Econ part 1
The following graph is the production possibilities curve of a nation. The total opportunity cost of 9 drill presses is
3 units of bread.
Answer the question on the basis of the following production possibilities tables for two countries, North Cantina and South Cantina. Refer to the tables. Suppose that North Cantina is producing 2 units of capital goods and 17 units of consumer goods, while South Cantina is producing 2 units of capital goods and 21 units of consumer goods. We can conclude that
South Cantina is fully and efficiently using its resources, but North Cantina is not.
In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (8) might represent
automobile purchases by the state of Maine.
Which product is most likely to be the most price elastic?
automobiles
The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. Using technique A will result in an
economic profit of $3.
If the price-elasticity coefficient for a good is 1.75, the demand for that good is described as
elastic
Government borrowing
may crowd out private sector investment.
Refer to the provided figure. If box A represents households, D the resource market, and C businesses, then flow (8) would represent ___, while flow (7) would represent ___.
money income; resources
Refer to the diagram. A decrease in quantity demanded is depicted by a
move from point y to point x.
The opportunity cost of doing or getting something is defined as
the value of the best alternative that is given up in order to do or get something
Accounting profits equal total revenue minus
total explicit costs
In determining one's personal income tax, taxable income is
total income less deductions and exemptions.
When an excise tax or sales tax is imposed on a product, the sellers are always able to shift the burden of the tax on to the buyers. Group starts
true
Which of the following statements is correct?
Economic rent is a price paid for productive land resources whose supply is perfectly inelastic
Which expression is used to calculate the present value of an amount of money?
Future Value / (1 + interest rate)time
Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate. The loan amount is
1,600
Demand is said to be inelastic when
A reduction in price results in a decrease in total revenue
An effective price floor on wheat will
result in a surplus of wheat.
Market failures
result in overproduction or underproduction of a good.
Refer to the diagram. A decrease in supply is depicted by a
shift from S2 to S1.
Refer to the diagram. A price of $20 in this market will result in a
shortage of 100 units.
Refer to the provided table. The total fixed cost of production is
$10.
If the interest rate is 15 percent, what is the future value of $10,000 two years from now?
$13,225
The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp's implicit costs, including a normal profit, are
$136,000.
he following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp's explicit costs are
$150,000.
Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The economic profits of Harvey's firm in the first year were
$160,000.
Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were
$200,000 and its economic profits were $0.
If total fixed cost is $200, total variable cost is $600, and total product is 4 units, then average total cost must be
$200.
Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The accounting profit of Harvey's firm in the first year was
$220,000.
The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp's accounting profit is
$230,000.
Refer to the provided table. The marginal cost of producing the sixth unit of output is
$25.
The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp's total economic costs are
$286,000.
If the interest rate is 5 percent, what is the future value of $5,000 three years from now?
$5,788
The following cost data are for a firm in the short run. What is the firm's average variable cost at an output of 5 units?
$60
Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The implicit costs of Harvey's firm in the first year were
$60,000
Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The explicit costs of Harvey's firm in the first year were
$605,000.
Refer to the provided table. The total variable cost of producing 5 units of output is
$63.
Refer to the provided table. The average variable cost of producing 3 units of output is
$9.33.
If a firm produces 10 units of output, total costs are $1,030, and average fixed costs are $10, then total variable costs are
$930.
The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp's economic profit is
$94,000.
Blossom, Inc., sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume. Using the midpoint formula, the price elasticity of demand coefficient is
0.33 and inelastic.
If you pay $2,640 annually on a $22,000 loan A, and pay $1,800 on a $12,000 loan B, then the interest rates are
12 percent on loan A and 15 percent on loan B.
Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2, respectively, and that the consumer's income is $18. What quantities of X and Y should be purchased to maximize utility?
2 of X and 5 of Y
Refer to the data. The value for W is
20
The price elasticity of demand for widgets is 0.8. Assuming no change in the demand curve for widgets, an increase in sales of 16 percent implies a(n)
20 percent reduction in price.
Refer to the table. What is the marginal utility of the fourth unit?
44
The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three cans of Pepsi is 38 units of utility. The marginal utility of the third Pepsi is
8 units of utility.
What level of total utility will the utility-maximizing consumer realize?
96 utils
Suppose a firm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further that the firm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship at $9 per unit. Refer to the provided table. Which technique is the most economically efficient way of producing Zenia?
D
Which of the following definitions is correct?
Economic profit = accounting profit - implicit costs.
Which of the following statements about economic profits is not correct?
Economic profits are an explicit cost of production.
Refer to the graph. Using Qs for quantity supplied and P for price, which of the following equations correctly states the supply of this product?
