Econ test 3

Suppose Ben owns a small company that makes kites. The market for kites is perfectly competitive, and kites sell for $25 each. Ben's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table. When Ben makes 2 kites per day, what is his average variable cost?

$13

The accompanying table describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. Given the information in the table above, what is the call center's marginal cost when it goes from making 6 to 16 calls an hour?

$2

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total revenue at its profit-maximizing level of output is ______.

$2,400

Refer to the accompanying figure. What is the equilibrium price of bananas in this market?

$5/pound

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 100 pizzas a day, its fixed cost is ______ and its total cost is ______.

$500; $1,350

The accompanying table describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. What is the total cost of making 6 calls an hour?

$65

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table. What is John's opportunity cost of cleaning windows for an hour?

$7

Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the accompanying table. The marginal cost if the 4th mug per day is ______.

$7

For two goods, A and B, the rational spending rule is expressed as:

(MUA/PA) = (MUB/PB).

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. Suppose that at the original income of $30, the price of a loaf of bread increased to $3 and the price of a jar of peanut butter decreased to $2. Dusty can buy a maximum of ______ loaves of bread or a maximum of ______ jars of peanut butter.

10; 15

Refer to the accompanying figures. If Mallory and Rick are the only two consumers in this market and the price of soda is $0.25 per can, then what will be the market demand for soda per month?

130 cans

Refer to the accompanying table. To increase output from 33 to 66 units requires ______ extra employee(s) per day; to increase output from 66 to 99 units requires ______ extra employee(s) per day.

1; 2

Refer to the accompanying table. If the price of Good A is $5 and the price of Good B is $4, then the rational spending rule is satisfied when the consumer purchases ______ units of Good A and ______ units of Good B.

1; 3

Taylor's marginal utility from watching movies and from eating out (in utils) is shown in the accompanying table. Taylor spends exactly $100 every month on these two forms of entertainment; the price of each movie is $10 and the price of each dinner is $20. Taylor's optimal combination of movies and eating out is:

2 movies and 4 dinners.

Jamie's marginal utility from muffins and from doughnuts (in utils) is shown in the accompanying table. Jamie spends a total of $8 on muffins and/or doughnuts every morning. The price of each muffin is $2 and the price of each doughnut is $1. If Jamie consumes 2 doughnuts a day, then what is her marginal utility per dollar spent on the second doughnut?

20

For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. If the market price of this good is $6, how many units would this seller produce?

300

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. If Dusty's income rises to $45, Dusty can now buy a maximum of ______ loaves of bread or a maximum of ______ jars of peanut butter.

30; 15

The accompanying figure shows the demand curve for a product that can be sold only in whole-number amounts. What is the maximum price that any buyer would be willing to pay for the first unit?

40

Refer to the accompanying table. The marginal utility of the 3rd dinner is:

60.

Laura's total utility from consuming 8, 9, and 10 bonbons is 35, 42, and 45, respectively. Her marginal utility from the 9th bonbon is _____.

7

Refer to the accompanying figure. The total utility of consuming 4 pizzas a week is:

90

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

Bus drivers

Last year, Casey grew fresh vegetables, which she sold at her local farmers market, but this year, Casey did not plant any vegetables and went to work at a bank instead. Which of the following best explains Casey's career change?

Casey's opportunity costs of gardening exceeded Casey's opportunity costs of working at the bank.

Which of the following is NOT true of a perfectly competitive firm?

It seeks to maximize revenue.

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.

If a consumer reallocates his or her spending away from Good B and towards Good A, then the consumer's total utility will increase if:

MUA/PA > MUB/PB.

Let MUc denote the marginal utility that Pablo receives from a cup of coffee, and let Pc denote the price of a cup of coffee. We typically expect that as Pablo buys more coffee:

MUc/Pc will fall.

Blair has vast riches and consumes thousands of dollars' worth of consumer goods each week, yet she is never satisfied. Why not?

People's wants are unlimited.

The price equals marginal cost rule for profit maximization is a specific example of which core principle?

The Cost-Benefit Principle

Which of the following is the most likely to be a variable factor of production at a university?

The number of librarians

Refer to the accompanying table. The law of diminishing marginal utility

applies to both Good A and Good B.

Refer to the accompanying figure. At quantities less than 50 doughnuts per day:

average cost is declining because marginal cost is less than average cost.

Angela is currently playing five games of pool and bowling three games. At this level of consumption, her marginal utility from a game of pool is 10 and her marginal utility from bowling a game is 6. If both pool and bowling cost $1 a game, Angela should:

bowl less and play pool more.

