CSM 303 Final Exam
Tom's Tent Company has total fixed costs of $300,00 per year. The firm's average variable cost is $80 for 10,000 tents. At that level of output, the firm's average total costs equal
$110
A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total cost are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101 unit of output?
$250
Average total cost equals
(fixed+variable costs) divided by quantity produced
Suppose that a firm operating in perfectly competitive market sells 400 units of output at a price of $4 each. Which of the following statements is correct? (i) marginal revenue equals $4 (ii) average revenue equals $100 (iii) totale revenue equals $1,600
(i) and (iii) only
Economists generally believe that rent control is
a highly inefficient way to help the poor raise their standard of living
Suppose that Jane enjoys Diet Coke so much that she consumes one can everyday. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of
a necessity versus a luxury in determining the price elasticity of demand
Which of the following would not interfere w/ market equilibria?
a non-binding price floor
If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then
a one-unit increase in output will increase the firm's profit
Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,
a smaller quantity of the good is bought and sold
Suppose the government has imposed a price ceiling on cellular phones. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?
a technological advance makes cellular phone production less expensive
Johnny is a sophomore in college and has a 1.5 cumulative GPA. Johnny's cumulative GPA will fall even further next semester if he performs worse than (i) his cumulative GPA (ii) he ever performed before (iii) he did last semester
a. (i) and (ii) only
A price floor will be binding only if it is set
above the equilibrium price
Consumer surplus is the
amount a consumer is willing to pay minus the amount the consumer actually pays
The cost of producing the typical unit of output is the firm's
average total cost
Marginal cost is equal to average total cost when
average total cost is at its minimum
When a firm is operating at an efficient scale,
average total cost is minimized
If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then
average total costs are rising at Q= 500
You and your college roommate eat 3 packages of Ramen each week. After graduation last month, both of you were hired at several times your college income. Your roommate still enjoys Ramen very much and buys even more, buy you plan to buy fewer Ramen in favor of foods you prefer more. When looking at income elasticity of demand for Ramen, yours would
be negative and your roommate's would be positive
Who is a price take in a competitive market?
both buyers and sellers
If the cross-price elasticity of 2 goods is negative, then the 2 goods are
complements
Which of the following costs of publishing a book is fixed?
composition, typesetting, and jacket design for the book
Which of the following is likely to have the most price inelastic demand?
cookies
A binding price ceiling (i) causes surplus (ii) causes shortage (iii) is set at a price above the equilibrium price (iv) is set at a price below the equilibrium price
d. (ii) and (iv) only
Which of the following industries is most likely to exhibit the characteristics of a free entry?
dairy farming
A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes
decreases, and the consumer surplus in the market for red wine decreases
Which of the following is likely to have the most price elastic demand?
diamond earrings
Marginal cost increases as the quantity of output increases. This reflects the property of
diminishing marginal product
Which of the following is not a characteristic of the competitive market?
entry is limited
For a firm in a perfectly competitive market, the price of the good is always
equal to marginal revenue
There are several criticisms of the minimum wage. Which of the following is not one of those criticisms? The minimum wage
fails to raise the wage of any employed person
Which of the following costs do not vary w/ the amount of output a firm produces?
fixed costs
Total cost can be divided into 2 types of costs:
fixed costs and variable costs
Elasticity if demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the
flatter the demand curve will be
Ina competitive market, the actions of any single buyer or seller will
have a negligible impact on the market price
The goal of rent control is to
help the poor by making housing more affordable
If the government removes a binding price ceiling from a market, then the price received by sellers will
increase, and the quantity sold in the marker will increase
The average-fixed-cost curve
is always decreasing
Suppose Jan started up a small lemonade stand business last month. Variable costs for Jan's lemonade stand now include the cost of
lemons and sugar
A key determinant of the price elasticity of supply is the
length of the time period
The cost of producing an additional unit of output is the firm's
marginal cost
At the profit-maximizing level of output,
marginal revenue equals average total cost
When OPEC raised the price of crude oil in the 1970s, is cause the US
nonbinding price ceiling on gasoline to become binding
A minimum wage that is set below a market's equilibrium wage will result in an excess a. demand for labor, that is, unemployment b. demand for labor, that is, a shortage of workers c. supply of labor, that is, unemployment d. none of the above
none of the abov
If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?
one year after the price increase
Which of the following expressions represent a cross-price elasticity of demand?
percentage change in quantity demanded of bread divided by percentage change in price of butter
Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the
quantity demanded of physicals increases, and the quantity supplies of physicals decreases
The price elasticity of demand measures how much
quantity demanded responds to a change in price
Total revenue
remains unchanged as price increases when demand is unit elastic
Which of the following is the most likely explanation for the imposition of a price floor on the market for corn?
sellers of corn, recognizing that the pice floor is good for them, have pressured policymakers into imposing the price floor
Which of the following events would increase producer surplus?
sellers' costs stay the same and the price of the good increases
When a supply curve is relatively flat, the
supply is relatively elastic
Producer surplus is
the amount a seller is paid minus the cost of the production
If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, ppl would have difficulty purchasing something to use in its place. These examples illustrate the importance of
the availability of close substitutes in determining the price elasticity of demand
Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. Which of the following costs are most likely to be considered fixed costs?
the costs of bookkeeping services
Which of the following statements about the effects of rent control is correct?
the short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments
Which of the following is not a determinant of the price elasticity of demand for a good?
the steepness or flatness of the supply curve for the good
Efficiency in a market is achieved when
the sum of producer surplus and consumer surplus is maximized
Total surplus is
the total value of the good to buyers minus the cost to sellers of providing the good
For a firm operating in a competitive industry, which of the following statements is not correct?
total revenue is constant
If a firm produces nothing, which of the following costs will be zero?
variable cost
Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because
with shortages and waiting lists, they have no incentive to maintain and improve their property
