BE Homework 8 (1/2), Economics Exam, Econ 414 Final Chapter 14, Fin 321 Midterm 2, Macro Final Exam, Econ chapter 14 & 16, ManEcon - Chapter 14 quiz, quiz 4, ECON TEST 3, Managerial Economics Chapter 12 Test Bank, BE Homework 8 (2/2)

In a competitive industry with identical firms, long-run equilibrium is characterized by:

P = MC. MR = MC. P = AC. --> All of the statements associated with this question are correct.

The demand curve facing a firm in perfect competition is:

Perfectly Elastic at a price determined by market forces

If a product has several possible substitutes, we would expect the demand curve to be

Relatively elastic

Transactions costs of a good or service, being higher than internal provision:

Result in the firm providing the good or service for itself.

Suppose a perfectly competitive firm's minimum average variable cost is $3 when it produces 50. If the price is $2 and the firm's marginal cost is $2, the frim should

Shut down.

Among the three stages of production, which is considered to be "rational"?

Stage II

If sellers try to charge a price which is above the equilibrium level, then it can be predicted that:

Surplus conditions will result and forces will be set in motion to cause prices to fall.

Which of the following best describes entrepreneurial ability?

The ability to manage scarce resources, find new methods to achieve objectives, and be willing and able to assume the risk associated with achievement.

Which of the following describes marginal revenue?

The addition to total revenue associated with a one-unit rise in quantity.

Which of the following describes how the allocating function of price determines long-run equilibrium quantity?

The change in market price provides an incentive for consumers to change their quantity of consumption and for producers to redistribute their resources. Producers respond to an increase in demand by allocating a greater amount of resources to production due to the increased profitability of the product. Consumers respond to an increase in supply by substituting away from other goods due to the relative price decrease. ALL OF THE ABOVE ACCURATELY DESCRIBE THE LONG-RUN PROCESS

Which of the following is an example of an implicit cost?

The cost of using capital an owner donates to the building

Suppose that initially the price is $50 in a perfectly competitive market. Firms are making zero economic profits. Then the market demand shrinks permanently, some firms leave the industry, and the industry returns to a long-run equilibrium. What will be the new equilibrium price, assuming cost conditions in the industry remain constant?

$50

If the price of a slice of pizza rises from $2.50 to $3, and quantity demanded falls from 10,000 slices to 7,400 slices, using the formula for arc price elasticity what is the price elasticity of demand ?

- 1.64

Number of Workers Units of Output 0 0 1 40 2 90 3 126 4 150 The Average Product is at a maximum when the number of workers that are hired is:

2

Number of Workers Units of Output 0 0 1 40 2 90 3 126 4 150 The Marginal Product of the fourth worker is:

24 units of output.

You are the manager of a firm that sells its product in a competitive market at a price of $60. Your firm's cost function is C = 50 + 3Q2. Your firm's maximum profits are:

250

If the cross price elasticity between a Subway Veggie Delite and Jimmy John's Veggie sandwich is 4.0, a 10% increase in the price of Subway sandwich will lead to a:

40% increase in the demand of Jimmy John's sandwiches

You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q2. The profit-maximizing output for your firm is:

5

The following are the actual sales for the last six periods: Period Sales 1 750 2 820 3 600 4 850 5 900 6 700 Using a 3 month moving average, what will be your prediction for Period 7 ?

817

You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q2. Your firm's maximum profits are:

85

If when the price of good A rises by 5 percent the quantity demanded of good B rises by 10 percent, it can be said that

A and B are substitute goods

Which of the following best describes the difference between a change in quantity demanded and change in demand?

A change in quantity demanded occurs when the price of the good has changed; a change in demand occurs when a non-price determinant of demand for the good has changed.

Which of the following best describes the process of answering the basic economic question in the United States?

A mixed economy where most goods and services produced are the result of market forces and government regulation.

Assume Coca-Cola and Pepsi-Cola are substitutes. A rise in the price of Coca-Cola will have which of the following effects on the market for Pepsi?

A rightward shift in the Pepsi demand curve.

An economist left his $100,000-a-year teaching position to work full-time in his own consulting business. In the first year, he had total revenue of $200,000 and business expenses of $150,000. He made a (an)

Accounting Profit but an Economic Loss

Which of the following best describes the conditions necessary for a market to attain equilibrium?

