ECON Test 3

Vipsana's Gyros House sells gyros. 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

Who was the economist who first analyzed the advantages of specialization and the division of labor?

Adam Smith

Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

Linda has a comparative advantage in dog bathing

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioral economists reveal that sunk costs often affect economic decisions. Which of the following could explain this observation?

People measure the value of a good in terms of its purchase price

Refer to Figure 11-9. What is the combination of inputs that produces 200 gooseberry pies at the lowest cost?

combination f: 40 hours of labor and 24 units of capital

A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a

quota

The main purpose of most tariffs and quotas is to

reduce the foreign competition that domestic firms face

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

Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. Without the quota, the domestic price of peanuts equals the world price which is $2.00 per pound. What is the quantity of peanuts supplied by domestic producers in the absence of a quota?

10 million pounds

Which of the following is an example of positive technological change?

A firm's workers participate in a training program designed to increase the number of surf boards they can produce per day

Figure 9-1 shows the U.S. demand and supply for leather footwear. Refer to Figure 9-1. Suppose the government allows imports of leather footwear into the United States. What happens to the market price and what is the quantity of imports?

The price equals $18 and imports equals 10 units

Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. What is the area of domestic producer surplus without a quota?

C

Refer to Figure 10-5. A change in income is shown in

Panel B

Marginal cost is the

additional cost of producing an additional unit of output

Consumers have to make tradeoffs in deciding what to consume because

they are limited by a budget constraint

Which of the following is not a common mistake made by consumers?

being overly pessimistic about their future behavior

If total utility increases at a decreasing rate as a consumer consumes more coffee, then marginal utility must

decrease

Which of the following does not explain why consumers buy products that many other consumers are already buying?

differences in tastes and preferences

Economic costs of production differ from accounting costs in that

economic costs add the opportunity costs of a firm using its own resources while accounting costs do not

The average total cost of production

equals total cost of production divided by the level of output

Wall Street, in the borough of Manhattan in New York City, is the heart of the U.S. financial system, where banks, brokerage houses, other financial firms, and the New York Stock Exchange are all located. What is the reason for New York City's comparative advantage in the financial market?

external economies

Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other, similar products. These economists believe that

in practice, the gains from using a superior technology exceed the losses consumers incur from switching costs

Caterpillar's sales were severely affected by the decline in the U.S. housing market that began in 2006. Sales in the United States declined by ________ between 2006 and 2008, and export sales ________ during the same time period.

more than half; increased by enough to make 2008 a record sales year

In 2010, ________ of Caterpillar's sales were outside the United States.

more than two-thirds

Today, the United States charged an average tariff rate

of less than 2 percent

If a producer is not able to expand its plant capacity immediately, it is

operating in the short run

Assume that 1366 Technologies initially does not sell enough solar wafers to realize economies of scale. To reach economies of scale, 1366 Technologies must

produce and sell more wafers at a lower average total cost

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges, then Marlowe

should buy more apples and fewer oranges

The demand curve for corn is downward sloping. If the price of corn, an inferior good, falls,

the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded.

The ratio at which a country can trade its exports for imports from other countries is called

the terms of trade

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

the ultimatum game

The demand curve for a Giffen good is

upward-sloping

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit, and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased, she

wants to consume more ankle socks and fewer bandanas

Giffen goods

were not shown to actually exist until 2006