test 2

The long run is best defined as:

a period of time sufficiently long that all factors of production are variable

If the cross-price elasticity of demand between blueberries and yogurt is negative, then the two goods are:

complements

According to the law of demand, when the price of shoes ______ people will consume ______ shoes.

falls, more

At a price of $20 each, the demand for t-shirts from a group's fundraising activity is unit elastic. Thus, the group's total revenue from selling t-shirts ______ at a price of $20 each.

reaches its maximum

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. When the firm uses 9 employee-hours, its total labor cost each day is:

$126

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. When the firm uses 9 employee-hours, its total cost each day is:

$176

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. This firm's fixed cost each day is:

$50

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:

(P/Q) × (1/slope)

A 3.5 percent increase in the price of milk causes a 7 percent reduction in the quantity demanded of chocolate syrup. What is the cross-price elasticity of demand for chocolate syrup with respect to the price of milk? Are the two goods complements or substitutes?

-2 complements

If the absolute value of slope of the demand curve is 2.5, price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is:

0, 3

When the price of hot dogs is $1.50 each, 500 hot dogs are sold every day. After the price falls to $1.35 each, 510 hot dogs are sold every day. At the original price, what is the price elasticity of demand for hot dogs?

0.2

Suppose an increase in the price of golf clubs from $75 to $125 leads to an increase in quantity supplied from 200 units to 300 units. The price elasticity of supply for golf clubs at the original price of $75 is ______, so supply is ______.

3/4; inelastic

If the absolute value of the price elasticity of demand for tickets to a football game is 2, then if the price increases by 1%, quantity demanded decreases by:

2%

In which of the following markets do firms sell the same standardized product?

2% milk

In which of the following markets do firms sell the same standardized product? four-door cars 2% milk Desktop computers Sandwiches

2% milk

If 20% increase in the price of a good leads to a 60% decrease in the quantity demanded, then what is the price elasticity of demand?

3

If the price elasticity of demand for pineapples is 0.75, then a 4% increase in the price of pineapples will lead to a:

3% decrease in the quantity of pineapples demanded.

Suppose an increase in the price of golf clubs from $75 to $125 leads to an increase in quantity supplied from 200 units to 300 units. The price elasticity of supply for golf clubs at the original price of $75 is ______, so supply is ______.

3/4. inelastic

Joe is shopping for a new computer. A computer can be delivered to Joe's home for $1,200. Alternatively, Joe can pick up the same computer at the warehouse for $1,000. How should Joe buy the computer?

Joe should drive to the warehouse if his cost of driving to the warehouse is less than $200.

Which of the following is likely to have the highest price elasticity of demand? -shoes -running shoes -Nike running shoes

Nike running shoes

what are three points of the demand curve like in terms of elastic, inelastic, unit elastic?

The demand is elastic at the upper end of the demand curve. The demand is unit elastic in the middle of the curve. The elasticity is relatively inelastic at the lower end of the curve.

Which of the following is the most likely to be a variable factor of production at a university? -The number of librarians. -The size of the football stadium. -The size of the student union. -The location of the university.

The number of librarians.

Which of the following is the most likely to be a fixed factor of production at a pizza restaurant?

The size of the seating area.

As one moves down along a linear demand curve (i.e., from high price, low quantity pairs to low price, high quantity pairs), demand:

becomes less elastic

As one moves down along a linear demand curve (i.e., from high price, low quantity pairs to low price, high quantity pairs), demand:

becomes less elastic.

Which of the following would be considered a factor of production in the provision of bus service?

bus drivers

If two products are substitutes, then the:

cross-price elasticity of demand between them will be positive.

Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. The lemonade market in Jenny's neighborhood is more likely to be perfectly competitive if:

each lemonade stand sells the same kind of lemonade.

If the absolute value of the slope of the demand curve is 0.25, price is $8 per unit, and quantity demanded is 12 units, then demand for this good is:

elastic

If the price elasticity of demand for a good is greater than one, then the demand for that good is:

elastic

To increase total revenue, firms with ______ demand should lower price, and firms with ______ demand should increase price.

elastic; inelastic

To produce 150 units of output, a firm must use 3 employee-hours. To produce 300 units of output, the firm must use 8 employee-hours. Apparently, the firm is:

experiencing diminishing returns.

t takes many years to train to become an orthopedic surgeon. This suggests that, in the short run, a sudden increase in the demand for orthopedic surgeons will:

have little effect on the number of trained orthopedic surgeons.

All else equal, compared to small-budget items such as paper towels, the price elasticity of demand for big-ticket items such as refrigerators is

higher

If your income elasticity of demand for hot dogs is negative, then:

hot dogs are an inferior good for you.

If the San Diego Opera decreases the price of their opera tickets and their total revenue falls, then this suggests that, at the original price, the demand for tickets to the San Diego Opera was:

inelastic

Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is

inelastic

A fixed factor of production:

is fixed only in the short run.

Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. If the lemonade market is perfectly competitive and Jenny is charging the equilibrium price, then Jenny can increase her revenue if she:

keeps the price of her lemonade the same and increases the output.

According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively:

larger and larger quantities of the variable factors of production.

If a production process exhibits diminishing returns, then as output rises:

marginal cost will eventually increase.

Antony's Pizza uses the same dough, sauce, and cheese for pizza and calzones. When the price of pizza is low Antony produces more calzones. For Antony, the supply of pizza is ______ compared to the supply at a pizza restaurant that does not serve calzones.

more price elastic

Suppose 30 employee-hours can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require:

more than 30 additional employee-hours.

If Chris's fixed costs decrease, then in the short run his profit-maximizing level of output will:

not change

Suppose that at a firm's profit-maximizing level of output, its total revenue is $1,250, the total cost of its variable factors of production is $1,000, and its total fixed cost is $500. This firm will ______ in the short run, and will ______ in the long run.

not shut down; exit the industry

Fred runs a fishing lodge, and has a very profitable business during the summer. In the fall, the number of guests at the lodge starts to decline. Fred should keep the lodge open:

only during those months in which his total revenue exceeds his variable cost.

A profit-maximizing perfectly competitive firm must decide:

only how much to produce, taking price as fixed.

The law of demand indicates that as the cost of an activity:

rises, less of the activity will occur.

If a firm's total revenue is less than its variable cost when the firm produces the level of output at which price equals marginal cost, then the firm should:

shut down

Suppose that if the price of plane tickets increased, more people would choose to travel by train. If this happened, you would know that:

the cross-price elasticity between plane tickets and train tickets is positive.

When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that:

the demand for Taylor's earrings at the original price was inelastic.

The owner of a pizza shop observes that when she raises the price of a large pizza, her total revenue decreases, and when she lowers the price of a large pizza, her total revenue increases. This suggests that:

the demand for her large pizzas is elastic with respect to price.

In general, when the price of a fixed factor of production increases:

the profit-maximizing level of output does not change.

In general, when the price of a variable factor of production increases

the profit-maximizing level of output falls.

Suppose that total expenditures for coffee reach a maximum at a price of $5 per pound. At this price, the demand for coffee is:

unit elastic

A firm should shut down if its total revenue is less than its _____ even when the firm produces the level of output at which price equals marginal cost.

variable cost