All of the above accurately describe the conditions necessary for a market to attain equilibrium.

Which of the following is the best example of economies of scope?

Amazon.com decides to rent out its Web site to independent e-commerce companies.

Which of the following statements is true?

An increase in demand causes equilibrium price and quantity to rise. A decrease in demand causes equilibrium price and quantity to fall. An increase in supply causes equilibrium price to fall and quantity to rise. A decrease in supply causes equilibrium price to rise and quantity to fall. ALL OF THE ABOVE

A perfectly competitive firm sells 15 units of output at the going market price of $10. Suppose its average fixed cost is $15 and its average variable cost is $8. Its contribution margin (i.e., contribution to fixed cost) is

Cannot be determined from the above information

Good capacity planning necessiates that the following elements are included:

Both (B) and (D)

The primary difference between monopolistic competition and perfect competition is:

Both the ease of entry and exit into the industry and the number of firms in the market are correct. the number of firms in the market. the ease of entry and exit into the industry. --> None of the answers is correct. Correct

Supply Chain Management deals with:

Both the internal and the external activities of the firm

When there are variation in a firm's returns over the business cycle, the firm is facing _______ risk.

Business

Which of the following would NOT describe an aspect of long-run adjustment to rising gasoline prices?

Consumers make no changes in their current driving habits.

If the demand curve for a good always has unitary price elasticity, what does this imply about consumer behavior?

Consumers will spend a constant total amount on the good.

If the coefficient of price elasticity for a given product is -2.5, then it can be said that

Demand will increase if price rises A lower price will be accompanied by lower total expenditures on the product A one percent change in the products price will tend to be accompanied by a 2.5 percent change in quantity demanded in the same direction of the price change Demand is inelastic NONE OF THESE

Typically, we can expect that the:

Elasticities for individual brands are likely to be higher than for the entire product category.

Managerial economics can best be described as:

How firm managers use economic analysis to make business decisions and solve problems to best use the firms resources.

Management can be best described as:

How firms organize and allocate a firms resources to achieve the firm's objectives

Ultimately, the firm's production level depends on:

How much consumers want to buy.

When a firm raises the price of its product, what happens to total revenue?

If demand is elastic, total revenue decreases

Which of the following best describes the difference between the short-run and the long-run?

In the short-run, at least one input is fixed and at least one input is variable; in the long-run, all inputs are variable.

Yesterday Seller A supplied 400 units of a good X at $10 per unit. Today Seller A supplied the same quantity of units at $5 per unit. Based on this evidence, Seller A has experienced a (an):

Increase in supply.

Suppose that the Vice President for Marketing of Aetna Pharmacueticals argues that a 10 percent increase in the price of insulin (used by diabetic patients) will raise total revenues. It can be inferred that the Vice Prseident of Marketing thinks that demand for insulin is:

Inelastic.

Diseconomies of scale is a result of

Input market imperfections

Which of the following would generally be regarded as the most subjective type of forecast?

Jury of executive opinion.

Which of the following best describes modern corporations in the U.S.?

Large publicly held firms in which the management of the firm is typically the dominate proportion of its owners.

Economies of scale occur when the:

Long - run average cost decreases

An optimal decision in managerial economies in reached when:

MR = MC

The general rule for profit maximization in all markets is to produce until

MR = MC.

Above the shutdown point, a competitive firm's supply curve coincides with its

Marginal cost curve

When transaction cost are high, a company may decide to:

May choose to provide the service/product itself

In the short run, a perfectly competitive firm

Might make an economic profit, an economic loss, or a normal profit.

Gasoline and sports utility vehicles (SUVs) are complementary goods. One would expect, therefore, that the recent increase in the price of gasoline would cause

The demand for SUVs to fall and the equilibrium quantity to fall

Which of the following best describes 'Market Value Added'?

The difference between the market value of the firm and the amount of contributed capital.

Which of the following best describes the opportunity cost of a year of college?

The dollar value of tuition, books, all associated explicit expenses, the interest that may have been earned on that sum, and any foregone income from not working over that period

Which of the following best describes the "guiding function" of price?

The guiding function of price is the movement of resources into or out of markets in response to a change in the equilibrium price of a good or service.

Which of the following examples best illustrates the concept of derived demand?

The higher the demand for automobiles, the greater the demand for steel.

Under which of the following circumstances should a firm hire more labor and less capital?

