Micro Econ Quiz #2
George is an excellent plumber and Harriet is an excellent carpenter. George can do all of the plumbing and Harriet can do all of the carpentry to fix up seven houses per year. Each earns a wage of $60 per year. If George and Harriet work together and fix up seven old houses each year, their average cost is
$17,143
At the end of the year, a firm produced 20,000 laptop computers. Its total costs were $10 million, and its fixed costs were $5 million. What are the average variable costs (to the nearest dollar) of this firm?
$250
Fixing up old houses requires plumbing and carpentry. Jack (who is a jack of all trades but is a master of none) is a decent carpenter and a decent plumber, but is not particularly good at either. He can fix up two houses in a year if he does all of the carpentry and plumbing himself. His wage is $60 per year. Jack's average total cost of fixing up two old houses is
$30,000
Assuming free entry and exit of other firms, based on the ATC curve, the price in the long run will be
$8
If the market price were $10 per bag, this firm would produce
3 bags
The graph provided represents the daily supply and demand for games played on an electronic dart board machine at a family entertainment restaurant. Each game lasts 2 minutes (30 games per hour) and the restaurant is open 10 hours per day (300 games per day). According to the graph, if the actual price for each game is $0.20, there is an excess demand of ________ games per day.
600
How does a consumer's budget set differ from his budget constraint
A budget set refers to all of the possible bundles of goods and services a consumer can purchase, while a budget constraint is limited to the bundles he can purchase using all of his income.
What is meant by holding all else equal and how is the concept used when discussing movements along the demand curve?
All variables that can affect the demand for the good are held constant.
Due to changes in the governments foreign policy, there is a 15% increase in the prices of laptops imported from other countries while there is a 5% decrease in the prices similar, domestically produced laptops. Which of the following is NOT true about the consumer's choice?
Consumers will prefer the domestically produced laptops over the imported laptops.
What is the difference between accounting profit and economic profit?
Economic profit subtracts both explicit and implicit costs from total revenue, while accounting profit only subtracts explicit costs.
Under which of the following examples is it likely that the accounting profit is positive and the economic profit is negative?
If you opened an amusement park in the middle of New York City
Which of the following is NOT a characteristic of a market?
Markets are physical locations where trading occurs.
Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $ 140 and his marginal benefit from an additional slice of pizza is $ 40. If the price of a soft drink is $ 4 and the price of a slice of pizza is $ 5, is Charley maximizing his total benefits?
No, he should shift consumption toward soft drink and away from pizza to maximize total benefits.
Which of the following is true about how a firm in a competitive market decides what level of output to produce in order to maximize its profit?
Produce at the point where price is equal to the marginal cost
Which of the following is not a possible reason for a change in the demand curve of Zee decorative light fixture, from DD to DD'?
The change in the rate of sales tax.
Given the prices and budget, which of the following commodities would any rational consumer purchase?
The commodity that best suits the consumer's tastes and preferences and maximizes satisfaction.
when the ATC curve is increasing, we know that MC is
above the ATC curve
According to the graph, if the restaurant wanted to charge a competitive equilibrium price of $0.20 per game, it would need to
add two more machines to its arcade.
In Figure B, the change shown was cause by
an increase in the consumer's income
In Figure A, the change shown was cause by
an increase in the price of good Y
When the ATC curve is decreasing, we know that the MC curve is
below the ATC curve
Combinations of apples and loaves of bread that a consumer could purchase would represent a ___________ while a ____________ represents the amount of apples and bread that a consumer could choose using his or her entire budget.
budget set; budget constraint
The shift in income causes the budget constraint to increase ___ and the slope to __
by the same amount; remain the same
If widespread unemployment leads to a drop in incomes, then the demand for the Toyota Rav4 SUV would
decrease (shift left)
Everything else the same, as the price of the good increases, quantity demanded
decreases
A consumer's budget constraint refers to the collection of all possible bundles that
exactly exhaust a consumer's entire budget
a decrease in a consumers income causes her budget constraint to encompass
fewer bundles
For a consumer with a given level of income, the combinations of goods for the budget set will be ___ than for the budget constraint.
higher
which of the following criteria would most likely influence an optimizing buyer's purchasing decisions?
highest marginal benefit per dollar spent
For economists, the "buyers problem" refers to
how consumers arrive at a choice as to what to purchase.
The demand curve shows
how the quantity demanded responds to changes in the price of the good.
If the number of people over the age of 16 in the country increased significantly, then the demand for the Toyota Rav4 SUV would
increase (shift right)
Assume the law of demand is true. Also assume the information provided by the demand schedule is correct. However, make no other assumptions. Given this information, if the price of a book is $25, the quantity demanded of books will be ? the quantity of books demanded when the price is $10 per book.
less than
We make the assumption of holding all else equal when considering demand curves since we want to focus on the changes in the quantity demanded that result from changes in
only the price of a good
Excess Supply Occurs
only when the actual selling price is above the equilibrium price.
Excess Demand Occurs
only when the price is below the equilibrium price.
An increase in income shifts the budget constraint
outward
A budget constraint for t-shirts and movie tickets is shown in the graph. If the price of either the t-shirt or the movie ticket decreases, the budget constraint:
pivots outward and slope changes
when one of the five major factors changes, causing an increase in demand, the demand curve shifts
rightward
The new budget constraint has a different ? ? than the initial budget constraint
slope and position
This problem tells us that one of the sources of economies of scale is
specialization
In a competitive market, if economic profits exist, then:
the market supply curve will shift rightward and the price will decrease.
The budget constraint pivots outward when
the opportunity cost of any one good changes
Richa wants to purchase 6 fluorescent light bulbs at a price of $30 per bulb. When the price of fluorescent light bulbs rises to $36, she purchases 5 bulbs. Which of the following could be the reason for Richa's change in the quantity purchased?
the opportunity cost of fluorescent light bulbs increase
The budget constraint shifts outward when
the price of both goods decreases
which of the following is NOT one of the five major factors that shifts the demand curve when it changes?
the price of the good itself
Using your graph, the slope of the industry demand curve demonstrates __________.
the realistic assumption that the Law of Demand holds for the good under consideration.
If Jay's Fruit Stand is able to charge considerably higher prices than other fruit stands with the same produce, it is likely that
there are no fruit stands in close proximity to Jay's.
Is it possible for accounting profit to be positive and economic profit to be negative?
Yes, this could occur if explicit costs were modest and implicit costs were high.
