Exam 2 Review Set Questions

0.5

According to the diagram below, what is the income elasticity of demand for salmon?

-1.59 elastic 23.85% revenue declines

After Hurricane Maria, the price of coffee in Costa Rica rose from $2.30 to $4.00 per kilogram and quantity demanded decreased from 1000 to 400 kilograms. a) What is the price elasticity of demand for Costa Rican coffee? b) Is coffee elastic, inelastic, or unit elastic? c) Suppose the elasticity you found is constant. If the price of coffee were to increase another 15 percent, what would be the change in quantity demanded? d) What happens to total revenue of Costa Rican coffee farmers when the price of coffee rises?

A) Sales of Yoplait Yogurt would rise by 80 units

Assume that a retailer sells 500 Yoplait Yogurts per day at a price of $0.40 each. You, as an economic analyst, estimate that the cross-price elasticity between Yoplait Yogurt and Dannon Yogurt is 0.8. If the retailer raises the price of Dannon Yogurt from $0.50 to $0.60, how would sales of Yoplait Yogurt be affected? A) Sales of Yoplait Yogurt would rise by 80 units B) Sales of Yoplait Yogurt would rise by 40 units C) Sales of Yoplait Yogurt would not be affected at all D) None of the above.

B) $150/ton

Assume that the price of sorghum grain is $6.00 per bushel. When we apply 30 tons of fertilizer on our 20 acres of sorghum grain, the total yield is 1,000 bushels. When we apply 50 tons of fertilizer, the total yield is 1,500 bushels. What is the marginal value product per ton of fertilizer? A) $75/ton B) $150/ton C) $25/ton D) None of the above

Tina = 20 Gene = 30 Louise = -5

Bob Belcher is scheduling his children Tina, Gene, and Louise to work the shop. When he schedules just Tina, the shop produces 20 burgers in one day. If he also schedules Gene, they produce 50 burgers. However, if he also hires Louise, then the kitchen is too crowded and they can only produce 45 burgers. What is the marginal product of each of his kids?

1200 200, 1500, 1700

Fill in table 5

D

If college enrollments drop by 10% when textbook prices double; textbooks and enrollments are _____________ goods and their cross price elasticity is _____________. A) substitutes; 0.5 B) substitutes; 5 C) complements; -0.5 D) complements; -0.1

A) Lower the price of Ragu

If the own-price elasticity of demand is -1.25, in order for the manufacturer of Ragu to increase total revenue, at least in the short run, it would be advisable to A) Lower the price of Ragu B) Raise the price of Ragu C) Can't tell; insufficient information D) Do nothing

A Inferior

Kevin's income elasticity for canned sardines is -1.5. His current income is $40,000 per year and he buys 200 cans of sardines annually. If his income falls to $36,000 how many cans of sardines will he purchase? A) 230 B) 150 C) 170 D) 125 What type of good are canned sardines to Kevin?

B) rise by 20%

Own-price elasticity of demand for oranges at the farm level is -0.3. If an unexpected freeze reduces orange production by 6%, orange prices will A) fall by 20% B) rise by 20% C) rise by 6% D) can't tell; insufficient information

$50 $69 Yes, the average profit per box is $6 $3450

See Table 2 a) What are Sprungli's total fixed costs? b) When output is 50 boxes of chocolates, what is the average total cost? c) If output is 50 boxes and each box of chocolates sells for $75, is Sprungli profitable? If so, what is its profit per box of chocolates? d) What is the total cost of producing 50 boxes of chocolates?

C at least $1560 $10.40 per sushi roll

See Table 3 a) The average total cost of the fourth sushi roll is: i. 120 ii. 30 iii. 97.50 iv. 390 b) If Mr. Tuna's sells five sushi rolls each day of the month, how much revenue does he need in order to stay in business (that is, not shut down)? Assume there are 30 days in a month. c) Using your answer to question b, what is the minimum price that Mr. Tuna should charge for a sushi roll?

A

See table 3 d) Mr. Tuna's ATC cost curve shifted up, while his AVC and MC curves stayed the same. Which of the following could have led to this? i. the state of Maine put a tax on YETI coolers, which are imported from Texas ii. Mr. Tuna suffered a wrist injury and his sushi rolling productivity decreased iii. Mr. Tuna qualified for a frequent-buyer discount on YETI coolers iv. the state of Maine put a tax on sushi-grade fish, which Mr. Tuna imports from Japan

MVP; wage rate Approximately 30 units of labor Approximately 24 units of labor

See table 4 a) This firm would maximize its profits by employing labor to the point where _______________ equals __________________________________. b) What is the optimal amount of labor if the wage rate is $10? c) What is the optimal amount of labor if the wage rate is $20?

Fixed - refrigerators Variable - yogurt, waffle cones, cups, toppings, workers MPP: 60, 50, 40, 35, 30, 15 MVP: 222, 185, 148, 129.5, 111, 55.5

Spoons Yogurt uses yogurt, refrigerators, waffle cones, cups, toppings and workers to make and sell frozen yogurts for $3.70 each. a) which inputs are fixed and which are variable? b) Use the information in the table attached (Table 7) to draw Spoons' total physical product (TPP) curve. Be sure to label your graph.