The last dollar spent on labor generated more output/total product than the last dollar spent on capital.

When the price of a good in a market is above equilibrium:

The quantity supplied exceeds the quantity demanded. A surplus is observed. The price will fall in the near future. ALL OF THE ABOVE

Which of the following best describes a production function?

The relationship between the maximum amounts of output a firm can produce and various quantities of inputs.

Weather conditions have been exceptionally good for growing strawberries this year and a bumper crop is anticipated. As a result, one would expect

The supply to be higher than normal, and the market price to be lower

Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?

There is free entry and long-run profits are zero.

Which of the following situation where using a moving average forecast may be the most appropriate?

There is no pronounced trend.

A firm should shut-down if it cannot recover it's:

Total Variable Costs

There is no change in total revenue when the demand curve for a good is:

Unitary elastic.

Which of the following would represent a microeconomics decision or process?

Using forecasted interest rates to determine the appropriate time to finance a new plant.

The three main economic questions can be categorized as:

What to produce, how to produce, for whom to produce

Which of the following statements is true?

When marginal productivity of a variable input is falling then marginal costs of production must be rising.

Consumers will tend to increase their expenditures on a product

When price increases and demand is price inelastic

A price-ceiling can be defined as:

a legal maximum price established by the government for a specific market.

The results of many empirical studies of short-run cost functions have shown that total costs conform to

a linear cost function.

A firm earns a normal profit when its total revenues just offset both the ________ cost and ________ cost.

accounting; opportunity

Suppose there is a shortage of food in the market. In the long-run,the guiding (allocation) function of price can be expected to cause

an increasing shift in the supply of food.

When we observe the relationship between productivity and costs, we can conclude that there is:

an inverse relationship between productivity and costs

Economies of scale exist whenever:

average total costs decline as output increases.

"Lean manufacturing" refers when producers emphasize

both (a) and (c)

When we collect the uninsurance rates across all the counties of the state of Texas in March of 2018, it represents an example of using

cross-sectional data.

According to the authors, monopoly power can be controlled more effectively by:

changing market conditions

In order to confirm that Apple and Samsung are indeed competitors, the Federal Trade Commission should test the ____ and should get a ____.

cross-price elasticity; positive number

When the more recent observations are more relevant to the estimate of the next period than previous observations, the naïve forecasting method to employ is

exponential smoothing.

Speed in communications and the growth of internet has caused transaction costs to:

decrease significantly

If an increase in a firm's input by some proportion results in less than proportional increase in output, it is referred to as:

decreasing returns to scale

As you move down along a demand curve,

demand becomes less elastic

Which of the following costs is likely to be irrelevant to a short-run business decision?

historical cost

Which of the following is NOT part of the basic business decision to enter or exit a perfectly competitive industry?

how much should we charge for our product?

Suppose President Trump threatens that all imports of Mexican built cars will be subjected to a border tax (tariff) in the future. As a result of this announcement, we can expect that the current demand for these cars to:

increase, which is a shift to the right of the demand curve.

Smoothing a time series of observations

is used to reveal an underlying pattern in the data.

A linear demand function exhibits:

less elastic demand as output increases.

Which of the following statements highlight the distinction between microeconomics and macroeconomics?

microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

Firms have market power in:

monopolistically competitive markets and monopolistic markets.

An inferior good has a ________ income elasticity of demand and demand for the good ________ as income rises.

negative; decreases

Several firms spent millions of dollars advertising their goods and services at the recent Super Bowl. One of the reasons they did so was that they were attempting to:

shift the demand for the product to the right.

The learning curve indicates that

repetition of various production tasks cause unit costs to decrease.

Unlike an accountant, an economist measures costs on a (n) ________ basis.

replacement

Which of the following describes the point at which the firm moves from the planning horizon (long-run) to the operating horizon (short-run)?

the firm has determined the appropriate plant size to build.

Which of the following is NOT a characterisitc of the perfectly competitve market structure?

the firm may raise the price of the product it sells incurring small declines in sales.

Which of the following would NOT result in increased efficiency of production through economies of scope?

the firm's inputs are unique to the final good it producers, which is equally unique.

The possibility that a person with a forceful/persuasive personality (but not always with good knowledge and judgment) can exercise significant influence is a major drawback of

the jury of executive opinion approach.

When we are making choices, we do because of:

unlimited wants and limited resources.