leftward shift in the supply curve for zlatkos (i.e., there is a decrease in the supply of zlatkos). As a result, what will happen to the equilibrium price and equilibrium quantity of zlatkos?

Price will increase; quantity will decrease

There is a decrease in the number of sellers of bib overalls. As a result, what will happen to the equilibrium price and equilibrium quantity of bib overalls?

Price will increase; quantity will decrease.

There is a leftward shift in the supply curve for swimsuits (i.e., there is a decrease in the supply of swimsuits). As a result, what will happen to the equilibrium price and equilibrium quantity of swimsuits?

Price will increase; quantity will decrease.

Assume that hot dogs and mustard are complements. There is a decrease in the price of mustard. As a result, what will happen to the equilibrium price and equilibrium quantity of hot dogs?