P = 2 + 0.2QsCorrect
Which expression is used to calculate the future value of an amount of money?
Present Value × (1 + interest rate)timeCorrect
In which of the following instances will total revenue decline?
Price rises and demand is elastic.
Which of the following statements is correct?
Total utility is the accumulation or summation of marginal utility.
Which of the following is not one of the five fundamental questions that an economy must deal with?
Why should the goods and services be produced?
In a command system,
a government-appointed planning board makes production and allocation decisions.
The minimum rate of return or payment necessary to keep an entrepreneur in some specific enterprise is referred to as
a normal profit.
Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D2 and S2. If there are substantial external benefits associated with the production of Z, then
an output greater than G would result in a more efficient allocation of resources.
The price elasticity of demand coefficient measures
buyer responsiveness to price changes.
Which of the following is considered to be an economic resource?
capital
Marginal utility is the
change in total utility obtained by consuming one more unit of a good.
If the market price of a product increases, then the total
consumer surplus will decrease.
In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (2) might represent
corporate income tax payments.
Variable costs are
costs that change with the level of production
Diminishing marginal utility explains why
demand curves are downsloping.
Government purchases and transfer payments
differ because the former absorb resources while the latter do not.
Economic profits are calculated by subtracting
explicit and implicit costs from total revenue.
The short run is characterized by
fixed plant capacity
Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D1 and S1. If there are substantial external benefits associated with the production of Z, then
government can improve the allocation of resources by subsidizing consumers of Z
The main characteristics of a modern market system include all of the following except
government is restricted to national defense and does not intervene at all in various markets.
In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (1) might represent
government provision of highways for truck transportation
To say that land rent performs no incentive function means that
higher rental payments will not bring forth a larger quantity of land.
Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n)
increase in the wage rates paid to laborers employed in the production of X.
If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will
increase the quantity demanded by about 25 percent.
If the demand for product X is inelastic, a 4 percent decrease in the price of X will
increase the quantity of X demanded by less than 4 percent.
If the government imposes an excise tax on a good, it will collect the most tax revenues from it if the demand for the good is
inelastic
A state government wants to increase the taxes on cigarettes to increase tax revenue. Because cigarettes are addictive, we would expect its demand to be
inelastic. Thus, the government's cigarette-tax revenues would rise with a tax increase.
College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are
inferior goods.
The price paid for the use of money is called
interest
The utility of a good or service
is the satisfaction or pleasure one gets from consuming it.
Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. We can conclude that the government is correcting for
negative externalities in diagram (a) and positive externalities in diagram (b).
Most economists contend that
noncash gifts are less efficient than cash gifts.
Implicit costs are
opportunity costs of self-employed resources.
"Proprietor's income" refers to income received by
owners of small, unincorporated enterprises
Social Security contributions are part of
payroll taxes
The largest source of tax revenue for the U.S. federal government is
personal income taxes.
he three most important sources of federal tax revenue in order of descending importance are
personal income, payroll, and corporate income taxes.
You are the only seller of eggs in town, and the price-elasticity coefficient for eggs is known to be 0.8. If you want to increase your sales quantity by 10 percent through a price change, what should you do to the price?
reduce price by 12.5 percent
Other things the same, if a price change causes total revenue to change in the opposite direction, demand is
relatively elastic.
The demand for a luxury good whose purchase would exhaust a big portion of one's income is
relatively price elastic.
The demand for a necessity whose cost is a small portion of one's total income is
relatively price inelastic.
Refer to the diagram for athletic shoes. If the current output of shoes is Q1, then
society would consider additional units of shoes to be more valuable than alternative uses of those resources.
Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. The shift of the supply curve from S to S2 in diagram (b) might be caused by a per-unit
subsidy paid to the producers of this product.
Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. The shift of the supply curve from S to S1 in diagram (a) might be caused by a per-unit
tax on the producers of this product.
Economic profit affects
the allocation of resources and the level of resource use.
Allocative efficiency occurs only at that output where
the combined amounts of consumer surplus and producer surplus are maximized.
Producer surplus is the difference between
the minimum prices producers are willing to accept for a product and the higher equilibrium price.
The diamond-water paradox occurs because
the price of a product is related to its marginal utility, not its total utility.
Economic rent, or pure rent, is
the price paid for the use of land and other nonreproducible resources.
interest is the
the price paid for the use of money
Allocative efficiency refers to
the production of the product mix most wanted by society.
Normal profit is
the return to the entrepreneur when economic profits are zero.
The largest single share of all income earned by Americans consists of
wages and salaries.
The optimal allocation of resources is found
where MB = MC.
Refer to the diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost
will be 4 units of bicycles.
The linear equation for line (1) on the provided graph is
y = 8 + 0.5x.