C) 10% decrease

Suppose that a retailer sells 500 six-packs of Dr. Pepper per day at $3.50/six-pack. Also, suppose that the cross-price elasticity between Dr. Pepper and Pepsi is 0.6. If the retailer lowers the price of a six-pack of Pepsi from $4.00 to $3.60, what is the percentage change in the price of Pepsi? A) 10% increase B) 6% increase C) 10% decrease D) 6% decrease

B) A 4% increase in price leads to a 5% decrease in quantity demanded

Suppose that the own-price elasticity for Ragu spaghetti sauce is -1.25. Which of the following is (are) true? A) The demand for Ragu spaghetti sauce is unit-elastic B) A 4% increase in price leads to a 5% decrease in quantity demanded C) A 10% decrease in price leads to an 8% increase in quantity demanded D) None of the above

D) Both A and C

Suppose that the own-price elasticity for yogurt (any brand of yogurt) is -0.6. Which of the following statement(s) is (are) true? A) Raising the price of yogurt will increase producer revenue in the short-run. B) Lowering the price of yogurt will increase producer revenue in the short-run. C) Own-price elasticity of Dannon Yogurt (a specific brand of yogurt) is likely to be larger than -0.6 (in absolute value). D) Both A and C

See answer key 1200 tractors

The attached table (Table 6) lists information about John Deere's monthly production of farm equipment (specifically, tractors). John Deere's fixed cost is 5,000 per month and labor costs are 2000 per worker per month. a) complete the above table b) what level of output minimizes John Deere's average total cost?

A) The amount of extra output that is produced when one extra worker is added and other factors of production are held constant.

The marginal physical product of labor is A) The amount of extra output that is produced when one extra worker is added and other factors of production are held constant. B) The output which labor could produce without other factors of production. C) The additional revenue received by the firm by selling the output of one additional worker. D) The amount of extra output that is produced when one worker is added and other factors of production are increased proportionally.

average physical product

The number of bushels of corn produced per acre is an example of ______________________________________.

B) rise by 20%

The own-price elasticity for cherries at the farm level is -0.60. Because of the recent freeze in Washington, cherry production will fall by 12 percent. As a result, cherry prices are likely to A) fall by 20% B) rise by 20% C) remain the same D) can't tell; insufficient information

A) Own-price elasticity of gasoline is nearly -0.70

The price of gasoline rose over from $3.50 to $4.00, an increase of about 14.29 percent. Gasoline consumption over the same time period declined by 10 percent. From this, we can conclude that A) Own-price elasticity of gasoline is nearly -0.70 B) Own-price elasticity of gasoline is roughly -1.43 C) Own-price elasticity of gasoline is -1 D) Can't tell; insufficient information

True

True or False: an example of average physical product in agriculture is the yield or number of bushels of corn produced per acre.

D

When the price of a slice of pizza is $4, the quantity demanded of pizza is 60 slices and the quantity demanded of donuts is 100 units. When the price of a slice of pizza is $2, the quantity demanded of pizza is 80 slices and the quantity demanded of donuts is 70 units. What is the own-price elasticity of demand for pizza? A) not enough information provided B) -1/5 C) 2/3 D) -3/7

-1, complements

When the price of tea increases from $1.20 to $1.50 per box, the quantity of scones demanded changes from 10 to 8. a) calculate the cross-price elasticity of demand for scones. b) scones and tea are __________________________

B

Which is not a fixed cost? A) a monthly rent or $2,000 contractually specified in a one-year lease B) a worker's wage of $15 per hour C) an insurance premium of $100 per year, paid last month D) an attorney's retainer of $50,000 per year

C) If the cross-price elasticity of demand between two goods is negative, then the two goods are complements.

Which of the following is true? A) If the income elasticity of demand f is greater than 0, then the good is labeled as inferior. B) If the income elasticity of demand for a product is greater than 1, then the good is labeled a necessity. C) If the cross-price elasticity of demand between two goods is negative, then the two goods are complements. D) The law of diminishing marginal utility states that utility declines as more of a good is consumed.

B

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output is: A) 400 units B) 800 units C) 200 units D) 1,600 units

Marginal Physical Product (MPP)

_________________________________________ is the change in output the business would achieve in the current period by expanding the use of an input by another unit.

Average variable costs (AVC)

_________________________________________ is the variable cost incurred by the business in the current period, per unit of output.

law of diminishing marginal returns

_________________________________________ says that as successive units of a variable input are added to a production process, with other inputs held constant, the marginal physical product eventually decreases.

5, 14, 30, 44, 50, 54 5,9,16,14,6,4 After 3 units of labor Yes, because the marginal physical product is greatly diminished

a) Complete the table attached (table 1) by filling in columns 3 and 4. b) At what point (in terms of labor use) does the firm begin to observe diminishing marginal returns to labor? c) Would it be a mistake for the firm to hire the sixth worker? Why or why not?

-2.14 no, demand is elastic so the quantity bought will decline if price is raised

a) What is the price elasticity of demand for sourdough bread? b) Is raising the price a good idea? Why or why not?

35 111 decreases because there are less other inputs to work with

c) what is the marginal physical product of the fourth worker? d) what is the marginal value product of the fifth worker? e) does the marginal physical product of labor increase or decrease with more labor? Why?

5, because the 6th workers MVP is less than $100 Fewer, because the 5th workers MVP is less than $120

f) If each worker's salary is $100 per day, how many workers should Spoons hire? Why? g) If labor costs rose to $120 per day, would Spoons hire the same number, more, or fewer workers? Why?