Economics Midterm 1-10
There is only one gas station within hundreds of miles. The owner finds that when she charges $3 a gallon, she sells 199 gal a day, and when she charges $2.99 a gal, she sells 200 a day. The marginal revenue of the 200th gallon of gas is
$1
in exhibit 4-11 the equilibrium price for bushel of wheat is
$2
Refer to exhibit 8-2. Using the rule that focuses on the marginal approach to maximizing profits, the monopolist maximizes profit by choosing price equal to
$20
suppose there are only three people in the economy: jane harry and bob - the individual demand for corn for each of these consumers is given in exhibit 3-1. the total quantity demanded of corn if the market price is $5 is
$25
As shown in exhibit 6-9 the total cost of producing 5 units is
$250
in exhibit 3-8 the equilibrium market price in this radio market would be
$50
Exhibit 6-1 shows the change in the production of Pizzas as more workers are hired. The marginal product of the fifth employee equals
1
Nikki decides to work 5 hours the night before her Econ exam. She earns and extra $75, but her exam score is 10 points lower than it would have been had she stayed home and studied. Her opportunity cost is the:
10 points she lost on her exam
In exhibit 6-5 the marginal product of the second worker is
12
Currently, union membership in the United States is about
15 %
Suppose that 1000 identical sellers each set their profit maximizing output level at 18 units when price equals $10. Then what is market quantity supplied at a price of $10
18,000
Suppose an economy is faced with the production possibilities table. The first unit of capital goods will cost the economy blank units of consumption goods
2
If the price of pepsicola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles, then according to the averaging equation the value of price elasticity of demand for pepsicola is
3
A firm can produce 10,000 bushels of wheat per year with 5 workers and 13,000 a year with 6 workers. Marginal product if the with worker is
3,000
Sam quits his job as an airline pilot and opens his own pilot training school. He was earning $40,000 as a pilot. He withdraws $10,000 from his savings where he was earning 6 percent interest and uses the money in his new business. He uses a building he owns as a hanger and could rent it out for $5,000 per year. He rents a computer for $1,200 buys office supplies for $500 rents an airplane for 6,000.. implicit cost equal to
39,000
A firm can produce 450 gallons of milk per day with 4 workers and 500 gallons per day with 5 workers. The marginal product of the fifth worker expressed in gallons per worker per day is
50
If the firm represented in exhibit 6-15 is operating with a plant whose size corresponds to the short run average total cost curve, A, the level of output that would minimize its short run average total cost
500 Units per week
If the value of the price elasticity of demand is .2 this means that
A 5 percent decrease in price causes a 1 percent increase in quantity demanded
Price discrimination requires
A firm to be able to segment its customers based on different price elasticities of demand
During the short run period of the production process, a firm will be
Able to vary some of its factors of production
Using exhibit 5-3 whose elasticity of demand is greatest when the price falls from $7 to $6
Albert
According to the data given in exhibit 2-3, the production of 1 unit of capital goods and 14 units of consumer goods:
All of the above
Scarcity is a problem:
Becuase human wants are unlimited while resorces are limited
When economists want to hold a number of factors constant, they are demonstrating which of the following expressions
Ceteris paribus
Suppose an oil cartel has an agreement to restrict members production in order to maintain a price of $30 over barrel. A single cartel member may want to cheat and exceed its quota so that it can
Earn a bigger profit
A picture frame company operates in a Monopolistic ally competitive market. It's short run equilibrium price is $80 and its ATC is $65. It sells 100 picture frames/ week . From this we can tell:
Economic profits are $1500
Which of the following is the best definition of economics?
Economics is the study of how society chooses to allocate its scarce resources
Using exhibit 5-3 in general, whose demand for orange juice is the most elastic
Edward
In exhibit 5-5 the change in total revenue resulting for a change in price from A to D indicates that the demand curve is
Elastic
(Graph) If the firm in exhibit 7-14 minimizes its loss at 200 units of output, marginal cost is
Equal to marginal revenue
(Graph) In exhibit 10-3, suppose that in the interest of boosting incomes of the working poor, Congress imposes a minimum wage of $6.00 per hour. This minimum wage creates a(n)
Excess supply of labor of food services
Of the following demographic groups, which has the lowest poverty rates in the US?
