ECON 3125 Final Study Guide

You sell bracelets online. The demand for these bracelets is:P = 95 - 2Q The bracelets cost $4 each to produce. If you choose to sell a bracelet, you cannot sell a necklace, which has averaged $19 in profit. At what price should you sell the bracelets?

59

Demand for Corn Flakes is: P = 30 - Q. Supply of Kellogg's Corn Flakes is: P = 2 + Q. Now a generic company enters the market, selling generic Corn Flakes for $8. Assume consumers are indifferent between generic and Kellogg's Corn Flakes. How many boxes of Kellogg's (brand) Corn Flakes will sell?

6

If TC = 108 + 20Q + 3Q2 , what level of Q generates the minimum average cost?

6

Assume P = 266 - 1Q and TC = 105 + 1Q2. What level of production maximizes profit? Enter as a value (round to two decimal places if necessary).

66.5

Reggie has an incoming GPA of 4, uses Facebook 9 hours per week, and is an upperclassman. Using Table 1, forecast his exam score.

66.76

Perfect CompetitionFirm cost equation: TC = 49 - 4Q + Q2Market demand: Q = 537 - 4P Solve for how many firms serve the market. Enter as a value.

71

Assume perfect competition:Price: $68Cost: TC = 9Q + 0.04Q2Solve for the profit-maximizing Quantity produced by an individual firm in the short run. ROUND TO THE NEAREST WHOLE NUMBER. Enter as a value.

738

Suppose that a firm is producing in the short run with output given by: Q = 40L - .25L2, The firm hires labor at a wage of $15 per hour and sells the good in a competitive market at P = $10 per unit. Find the firm's optimal use of labor.

77

A regression equation is constructed: WEIGHT = 100 + 3DONUTS - 4EXERCISE where WEIGHT is a person's weight in pounds, DONUTS is the number of donuts consumed per week, and EXERCISE is the hours of exercise each week. If a person eats 4 more donuts per week but exercises 1 more hour, their weight will change by how many pounds:

8

The market demand for a good is P = 90 - Q. The good can be produced at a constant cost of $10. How much deadweight loss is created if the market is served by a monopolist as opposed to a competitive market?

800

The Return of Detroit City: Enpar manufactures engine parts for Ford using steel as an input. Enpar operates two plants, one in Detroit, MI and one in Greenville, SC. The production functions for the two Enpar plants are:Detroit: QD= 19SD - 0.25 SD2 Greenville: QG= 41SG - 0.5 SG2 where QD and QG are the outputs of engine parts (in units) from the Detroit and Greenville plants, respectively. SD and SG are the amounts of steel for the two plants. The firm has 147 units of steel available.How much steel should be sent to Detroit?

83

If the coefficient of determination (R2) is 0.86 from Table 1, this means that

86 percent of the variation in the dependent variable is explained by the regression.

If the marginal cost to make a good is $8 and the price elasticity of demand is -6, what price should be charged via the optimal markup rule?

9.60

TC = 101 + 44Q + 3Q2What is the average variable cost when 18 units are produced?Enter as a value.

98

If Q = 2LK2 , what happens to average cost as the firm expands (produces more)?

AC decreases

A food manufacturer is trying to maximize profit by selling wheat-based cereal (C) and wheat bread(B) with raw wheat (W). The production functions are: Cereal: C = 20WC - 1.5WC2 Bread: B = 66WB - 2WB2 Constraint: WC + WB = 8,732 Profit is $1.00 per box of cereal and $0.50 per pack of wheat bread. There are 8,732 units of raw wheat available. How much wheat should go to the cereal (WC)? Enter as a value.

3490

If the production function is Q = 30 + 39L + 11K, what's the most you can produce with 8 workers (L) and 3 unit of capital (K)?

375

You own a restaurant near the beach. Business has been growing each year, but obviously spikes during the summer months. A regression produces the following equation:M = 30,000 + 596t + 1,000S Where M is monthly sales, t is years past 2010, and S is a dummy variable for the summer months. If the month is June, July, or August, insert a "1". If not, the value for S is zero.What are the predicted sales for June 2026?

