EC 201 Test 2

Average Fixed Cost

ATC-AVC

Total Cost

AVC-AFC

Refer to Test 2 # 17: How do you calculate marginal product

Additional Worker Production- Original Production

Refer to #8 on test 2: A B C or D?

D

Refer to #9 on test 2: A B C or D

D

Suppose that when the price of online textbooks rose by 8%, quantity demanded fell by 5%. This indicates that demand is ______________________? A) Perfectly inelastic B) Elastic C) Unit Elastic D) Inelastic

D) Inelastic

If Sharon's Long-Run Average Total Cost curve shows that she can produce 10,000 DVDs at an average cost of $2.00 and 15,000 DVDs at an average cost of $2.50 this is evidence of: A) economic of scale B) the law of supply C) increasing returns D) diseconomies of scale

D) diseconomies of scale

Total Cost=

Fixed Cost + Variable Cost

Test 2 # 22-24 Look at graph. What represents gain to foreign producers after imposition of quota?

I + J

The price of Stork ice cream increases from $3.00 to $4.00, thus the quantity demanded for Stork ice cream decreases from 40 to 36 per day. Use mid point formula to calculate the price elasticity of demand.

.368; inelastic

Marginal Cost=

Total Cost(now)-Total cost(before)/Marginal Product of Labor

Average Total Cost=

Total cost/Quantity

What is autarky? (Refer to test 2 #14)

no trade

Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports . Which of the following counter-arguments is made by economists who oppose trade restrictions? A) Statistics show that trade restrictions actually do not save jobs B) Consumers pay a high cost for jobs saved through trade restrictions C) Trade restrictions benefit consumers in the short run but not in the long run D) Trade restrictions have a limited impact because most Americans prefer domestic goods over imports

B) Consumers pay a high cost for jobs saved through trade restrictions

Holding everything else constant, the absolute value of the price elasticity of demand for Adidas tennis shoes is ______________ the price elasticity of demand for tennis shoes in general. A) less than B) greater than C) twice as great as D) equal to

B) Greater than

In order to prove that Ramen Noodles are an inferior good, one should measure the ________________ and get a ____________________ A) Cross price elasticity of demand; negative number B) Income elasticity of demand; negative number C) Income elasticity of demand; positive number D) Income elasticity of demand; a number greater than one

B) Income elasticity of demand; negative number

If the price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises? A) It falls by 162 percent B) It falls C) It rise D) It rises by 1.62 percent

B) It falls

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. One reason for this is: A) tastes for many traded goods are similar in many countries because of globalization B) production of most goods involves increasing opportunity costs C) comparative advantage works better in theory than in practice D)some countries have more resources than other countries

B) production of most goods involves increasing opportunity costs

If a firm lowered the price of the product it sells and found that total revenue did not change, then the demand for its product is________? A) relatively elastic B) unit-elastic C) perfectly elastic D) perfectly inelastic

B) unit-elastic

Refer to #10 on test 2: A B C or D

C

Suppose Tinsel Town Videos lowers the price of its movie club membership by 10% and as a result, CineArts Video experienced a 16% decline in its movie club membership. What is the value of the cross-price elasticity between the two movie club memberships? A) -1.6 B) -0.625 C) 1.6 D) 0.625

C) 1.6

Dumping A) is selling a product for a price the same as its cost of production B) is selling a product for a price above its cost of production C) is selling a product for a price below its cost of production D) none of the above

C) is selling a product for a price below its cost of production

Variable cost

Changes with each additional worker

Which of the following statements is FALSE? A) Marginal cost will equal average total cost when average total cost is at its lowest point B) When marginal cost is less than average total cost, average total cost will fall C) when marginal cost is greater than average total cost, average total cost will rise D) marginal cost will equal average total cost when marginal cost is at its lowest point

D) marginal cost will equal average total cost when marginal cost is at its lowest point

The law of diminishing marginal returns states: A) average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increase B) that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline C) that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added D) that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of variable input to decline

D) that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of variable input to decline

Suppose a professional basketball game is to be played at a downtown urban arena, which increases the demand for parking on the night of the game. If the urban area has limited ability to create additional parking during periods of peak demand, then ______________? A) the supply of parking will be more elastic and the price of parking will not change the night of the game B) the supply of parking will be more inelastic and the price of parking will increase by a relatively small amount the night of the game C) the supply of parking will be perfectly inelastic and the price of parking will increase by a relatively small amount the night of the game D) the supply of parking will be more inelastic and the price of parking will increase by a relatively large amount the night of the game

D) the supply of parking will be more inelastic and the price of parking will increase by a relatively large amount the night of the game

Calculation for: Marginal Product of Labor=

Quantity (new) - Quantity (before additional worker)

Fixed cost

consistent cost paid