Test #2 Microeconomics

All of these determine price elasticity of demand, EXCEPT

A change in the price of the resources used to produce the product.

If the own price elasticity of demand =-4, then

A price increase of 1% will reduce quantity demanded by 4%

If organs cost $4 a bag last year, but they cost $6 a bag this year, using the midpoint or arc formula, the percentage change in the price of oranges is

40%

Refer to the table which shows the total utility and marginal utility for ice cream consumption. The value for E is

8

Carla purchased cupcakes and milk until the marginal utility per dollar spent was equal for both goods. If the price of the cupcakes was $3 and the price of milk was $1.50 then

The marginal utility of cupcakes is two times greater than the marginal utility of milk.

For a normal good, the income effect

moves in the same direction as the substitution effect.

Based on the graph, implementing a tax

raises equilibrium price from $6 to $10 and lowers equilibrium quantity from 120 units to 100 units.

As one moves along the budget line:

Income and prices are held constant, but quantities change.

A decrease in the price of a good causes the

Purchasing power of a person's money to increase.

Cross price elasticity of demand is defined as percentage change in

Quantity demanded of one product divided by the percentage change in the price of another product.

Based on the table, ____ is the total cost when producing 21 units.

$1,850

When the Frame Factory is producing 1,500 frames, total cost is $225,000 and variable cost is $180,000. What do average fixed costs equal at 1,5000 units.

$30

If Vicky's marginal utility of the last orange consumed is 20 and her marginal utility of the last pineapple consumed is 80, what is the price of pineapples if the price of orange is $1 and Vicky has maximized her utility?

$4

Based on the table, ____ is the average variable cost when output is 12 units

$75.00

Suppose Peter faces this budget line for eating out. If his weekly budget for pancakes is $40, a breakfast at IHOP costs ___ and a breakfast at the original pancake house costs ___.

$10; $8.

To pursue her goal of being a business owner, Mary left a job that paid $40,000 per year. At the end of her first year in business, her cash revenues summed to $90,000, and her explicit costs were $50,000. Also, in order to fund her business startup, Mary cashed in a $20,0000 certificate of deposit that was providing a yield of 5%. Ceteris paribus, Mary's economic profit is

-$1,000

Using the midpoint method, what is the elasticity of demand for a product who's price increased from $2 to $4 and whose quantity demanded decreased from 10 units to 5 units?

-1.0

If a product's price rises by 6% and its quantity demanded falls by 8%, then its elasticity is equal to

-1.33

Based on the graph, if the price for shoes increases from $40 to $80 (from point d to point b), the absolute value for the price elasticity of demand (using the arc or midpoint method) is:

1.5

According to the figure, this person's marginal rate of substitution of pizza for wall climbing when maximizing utility is

2/1

In the table, assume that a consumer has a budget of $12, water costs $2 per bottle, and chips cost $3 per bag. Utility will be maximized by buying

3 bottles of water and 2 bags of chips.

Match the curves in the figure (lines A, B and C) with the correct cost curve name (AVC, ATC, AFC, or MC).

A=MC; B=AVC; C=ATC

If marginal cost (MC) at the current output is less than average total cost (ATC), then

ATC is decreasing

Carson, who is currently maximizing his utility, likes to go to plays and concerts. If the price of concerts increases:

Carson will be temporarily in a state of disequilibrium and thus go to fewer concerts and more plays in order to maximize his marginal utility per dollar.

Which equation is correct?

Economic Profit = Total Revenue - Explicit Costs -Implicit Costs.

Specialization of labor and management typically supports:

Economies of scale (or increasing returns to scale).

Which of the following examples represents the short run?

Ford asks its workers to work overtime.

As a local kayak outfitter was looking over her financial records, she noticed that when the shop down the street increased the price of stand up paddle board tours by 10%, her sales increased by 15%. How might her sales be impacted if the paddle board tour price were lowered by 20%?

Her sales would fall by 30%

Jenn's marginal utility of the last candy bar consumed is 8 and her marginal utility of the last smoothie consumed is 20. If candy bars cost $2 and smoothies cost $4, which statement is true according to the utility maximization rule?

Jenn should consume more smoothies and less candy bars to maximize utility.

Which of the following is an implicit cost?

Opportunity Cost

The (own) price elasticity of demand measures the

Percentage change in quantity demanded divided by the change in price.

Assume that Vitamin Water and Gatorade are substitutes. Their cross price elasticity of demand is

Positive

If Jack is maximizing utility by consuming 2 units of root beer and three candy bars,

Root Beer and candy bars must cost the same amount.

_______ are costs that have already been incurred and cannot be recovered.

Sunk Costs

If consumers purchase more of a good because its relative price has gone down, then it would be described as

The substitution effect.

Which of these is the most likely to have the highest own price elasticity of demand?

Theme park tickets.

Based on the table, diminishing returns occur when hiring the ____ worker.

Third

A gas station owner in a large city learned in his microeconomics class that buyers are relatively unresponsive to changes in the price of gasoline. If, based on that assumption, he increases the price of gas at his station:

Total revenue will increase.

A shift in the budget line in the figure from 3 to 2 is caused by an

increase in the price of milk.

Refer to the demand schedule for honey on the table. In this price range, the demand for honey is

inelastic

When a consumer chooses among a set of goods or services, utility is maximized when marginal utility

per dollar spent is equal for all goods

Marginal Product is

the change is total output, given a change in labor input.