40536

The demand for the book is P = 82 - 3Q. A bookstore can order copies that will cost $6. If the bookstore orders 9 books, what is the total profit?Enter as a value.

441

From the following data: Total food orders delivered (Q) # of cooks (C) # of packagers (P) 10 1 1 14 2. 1 18 3 1 24 3 2 28 4 2 Write out the corresponding production function:

4C + 6P

A firm faces the demand curve: P = 1,000 - 25Q. What is the firm's revenue maximizing price?

500

If TC = 40 + 50Q2 , what is the marginal cost at the 5th unit?

500

Calculate SSE from the following data. Q. Q* 8. 6 10. 10 12. 19

53

The demand for the book is P = 200 - Q. A bookstore can order copies that will cost $16. If the bookstore orders 40 books, what is the total profit?

5760

If a firm quadruples(4x) in size and output triples (3x), what is the returns to scale?

Decreasing Returns to Scale

Assume in a perfectly competitive market that Consumer Surplus = 50 and Producer Surplus = 100. Now assume a government action changes the allocation to Consumer Surplus = 90 and Producer Surplus = 60. This new outcome is

Efficient because total surplus remains the same

An analyst believes that incoming GPA, the number of hours spent on Facebook per week, and upperclassman status can predict exam scores. Data is collected for 260 students. Students' incoming GPA and the average number of hours spent on Facebook each week is recorded. A dummy variable for Upperclass is created (1 = upperclassman, 0 = not upperclassman). A regression is performed, and the results of the regression are in Table 1. Multiple R 0.68 R Square 0.86 Observations 260 Intercept 70.56 0.029 GPA 4.80. 1.275 Facebook (hours per week) -2.70 0.635 Upperclass. 1.30. 0.40 What is the dependent variable?

Exam Score

According to the theory of the firm, management's ultimate objective is to minimize costs.

False

It takes you 3 hours to make a sweater which you can sell online and make a $60 profit for the sweater. It takes you 2 hours to make a pair of pants which you can sell online and make a $50 profit for the pair of pants. True or false: if you have an extra hour of labor, you should use it to make a sweater.

False

Teacher A is more effective than Teacher B. Both teachers become less effective the larger their class becomes. Both teachers are paid the same salary.True or false: the optimal allocation of 120 students is 60 for Teacher A and 60 for Teacher B.

False

True or false: consumers are better off if a cartel serves a market as opposed to a perfectly competitive market.

False

In the long run, firms under perfect competition

Have P = MC

Suppose a firm has two plants, A and B, each producing the same product but using different production processes. After analyzing production reports a UNC Charlotte intern realizes that the marginal product of labor in plant B is greater than the marginal product of labor in plant A. What should he recommend as a short-run remedy?

Move labor from plant A to plant B.

In the long run, perfectly competitive firms are at equilibrium when: (LMC = Long-Run Marginal Cost; LAC = Long-Run Average Cost)

P = LMC = LAC.

Which is not a characteristic of a monopoly:

P = MR

A good's demand is given by: P = 424 - 2Q. At P = 59, the point price elasticity is: Enter as a value (ROUND TO TWO DECIMAL PLACES).

-0.16

A good's demand is given by: Q = 1000 - 40P. At Q = 800, the point price elasticity is:

-0.25

A good's demand is given by: P = 675 - 2Q. At P = 182, the point price elasticity is:

-0.37

A good's demand is given by: P = 475 - 2Q. At P = 135, the point price elasticity is: Enter as a value (round to two decimal places if necessary).

-0.4

You quit your job as an analyst making $50,000. You then take your $500,000 in savings and open a Mighty Taco restaurant. You work roughly the same hours as before and make $60,000 per year from the restaurant. Assume the interest rate on government treasury notes is 6%. Calculate the economic profit or loss from your move in year 1. (Include a negative sign if it's a loss)

-20,000

Assume P = 40 - Q and TC = 2 + Q2. What level of production maximizes profit?

10

If TC = 242 - 12Q + 2Q2 in perfect competition how much will each individual firm produce in the long-run?

11

If TC = 32 + 18Q + 10Q2 , what is the marginal cost at when Q=7? Enter as a value.

