ECON 212 final

Which of the following represents the price elasticity of demand?

(change in Q / change in P) * (P / Q)

There are 10 consumers in the market, each with the demand curve Q = 100 - 0.5P. In a graph of the market demand curve, its slope (ΔP/ΔQ) would equal:

-0.20

(Figure; Price and Quantity VII) If this firm operates, it earns a profit of ------ but if shuts down, it earns a profit of -------

-9000; -5000

f the quantity of good A (QA) is plotted along the horizontal axis, the quantity of good B (QB) is plotted along the vertical axis, the price of good A is PA, the price of good B is PB and the consumer's income is I, then the slope of the consumer's budget constraint is:

-PA/PB.

Consider a good whose own price elasticity of demand is -0.5 and price elasticity of supply is 1.5. The fraction of a specific tax that will be passed through to consumers is:

0.75

The demand for books is: Qd = 120 - P The supply of books is: Qs = 5P What is the equilibrium quantity of books sold?

100

(Figure: Firm I) At the profit maximizing quantity, the firm's total cost is

150 (area of rectangle from ATC until x axis)

Figure: Production Function I) The average product at L = 2 and L = 8, respectively, are:

2 and 1.13

(Table: Short-run Production I) The short-run production situation for a firm is listed on this table. The marginal product of labor for the third unit of labor is

20

Refer to Figure 9.1.1 above. If the market is in equilibrium, the producer surplus earned by the seller of the 1st unit is:

20.00

(Figure: Firm I) At the profit maximizing quantity, the firm's total revenue is

200 (area of rectangle form D=MC down to x axis)

(Figure: Cost and Quantity per week I) At 6 units of output FC is and VC is

200; 250

(Figure: Price and Quantity III) If the market price is 6, this perfectly competitive firm will earn profits of

27 (area of rectangle from D=MC down to ATC)

(Figure Profit-Maximizing Output Level I) At the profit maximizing quantity, the slope of the total revenue curve is:

3 (rise over run at intersection)

Refer to Figure 9.1.1 above. If the government establishes a price ceiling of $20, the resulting deadweight loss will be:

300 (ceilings van abajo de equilibrium price then just take the area of the triangle)

(Level of Output I) The level of output where marginal revenue equals marginal cost is:

4

Use the following table to answer the question. At an output level of 4, the average variable cost is

50

Which of the following would cause an unambiguous decrease in the real price of DVD players?

A shift to the right in the supply curve for DVD players and a shift to the left in the demand curve for DVD players

The figure shows how supply and demand might shift in response to specific events. Suppose the technology used to produce cereal improves. Which panel BEST illustrates how this innovation will affect the market for milk, a complement in consumption of cereal?

An increase in Demand for Milk (panel a)

(Figure: Capital and Labor VI) Suppose a firm spends $4,000 per day producing a good. The wage rate per worker is $200 per day and rental rate per unit of capital is $500 per day. The firm's isocost line at the current expenditure level is represented by:

C3 intersections at y=8 and x=20

(Figure: Average Total Cost and Quantity of Output IV) ____ of scale occur between ____ units of output

Diseconomies; 5 and 9

(Figure: Revenue and Costs and Output I) Which of the following statements is (are) TRUE?

I AND II (not the marginal revenue one)

(Figure: Price and Quantity XII) Which of the following statements is (are) TRUE?

I, II, III and IV

The budget constraint for a consumer who only buys apples (A) and bananas (B) is PAA + PBB = I where consumer income is I, the price of apples is PA, and the price of bananas is PB. To plot this budget constraint in a figure with apples on the horizontal axis, we should use a budget line represented by the slope-intercept equation:

I/PB - (PA / PB)A

Which of the following statements is true?

II AND III If the marginal cost is rising the average total cost must be rising If marginal cost is less than average variable cost, the average variable cost curve is negatively sloped

Which of the following characteristics relate(s) to perfect competition

II and III

(Figure: Perfectly Competitive Firms I) The graph represents three perfectly competitive firms. Which of the following statements is (are) TRUE

II and III "same quantity of output" one no

(Figure: Market for Walnut I) The graph depict the perfectly competitive market for walnuts. Which of the following statements is (are) TRUE?

II and III ("perfectly elastic at 1" one is not true)

The demand for a product sold by Firm A is price elastic. If the market price for the product decreases, total revenue for firm A will:

Increase

Bill currently uses his entire budget to purchase 5 cans of Pepsi and 3 hamburgers per week. The price of Pepsi is $1 per can, the price of a hamburger is $2, Bill's marginal utility from Pepsi is 4, and his marginal utility from hamburgers is 6. Bill could increase his utility by:

Increasing Pepsi consumption and reducing hamburger consumption.

In an increasing-cost competitive industry, if price rises above its long-run equilibrium level, which of the following will occur as the industry adjusts to a new long-run equilibrium?

Input prices will rise

An individual only desires two goods (Food and Clothing). Units of food are on the horizontal axis and units of clothing are on the vertical axis. Which of the following equations identifies an optimal market basket for an interior solution?

MUf/Pf=MUc/Pc

Which of the price levels in the figure will result in a shortage?

P1

In Figure 10-3, the prices in the United States are a touch blurry. From top to bottom the prices are: P4, P3, P2, P1, P0. Comparing no trade between countries to the countries allowing free trade with each other, producer surplus changes by______ in the U.S.

P3ELP2.

