Econ Final Learning Curve Questions

Waterworks Irrigation was a startup that was open for only one year of operation. During that year, it collected $175,000 in revenue and spent $50,000 on trucks, irrigation supplies, employees, and utilities. The owner of the firm, Cosmo, spent $100,000 of his own money to buy an office building and set up the office (instead of buying bonds and earning a 10% annual rate of return), which he later sold at the end of the year for $100,000. The firm's economic profit is:

$115,000 $175,000 - 50,000 = $125,000 $100,000 x .10 = $10,000 $125,000 - 10,000 = $115,000

You have just purchased your first car, and the purchase agreement commits you to pay $500 per month for 12 months. You have an opportunity to go to California for the entire month of October, and you will spend $2,000 traveling. You will be leaving your car behind, but because of your purchase agreement, you must still make the loan payment. The cost of the trip to California is:

$2,000, because your $500 loan payment for October is a sunk cost.

Each month Jamie buys exactly 15 McWraps, regardless of the price. Jamie's price elasticity of demand for McWraps is:

0

A 10 percent increase in income increases the quantity demanded of online movie rentals by 3 percent. The income elasticity of demand for online movie rentals is:

0.3.

Janelle loves sashimi. Her first piece of sashimi normally gives her a marginal benefit of $5. Each additional piece yields a marginal benefit that declines by $0.25 per piece. If her favorite sushi bar charges $2.75 per piece of sashimi, how many pieces should she eat?

10

If the demand curve is elastic, and the price of a MacBook decreases, total revenue will

Increase

MC < MB Marginal cost < Marginal Benefit

Increase production

If the account profit of a firm is negative

Its economic profit must be negative

MC > MB Marginal cost>Marginal Benefit

decrease production

As Massimo ate cheesecake during one recent outing, he found that he enjoyed each additional slice less and less. This implies that his marginal benefit was:

decreasing

It is very easy for Evelyn to find inexpensive inputs for her business. Evelyn's supply is therefore likely to be:

elastic

If the University of Michigan decreases the price of tickets to Wolverines' football games to collect more revenue, it is assuming that the demand for tickets is:

elastic.

If an increase in the price of coconut oil brings about an increase in total revenue, then the price effect is _____ the quantity effect.

greater than

The long-run price elasticity of supply of automobiles is _____ the short-run price elasticity of supply of automobiles.

greater than

Suppose Westmorland College could rent out parts of the campus to various summer sports camps for $100,000. The potential revenue of the summer camps represents a(n):

implicit cost of capital

Total revenue: 1 - 200 2 - 215 3 - 225 4 - 230 The marginal benefit of a bottle of whiskey is:

increasing at a decreasing rate

If a good is a necessity with few substitutes, demand will tend to be:

inelastic

To determine the quantity of any activity that will maximize total profit, economists employ:

marginal analysis.

The _____ of producing a good or service is the additional cost incurred in producing one more unit of that good or service.

marginal cost

If the price of emergency visits to the dentist rose, we would expect:

only a slight decline in the number of emergency visits to the dentist.

The larger the output, the more output over which the fixed cost is distributed. Called the _____ effect, this leads to a _____ average fixed cost as output rises.

spreading; lower

Frozen yogurt and ice cream have a positive cross-price elasticity of demand. This means that frozen yogurt and ice cream are:

substitutes.

At 4 hours of study, Camille will maximize her benefit from study time because: Perfectly intersecting X

the difference between total benefits and total costs is maximized

Which of the following factors is important in determining the price elasticity of supply?

the time the producer has to adjust inputs and outputs

In economic analysis, at the optimal quantity of an activity:

the total benefit exceeds the total cost by the greatest amount, and the marginal benefit equals marginal cost

You run a business producing paintings. This month, your total cost of production is $10,000, your variable cost is $6,000, and you produce 3,000 paintings. It follows that your average _____ cost is _____.

variable; $2

highly inelastic demand

The quantity of a commodity that consumers demand is not very responsive to a change in price

Ian is such a big Rangers fan that his benefit from seeing a Rangers game is $200. He pays $100 for a ticket to see one of their playoff games. Unfortunately, he left the ticket in his jeans when he laundered them and the ticket was destroyed. According to marginal analysis, Ian should:

Buy another ticket for $100 and attend the game

implicit cost example

Costs that do not require a monetary outlay but instead reflect the dollar value of benefits forgone are:

Which demand curve has the HIGHEST elasticity

D3 it is the smallest curve

Which demand curve has the LOWEST elasticity

D4 it is a straight vertical line

If the demand curve is inelastic, and the price of a MacBook decreases, total revenue will

Decrease

Ashley Furniture expects its marginal cost curve to eventually slope upward because, as with most production processes, furniture manufacturing has:

Diminishing marginal returns

The eventual increase in AVC as output increases is the _____ effect.

Diminishing returns

The _____ of a good or service is the additional benefit derived from producing one more unit of that good or service.

Marginal benefit

(Figure: The Cost Curves for Charlie's Cookie Confections) Use Figure: The Cost Curves for Charlie's Cookie Confections. The curve labeled V represents the firm's _____ cost curve.

Marginal cost curve

For an inferior good, the income elasticity of demand is:

Negative

When Emily's computer factory hires two workers, the total product is 250 computers. When Emily hires three workers, the total product is 260 computers. And when she hires four workers, the total product is 265 computers. The slope of the marginal product curve between two and four workers hired is:

Negative

After three years at the Massachusetts Institute of Technology, Renaud realizes that he doesn't want to finish school but really wants to be a chef. When Renaud mentions that he is considering leaving university for culinary school, his parents insist that he stay for one more year to get his degree. Which statement is TRUE?

Renaud's parents are wrong: the marginal benefit to Renaud of another year of university is less than the marginal cost of university.

Which statement describes a "how much" decision?

Tawny is trying to decide how much money she needs to save to buy a car next month.

highly elastic demand

The quantity of a commodity that consumers demand is highly response to a change in the price of that commodity

(Table: Costs of Wedding Cakes) Use Table: Costs of Wedding Cakes. Assume that fixed costs are $10. What is the average variable cost of 4 wedding cakes? Ex: Quantity = 4 VC = 38

Variable cost (VC) / Quantity 38/4 = 9.50 Ignore fixed costs

To find total benefit on a marginal benefit curve

You add up all of the previous numbers. If you want to find the benefit of cleaning four pools. You add up the benefit of cleaning pools 1-4.

(Table: Patricia's Pie Palace) Use Table: Patricia's Pie Palace. Suppose five slices of pie are produced. What is the optimal level of production?

You want to find the highest difference between total cost and benefit. If there is the same amount of profit for both pick the one with highest production