econ unit 2 test

suppose a university raises its tuition by 6 percent and as a result the enrollment of students decreases by 3 percent. the absolute value of the price elasticity of demand is...

0.5 (3/6)

if an additional unit of labor costs $20 and has a MPP of 15 units of output, the marginal cost is

1.33 (20/15)

diminishing returns occur because

A firm increases the amount of a variable input without changing a fixed input.

if demand is elastic then

An increase in price will reduce total revenue.

Assume a given amount of output can be produced by several small plants or one large plant with identical minimum per-unit costs. This long-run situation reflects the existence of

Constant returns to scale

if the demand for a product is elastic, then

The percentage change in quantity demanded is greater than the percentage in price.

In making an investment decision, an entrepreneur

Treats all costs as variable.

the long run is

a period long enough for all inputs to be variable

a competitve firm is

a price taker

what about the relationship between economic costs and accounting costs is true

accounting costs are always less than or equal to economic costs

what is not a determinate of the price elasticity of demand

amount of income the consumer has

If DVD players and DVDs are complementary goods, an increase in the price of DVDs will, ceteris paribus,

decrease the demand for dvd players

Higher prices will increase total revenue if

demand is inelastic

the demand curve confronting a competitive firm

equals the marginal revenue curve

which of the following will have elastic demand - cigarettes, alcohol, gasoline, or eu travel

eu travel

if income increases and as a result, the demand for good X increases and the demand for good Y falls,

good x is a normal good and good Y is an inferior good

the shape of the marginal cost curve reflects the

law of diminishing returns

Sam owns a taco restaurant, and he conducted a consumer survey that indicates that the price elasticity of demand for his restaurant is 3.5. You would advise Sam to

lower his price to increase revenue

If the marginal physical product (MPP) is falling, then the

marginal cost of each unit of output is rising

ceteris paribus, as the number of substitues for a good increases, the

price elasticity of demand should become larger

a firm will shut down production when

price falls below AVC

A firm experiencing economic losses will still continue to produce output in the short run as long as

price is above the AVC

if the equilibrium price in a perfectly competitive market for walnuts is $4.99 per pound, then the individual firm in this market can

sell an additional pound of walnuts at 4.99

you are told that costs are constant because enough help is always hired for a full stadium, so assume your task is to maximize revenues from ticket sales. your advice to the owner should be to

set the price of tickets at the unitary elasticity price

when the price of stamps rise, the demand for internet services increases. postage stamps and internet services are therefore

substitutes

changes in short run total costs result from changes in

variable costs