In Figure 10-3, the prices in the United States are a touch blurry. From top to bottom the prices are: P4, P3, P2, P1, P0. With Free Trade consumer surplus in the U.S. is

P4KP2

Suppose the market for a good is composed of 1,000 identical consumers. The market's demand curve is given by QM = 150,000 - 25P. What is the equation for an individual consumer's demand curve?

Q = 150 - 0.025 (equation divided by 1000)

Which of the following statements is (are) TRUE assuming the firm is choosing the optimal bundle of inputs that minimizes the cost of producing a given quantity of output?

The marginal product per dollar spent on labor equals the marginal product per dollar spent on capital. (MPL/W) = (MPK/R)

Which factor will NOT cause an increase in the demand for cars?

a decrease in the price of cars

A tangency between an isocost line and an isoquant shows

a. the maximum output attainable to a firm at a given cost. b. the minimum cost necessary to produce a given output. c.an input combination where the ratio of marginal products equals the ratio of the input prices.

A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called:

an indifference curve

Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will:

become flatter.

Suppose a consumer must pay $P per visit to the local museum for each of the first 10 visits but only $P/2 per visit from the 11th visit on. With a composite consumption good on the y-axis and "Visits to the Museum" on the x-axis, the budget line

becomes flatter after 10 visits.

(Figure: Capital and Labor IX) The movement in the isocost line is caused by a(n):

decrease in the wage rate

Suppose that a firm is producing where 0 < MR < MC. If the firm produced one less unit of output, total revenue would ____ and total cost would ____.

decrease; decrease

A fixed cost:

does not change with the level of the firm's output

Increasing returns to scale implies

economies of scale, but not viceversa

The golden rule of cost minimization indicates that a firm should

employ inputs such that the marginal product per dollar spent is equal for all inputs.

In a perfectly competitive industry, the equilibrium price is $56 and the minimum average total cost of the industry's firms is $40. If this is a constant-cost industry, we can expect that in the long run, firms will _____ the market, shifting the industry's short-run supply curve _____.

enter; outward until the new equilibrium price is $40

The short-run supply curve for a competitive industry is

found by summing the supply curves of all the firms horizontally

The price of good A goes up. As a result, the demand for good B shifts to the left. From this we can infer that:

goods A and B are complements

The burden of a tax per unit of output will fall heavily on consumers when demand is relatively ________ and supply is relatively ________.

inelastic; elastic

The competitive firm maximizes its profit by operating where

marginal cost equals price, as long as P > AVC

The perfectly competitive firm maximizes profits by producing at the rate of output where

marginal revenue and marginal cost are equal

The marginal rate of technical substitution

measures the degree to which one input can be substituted for another, output held constant.

When the income-consumption curve is upward-sloping to the right, the good represented on the X-axis must be

normal good

Returns to scale refer to the way

output changes in response to a proportionate change in all inputs

(Figure; Perfectly Competitive Market I) In a perfectly competitive market with 5,000 firms the equilibrium price and quantity are 0.70 and 3.0 million. The demand curve facing a firm in this market is represented

panel c (horizontal line at 0.70)

(Figure: Total Cost and Quantity of Output III) The firms average total cost curve appears in which of the following panels

panel d (lowest ATC)

If two goods are substitutes, the cross-price elasticity of demand must be:

positive

The perfectly competitive firm minimizes losses by shutting down whenever

price is below the minimum point of the average variable cost curve

The policy shown in Figure 9.4.3 is a:

quota of 2000 (straight vertical line)

In the short run, if price falls, the perfectly competitive firm will respond by

reducing output along its marginal cost curve as long as marginal revenue exceeds average variable cost.

Refer to Figure 9.1.1 above. Suppose the market is currently in equilibrium. If the government establishes a price ceiling of $20, consumer surplus will:

remain the same (?)

The endpoints (horizontal and vertical intercepts) of the budget line:

represent the quantity of each good that could be purchased if all of the budget were allocated to that good.

The deadweight loss of a specific tax will be a small share of the tax revenue collected if:

supply and demand are both inelastic.

The battery packs used in electric and hybrid automobiles are one of the largest cost components for manufacturing these cars. As the price of these batteries decline, we expect that the:

supply curve for electric and hybrid autos will shift rightwar

Negatively-sloped, straight-line indifference curves imply

that the goods are perfect substitutes

Marginal utility measures:

the additional satisfaction from consuming one more unit of a good.

The demand curve of a perfectly competitive firm is determined by

the intersection of the market demand and supply curves.

An important determinant of market structure is

the level of output at which long-run average cost is at a minimum relative to market demand.

The slope of an indifference curve reveals:

the marginal rate of substitution of one good for another good.

Using the utility approach, the consumer is in equilibrium when

the marginal utility per dollar's worth of each good is equal.

The perfectly competitive firm's short-run supply curve is:

the portion of its marginal cost curve that lies above average variable cost

Along any downward-sloping straight-line demand curve:

the price elasticity varies, but the slope is constant.

With a composite good on the vertical axis, the slope of the budget line is

the price of the good on the horizontal axis.

A supply curve reveals:

the quantity of output that producers are willing to produce and sell at each possible market price

When a person consumes two goods (A and B) that person's utility is maximized when the budget is allocated such that:

the ratio of the marginal utility of A to the price of A equals the ratio of the marginal utility of B to the price of B.

The composite good is measured by

total spending on all other goods.

If a consumer prefers basket A to basket B and basket B to basket C, then the consumer also prefers A to C. This assumption is called:

transitivity.

Refer to Figure 2.4.1. At Point D, demand is: (Point D is in the middle)

unit elastic

A long-run competitive equilibrium is always characterized by

zero economic profits for firms in the industry.