Refer to the accompanying table. The marginal utility of consuming apples is:

decreasing after the first apple.

Refer to the accompanying figure. For Jeff, the consumption of movies reflects the law of:

diminishing marginal utility.

Suppose a profit-maximizing firm in a perfectly competitive market is collecting $1,999 in total revenues. If the total cost of its fixed factors of production falls from $500 to $400, the firm will:

earn greater profits or smaller losses.

Sven likes to water ski, but can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. Sven's vacation convinced him that:

even for activities he really enjoys, diminishing marginal utility eventually sets in.

The most important challenge facing a firm in a perfectly competitive market is deciding:

how much to produce.

Suppose that each week Henry buys 12 peaches and 3 apples at his local farmer's market. Both kinds of fruit cost $1 each. From this we can infer that:

if Henry is maximizing his utility, then his marginal utility from the 12th peach he buys must equal his marginal utility from the 3rd apple he buys.

Sven likes to water ski, but can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. Sven's total utility ______ with each hour that he skied.

increased

Suppose the market for shoes consists of three consumers. The accompanying table shows the quantity demanded at various prices for each consumer:

is the same as Leigh's demand.

A variable factor of production:

is variable in both the short run and the long run.

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 Terry's total utility is maximized when he owns 10 pairs of shoes, then Terry's total utility from owning 7 pairs of shoes is ______ Terry's total utility from owning 8 pairs.

less than

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $9, then at its profit-maximizing level of output, this firm will earn a ______ of ______.

loss; $300

When plotting marginal and average cost curves, the ______ cost curve always crosses the ______ cost curve at its ______.

marginal; average total; minimum

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ______ utility from eating the first pie than from eating the third pie.

more

For two goods, coffee and scones, suppose that MU(coffee)/P(coffee) = 4 and MU(scones)/P(scones) = 3. To maximize your total utility from these two goods, you should purchase:

more coffee and fewer scones.

The absolute price of a good in dollar terms is the good's:

nominal price.

The accompanying graph shows the cost curves for Moe's mushroom gathering business, which is perfectly competitive. The curve labeled A is upward sloping because:

of diminishing returns to Moe's variable factors of production.

If the market for butter is perfectly competitive, then the demand curve facing a firm that produces butter will be:

perfectly elastic.

Assume that each day a firm uses 13 employee-hours per day and an office to produce 100 units of output. The price of each unit output is $5, the hourly wage rate is $10, and rent on the office is $200 per day. Each day the firm earns a ______ of ______.

profit; $170

Suppose that Cathy spends all of her income on 20 units of good X and 25 units of good Y. Cathy's marginal utility from the 20th unit of good X is 9 utils, and her marginal utility from the 25th unit of good Y is 19 utils. If the price of good X is $0.50 per unit and the price of good Y is $1.00 per unit, then to comply with the rational spending rule, Cathy should:

purchase less than 20 units of good X and more than 25 units of good Y.

Alex wants to maximize his utility. At his current level of consumption, Alex's marginal utility from an additional cup of coffee is 15 utils, and his marginal utility from an additional can of soda is 11 utils. If the price of a cup of coffee is $3 and the price of a can of soda is $2, Alex should:

reallocate his spending away from coffee and towards soda.

The goal of utility maximization is to allocate your ______ in order to maximize your ______.

resources; satisfaction

When the price of a good falls, marginal utility per dollar spent on that good ______, prompting consumers to purchase ______ of that good.

rises; more

Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm:

should not shut down if its total variable cost is less than $750.

Joaquin's marginal utility from an additional slice of pumpkin pie is 4 utils and his marginal utility from an additional slice of pecan pie is 6 utils. If a slice of pumpkin pie costs $2.50, and a slice of pecan pie costs $3.00, then Joaquin:

should reallocate his spending towards pecan pie and away from pumpkin pie.

Suppose that when a perfectly competitive firm produces 1,000 units of output, its total variable cost is $1,900. If the marginal cost of producing the 1,000th unit is $1.70, and if the market price of each unit of output is $1.70, then the firm should:

shut down.

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table. If we plot John's opportunity cost per window on the vertical axis and the number of windows cleaned each day on the horizontal axis, we will have John's ______ curve for window-cleaning services.

supply

Marginal cost is calculated as:

the change in total cost divided by the change in output.

Consumer surplus measures:

the difference between the most a buyer would be willing to pay for a product and the price actually paid.

The term marginal utility denotes the amount by which ______ changes when consumption changes by ______ unit(s).

total utility; 1

Higher education is a ______ and assigned textbooks are ______.

want; wants

A firm's profit equals:

(P − ATC) × Q [(price minus average total cost) times the quantity sold].