158

A firm faces the demand curve: P = 3,182 - 13Q. What is the firm's revenue maximizing price?

1591

The market demand for a good in a monopoly is P = 400 - 2Q. The good can be produced at a constant cost of $20. What is the amount of producer surplus?

18,050 or 19,950 (got corrected on test)

If the marginal cost to make a good is $148 and the price elasticity of demand is -5, what price should be charged via the optimal markup rule? Enter as a value (round to two decimal places if necessary).

185

TC = 192 + 38Q + 2Q2What is the average fixed cost when 9 units are produced?

21.33

You produce shoes (Q) with labor (L) and capital (K). The production process is as so:Q = 400L - 20L2 + 600K - 10K2The cost of labor is $20 and the cost of capital is $30. You have a budget of $880. How many units of capital(K) should you rent/buy?

24

Assume a firm uses rats running on treadmills (R) to produce electricity (E) measured in volts. Here is the daily production function: E = 2,000 + 500R - R2 Electricity sells for $5 per volt, and rats cost ten dollars a day. How many rats should be used?

249

Assume you inherit 40 copies of the textbook for ECON 3125. You plan to sell these textbooks in two markets: directly to students on campus, and sell them online on ebay. Here are the two demand equations: Student Demand: PS = 200 - 2QS Ebay Demand: PE = 250 - 5QE If your goal is to maximize total revenue, how many books will you sell to students?

25

If the sample coefficient of determination (R2) is 0.25, this means that

25 percent of the variation in the dependent variable is explained by the regression.

If demand is P = 100 - 2Q and supply is P = 20 + 3Q, what is the value of the Consumer Surplus?

256

Monopoly Demand: Q = 100 - 0.20P Cost: TC = 10 + 60Q Solve for the profit-maximizing Price.

280

Some UNCC students are selling Cam Newton autographed jerseys. They are selling them at two locations: the Cone Center and the Friday Building. They want to maximize total revenue, but the number of jerseys available is a constraint. Here are the two demand equations, where the Q's are the jerseys to be sold in each location:Cone Center Demand: PC= 240 - 6QC Friday Building Demand: PF= 400 - 3QF The total number of jerseys (Q) available is 30. What quantity of jerseys should be allocated to the Friday Building?

29

If the production function is Q = 30 + 40L + 60K, what's the most you can produce with 5 workers (L) and 1 unit of capital (K)?

290

Suppose that a firm is producing in the short run with output given by: Q = 61L - L2 The firm hires labor at a wage of $41 per hour and sells the good in a competitive market at P = $22 per unit. Find the firm's optimal use of labor. Enter as a value.

30

Suppose that a firm is producing in the short run with output given by: Q = 66L - L2The firm hires labor at a wage of $25 per hour and sells the good in a competitive market at P = $23 per unit. Find the firm's optimal use of labor.

32

When Target charges $92 for a children's game, they sell 100 units. When they charge $84, they sell 120 units. If they were to give away the game for free, how many units (Q) would be demanded? (Answer is NOT infinity)

330

You own a restaurant near the beach. Business has been growing each year, but obviously spikes during the summer months. A regression produces the following equation: M = 30,000 + 500t + 1,000S Where M is monthly sales, t is years past 2010, and S is a dummy variable for the summer months. If the month is June, July, or August, insert a "1". If not, the value for S is zero. What are the predicted sales for July 2016?

34,000

You produce quesadillas (Q) with beef (B) and cheese (C). The production process is as so:Q = 40B - 1.5B2 + 50C - 1.5C2 + 0.5 Price of beef is $4 per box, and the price of cheese is $5 per box. The boxes are the same size and you only have room for 9 boxes in your freezer. What's the most quesadillas you can produce?

349

You manage a hotel, and currently charge $130 per night and sell 100 rooms a night. When looking to increase profit, marginal analysis would say to:

Adjust the price to $125 and see what happens to sales

Consumer surplus is the

Area below the demand curve and above the market price of the good.

If a firm triples (3x) in size and output triples(3x), what is the returns to scale?