Families in which the "head of the household" has not attained at least a bachelor's degree from a college or university
The social security tax is called FICA, which stands for
Federal Insurance Contributions Act
Which firm in exhibit 6-16 displays a long run average cost curve with diseconomies beginning at 2,000 units of output per week
Firm A
Some economists argue that monopolistically competitive markets are inefficient because
Firms do not produce the output rate that would minimize their average total cost
The law of increasing opportunity costs caused the production possibilities curve to
Have a bowed-out shape
In a perfectly competitive industry, assume the short run average total cost increases as the output of the industry expands. In the long run, the industry supply curve will
Have a positive slope
Macroeconomics deals with the analysis of all following questions except
How does Microsoft price its software packages
Which of the following is an implication of the law of diminishing returns
In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost
In exhibit 5-7 if promoters raise their prices from $10 to $40 per ticket, then their total revenue will;
Increase
Microeconomics approaches the study of economics from the viewpoint of
Individual economic units, such as consumers, firms, and units of government
Consider a firm with the following cost and revenue information: ATC=$8, AVC=$7, and MC=MR=$6. If the firm produces Q=60 in the short run, it
Is making a mistake and should shut down
If a firm is operating at a loss in the short run and finds that its price is greater than average variable cost, then in the short run
It should produce where MR=MC
The amount of a good that is given up to produce another good is
Its opportunity cost
the principal that the opportunity cost increases as the production of one output expands along the production possibilities curve is the
Law of increasing opportunity costs
A monopoly firm can sell its fourth unit of output for a price of $250. In order to sell more than five units, it must expect to receive a price
Less than $250
A point inside the production possibilities curve is:
Less than full use of resources and technology
If product price increases, then
MRP will increase
A perfectly competitive firm sells its output for $100 per unit and marginal cost is $100 per unit. To maximize short run profit, the firm should
Maintain its current output
Economists believe that scarcity forces everyone to
Make choices
Economics is the study of how people
Make choices to produce and consume goods and services
If ABC Printing is producing an output level of 100, where MR is $5 and MC is $3, then the firm is
Making an unknown amount of profit or loss
Profit is maximized when which of the following conditions occurs?
Marginal revenue equals marginal cost
The profit maximizing, or loss minimizing quantity of output for any firm to produce exists at that output level in which
Marginal revenue equals marginal cost
Under both perfect condition and monopoly, a firm
Maximizes profit by seeking marginal cost equal to marginal revenue
Normal profit is defined as
Minimum necessary to keep a firm in operation
As shown in exhibit 6-3 the law of diminishing returns Applies where there are
More than 5 workers per day
In exhibit 2-13, point H is
Not achievable today bc of inadequate production capacity
The law of increasing costs holds that the opportunity cost
Of a good increases as more of the good is produced
Under perfect competition, a business firm can accept losses
Only in the short run
an entrepreneur is an
Organizer who seeks profitable opportunities and is willing to accept risks
Which of the following is a distinction between perfectly competitive and monopolistic competition?
Perfectly competitive firms confront a perfectly elastic demand curve, monopolistically competitive firms face a downward sloping demand curve
The supply curve of a price taker firm in the short run is the
Portion of the firms marginal cost curve that lies above average variable cost curve
If a decrease in the price of theater tickets increases the total revenue earned by the theater, this is evidence that demand is
Price elastic
The production possibilities curve depicts the various combinations of two goods that can be
Produced with a given technology
Elasticity measures how sensitive consumers are by measuring their change in __ as the price of the product changes
Quantity Demanded
Opportunity cost
Represents the best alternative sacrificed for chosen alternative
Diseconomies of scale exist over the range of output for which the long run average cost curve is
Rising
price discrimination occurs when
Sellers charge two separate prices for the same product to two different groups.
(Graph) In the long run, the demand curve for the monopolistic competitive firms shown in Exhibit 9-1:
Shifts leftward
For the economy shown in exhibit 2-7, which of the following is true when the economy is at point A
Some car production must be forgone in order to produce more grain in the same period
What happens to the MP of labor when the market price of the good produced increases?
Stays the same
Which of the following is true for a pure monopolist
The demands curve is above the marginal revenue curve
The Law of diminishing returns applies to which of the following segments of the marginal product of labor curve?
The downward sloping segment only
Is an economy is producing at full employment, it means that
The economy is producing along its production possibilities curve
Which of the following is an example of a positive economic statement
The economy's real output increased at about 3 percent last year and the unemployment rate decreased
Which of the following is true of a perf. Competitive firm?