Constant Returns to Scale

The reason monopolies are inefficient for society is because monopolies:

Create deadweight loss

According to the sign on the Facebook coefficient from Table 1,

If the Facebook usage is higher, then the Exam score is lower

If I add another independent variable to the regression in Table 1 and this decreases my sum of squared errors, the R-squared will:

Increase

A person needing a lung transplant has what price elasticity of demand?

Inelastic

If the price elasticity of demand for HD Tv's is -0.2, the elasticity is classified as:

Inelastic

For the production function Q = 8L + 3K, returns to scale:

Is Constant

For the production function Q = 4L2 + K2, returns to scale:

Is increasing.

Would mistakenly using a linear instead of a quadratic model be more problematic in the short or long-term?

Long-term

Which condition is correct for a firm wanting to maximize profit:

MRP = MC

Which condition is correct for a firm wanting to maximize profit:

MRP=MC

Total revenue is maximized at the point where

Marginal Revenue equals zero

In order to maximize profits, a firm in monopolistic competition continues producing until

Marginal revenue equals marginal cost

In the short run, the firm should continue to produce if and only if

Price exceeds average variable cost.

A company produces two products. FC = Total Fixed costs = $580 VC1= variable costs from product 1 = $820 VC2= variable costs from product 2 = $805 TR1= revenue from product 1 = $900 TR2= revenues from product 2 = $900In the short run, what should the firm do?

Produce both

According to the theory of the firm, what is management's ultimate objective?

Profit Maximization

The goal for an individual firm in perfect competition is:

Profit maximization

From the following data Total Orders (Q). # of Workers (L) # of Machines (K) 11 1 1 16 1 2 21 1 3 27 2 3 32 2 4 Which is the correct corresponding production function?

Q = 6L + 5K

If the price of a good is in the elastic range and the firm raises price,

Quantity will fall, and revenue will fall.

If the price of a good is in the inelastic range and the firm raises price,

Quantity will fall, but revenue ill increase

If you survey only Hispanic students on campus and ask if they support funding a library renovation, this would lead to:

Sample Bias

A survey company asks Asian students at UNCC if they feel the sports stadiums on campus should be upgraded for a cost of $3 million. A potential problem with this survey is:

Sample bias

Ricky's Donuts sells premium donuts. Premium donuts have toppings. The demand for premium (PR) donuts is: PPR = 5.70 - 0.45QPR The marginal cost for each is: MCPR = 0.20 Now Ricky starts selling cupcakes. This creates an opportunity cost of 0.10 per premium donut as the those toppings cannot be used for cupcakes. Which of the following statements is true?

The opportunity cost will change the minimum average cost

Joe's Yoga is the only yoga studio in a small town, selling classes at high prices and earning above-average profit. Now a new competing yoga studio opens up across the street, offering its own different styles of yoga classes. With the competing yoga studio now open, which of the following statements is true?

There is deadweight loss in the market

For the production function Q = 16L + 0.2K, returns to scale:

is constant

When average total cost is at its minimum

marginal cost is equal to average total cost.

Total profit is maximized at the point where

marginal profit equals zero.

Which of the following can continue to earn positive economic profit (above-average rates of return) in the long run:

monopoly

Sometimes a move by a firm that increases cost can increase profit.

True

Sometimes a move by a firm that increases revenue can decrease profit.

True

True or false: in the long run, firms under monopolistic competition should have similar rates of return (similar annual profit rates).

True

A manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is $12 per hour and capital is rented at $8 per hour. The marginal product of labor is 60 units of output per hour and the marginal product of capital is 48 units of output per hour. The marginal product of both inputs is decreasing. In order to efficiently use these inputs, the firm should:

Use less labor and more capital

Which of the following would be the closest to a perfectly competitive market?

Wheat

From Table 1, is the coefficient on the GPA variable statistically significant?

Yes

If the t-statistic for a variable is 2.54, is the variable statistically significant?

Yes

You pay $5 to enter the County Fair, and then you pay $1.00 for each ride. Is this price discrimination?

Yes

You pay $90 to get in DisneyWorld and then pay $2 per ride. Is this price discrimination in terms of the rides?

Yes

If the market demand decreases in perfect competition, then in the long run:

firms will exit the market