The firm will not not earn an economic profit in the long run
Total fixed costs are costs that are fixed with respect to
The rate of output
Paul's plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm
The wages paid to the 12 employees
An example of price discrimination is the price charged for
Theatre tickets that offer lower prices for children
The production possibilities curve demonstrates the basic economic principle that
To produce more of any one thing, assuming full employment, the economy must produce less of something else
The sum of the explicit and implicit costs incurred in the production process is called
Total cost
(Graph) In exhibit 4, this firm is currently operating at its profit maximizing level of output. How much profit is the firm earning?
Unable to determine with this info
If a 5 percent decrease in the price of a good produces a 5 percent increase in the quantity demanded, the price elasticity of demand is
Unitary Elastic
If the percentage change in the quantity demanded of a good equals the percentage change in price, price elasticity of demand is
Unitary elastic
Exhibit 6-13 ATC is shown by the graph labeled
V
In exhibit 2-16, which of the following points on the production possibilities curve are efficient production points
abcd
The purpose of a cartel is to
act like a monopoly
Which of the following statements is true?
all of the above
each year around valentines day we would expect
all of the above
market failure can result from market outcomes that
all of the above
which of the following would decrease the price of packaged hot dogs
all of the above
Which of the following statements are false?
b and d
In an oligopoly industry, price
cannot be predicted exactly, because it is likely to lie between the competitive and monopoly prices
ceteris paribus which of the following would cause a decrease in demand for HD TVs
decrease in consumers' income
assuming that chicken and beef are substitutes a decrease in the price of beef, other things being equal, will
decrease the demand for chicken
a decrease in demand leads to a
decreased equilibrium price and a decreased equilibrium quantity
two goods x and y are complementary goods if the demand for x
decreases when the price of y increases
how would a decrease in consumer income affect the market for new automobiles
demand would decrease leading to a reduction price and a reduction in quantity sold
in exhibit 4-3 an increase in quantity supplied would cause a movement from which equilibrium point to another other things being equal
e1 to e4
If the percentage change in quantity demand it of a good is greater than the percentage change in price price elasticity of demand is
elastic
if you were a government official that wanted to raise the equilibrium price of milk which of the following actions would you take
encourage farmers to produce less milk
which of the graphs in exhibit 3-3 depicts the effect of an increase in income on the demand for DVDs (a normal good)
graph A
consider the market for chicken assuming that chicken and beef are substitutes an increase in the price of beef will
increase the demand for chicken creating a higher price and greater amount of chicken purchased in the market
assuming that dry cleaning is a normal good an increase in consumer income, other things being equal, will
increase the demand for dry cleaning
One source of economic growth is:
increasing capital
Suppose the president of a textbook publisher argues that a 10 percent increases in the price of a textbooks will raise total revenue for the publisher. It can be concluded that the company president thinks that demand for textbooks is
inelastic
A perfectly elastic demand curve has a price elasticity of demand coefficient of
infinity
which of the following changes could cause the computer market to change as shown in exhibit 4-5
lower costs for computer chips and mother boards
if market supply decreases and simultaneously market demand increases the new equilibrium will show
market price will increase and the quantity exchanged could increase decrease or remain the same
which of the following is the best example of a public good
national defense
Which of the following statements is correct?
none of the above
a demand curve for the steel porcupines concert tickets would show the
number of concert tickets that will be purchased at each price
Implicit costs are best thought of as
opportunity costs
Other things constant, the price elasticity of demand for a product will be smarter (more inelastic) if: people spend an insignificant share of their income on the product
people spend an insignificant share of their income on the product
A monopolist will maximize profits by
producing the output where marginal revenue equals marginal cost.
Another word for elasticity is
responsiveness
Marginal revenue product is defined as the extra
revenue earned by hiring one more unit of resource
if the cost of fertilizer rises then the price of corn will
rise
the development of new technology typically
shifts the supply curve to the right
when the price of a good is below its equilibrium level a
shortage puts upward pressure on the price
the use of a price system eliminates
shortages and surpluses
when the price of a good is above its equilibrium price a
surplus puts downward pressure on the price
The long run is a period of time
that is long enough to permit changes in all the firm's inputs, both fixed and variable
which of the following is true if the price of coffee increases
the demand for tea, a substitute good, will increase
externalities are unintended costs or benefits that are imposed on unsuspecting people and that result from
the economic activity of others
in exhibit 3-15 if the market price of good x is initially $1.50 a movement toward equilibrium requires
the price to fall below $1.50 the quantity supplied to fall and the quantity demanded to rise
if equilibrium is present in a market
the quantity demanded equals quantity supplied
how would a decrease in the price of the feed grains used to feed cattle affect the market for beef
the supply of beef would increase decreasing beef prices
