Econ 1

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Resources

Anything used to produce a good or service, or achieve a goal

Leftward shift of demand curve:

Decrease in demand

d

PXX + PYY = M is called a. An indifference curve b. An opportunity set c. A budget set D. A budget line

Which of the following is NOT a supply shifter?

Average income level

Which firm would you expect to make the lowest profits, other things equal? Betrand Sweezy Cournot Stackelberg

Betrand Oligopolist

Which of the following is most likely NOT an example of a normal good? A. Sports cars B. Bus travel C. Jacuzzis D. Lobster

Bus travel

Two sides to Every Transaction

Buyer & Seller

In asset markets, an assetʹs price is A) set equal to the highest price a seller will accept. B) set equal to the highest price a buyer is willing to pay. C) set equal to the lowest price a seller is willing to accept. D) set by the buyer willing to pay the highest price.

D

In the one-period valuation model, an increase in the required return A) increases the expected sales price of a stock. B) increases the current price of a stock. C) reduces the expected sales price of a stock. D) reduces the current price of a stock.

D

Suppose the production function is given by Q = K^1/2L^1/2, and both K and L double. Then output Q will? A. More than double B. Increase by half C. Less than double D. Double

Double

c

Given that income is $300, the price of good Y is $15, and the price of good X is $20. What is the vertical intercept of the budget line? a. 4,500 b. 300 c. 20 d. 15

For given input prices, isocosts closer to the origin are associated with: A. Higher costs B. Lower costs C. The same costs D. Initially lower, then higher costs

Lower costs

An increase in the price of steak will probably lead to:

an increase in demand for chicken.

Advertising & Consumer Taste

increase in advertising shifts the demand curve to the right and can impact consumer tastes

If A and B are complements, an increase in the price of good A would:

lead to a decrease in demand for B.

If a shortage exists in a market, the natural tendency is for:

price to increase.

What is the marginal revenue of producing the third unit? Units produced 0 1 2 3 4 5 total revenue 0 100180 250 290 310 total costs 0 50 110 180 270 380 A. 250 B.70 C. 0 D. 90

70

Ad Valorem Tax

A percentage tax; best known is the sales tax

Which of the following is probably not a normal good? A. Designer jeans.B. Diamond rings.C.Intercity passenger bus travel.D. New automobiles.

Intercity passenger bus travel

If a consumer's income decreases, what will happen to the budget line?

It will shift inward

Which of the following is true under monopoly? P=MR Profits are always positive P>MC All of the choices are true

P>MC

Market Equilibrium

Price of a good is determined by the interactions of the market demand and market supply for the good

Suppose you produce wooden desks, and government legislation protecting the spotted owl has made it more expensive for you to purchase wood. What do you expect to happen to the equilibrium price and quantity of wooden desks? A. Price will increase but quantity will decrease B. Price will decrease but quantity will increase C. Price and quantity will increase D. Price and quantity will decrease

Price will increase but quantity will decrease

Suppose you produce wooden desks, and government legislation protecting the spotted owl has made it more expensive for you to purchase wood. What do you expect to happen to the equilibrium price and quantity of wooden desks?

Price will increase but quantity will decrease.

Supply Shifters

Prices of Inputs, Technology, Number of Firms in the Market, Taxes (Government) , natural disasters, substitutes in production, and Producer Expectations

The creation of a new product is referred to as:

Product innovation.

By instituting performance-based rewards to CEOs the profits of firms will: A. Remain constant B. Rise C. Fall D. None of the statements are correct

Rise

a

Running a supermarket involves a. A lower level of risk than running a gourmet shop b. A higher level of risk than running a gourmet shop c. The same level of risk as running a gourmet shop d. All of the statements associated with this question are correct

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output? A. The MRTS is equal to the ratio of input prices, and the marginal product per dollar spent on all inputs is equal. B. The marginal products of all inputs are equal C. The marginal product per dollar spent on all inputs is equal D. The MRTS is equal to the ratio of input prices

The MRTS is equal to the ratio of input prices, and the marginal product per dollar spent on all inputs is equal

Price Ceiling

The Maximum legal price that can be charged in a market, QD exceeds QS and creates a shortage

Changes in the prices of other goods lead to:

a change in demand.

Economics: A.exists because of scarcity.B. is not related to decision making.C. is the science of the rich.D. has nothing to do with the allocation of resources.

exists because of scarcity

In the Wealth of Nations, Adam Smith argues that: A.self-interest leads to the efficient allocation of resources.B. benevolence leads to the efficient allocation of resources.C. profits are maximized where marginal revenue equals net marginal benefits.D. None of the statements associated with this question are correct.

self-interest leads to the efficient allocation of resources

If consumers expect future prices to be higher A. they substitute current purchases for future purchases of perishable products.B.stockpiling will happen when products are durable in nature.C. the position of the demand will not change.D. the demand for automobiles today will not change.

stockpiling will happen when products are durable in nature

An isoquant defines the combination of inputs

that yield the producer the same level of output.

Suppose the cost function is C(Q) = 50 + Q - 10Q2 + 2Q3. What is the total cost of producing 10 units?

$1,060

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day. What is the minimum the worker can earn in a day?

$100.

Suppose that production for good X is characterized by the following production function, Q = K^.5L^.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $25, and the per-unit wage, w, is $15, then the average variable cost of using 81 units of capital and 9 units of labor is: A. $2,025 B. $2,160 C. $135 D. There is insufficient information to determine the variable costs

$135

You are the manager in a perfectly competitive market. The price is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q^2. What price should you charge in the short run? A. $12 B. $16 C. $14 D. $18

$14

Suppose a monopolist knows the own price elasticity of demand for its product is -3 and that its marginal cost of production is constant MC(Q) = 10. To maximize its profit, the monopoly price is: A. $10 per unit B. $15 per unit C. $6.67 per unit D. $1.50 per unit

$15 per unit

Suppose a firm manager has a base salary of $75,000 and earns 1.5% of all profits. Determine the manager's income, if revenues are $10,000,000 and profits are $5,000,000. A. $75,000 B. $150,000 C. $300,000 D. $225,000

$150,000

In a perfectly competitive market, each firm has the following cost function: C = 49 + 5Q + Q^2. The market price is $35 and the market demand is Qd = 185 - P, where P is the market price. The short run profit level is: A. $176 B. $100 C. $0 D. None of the above

$176

Suppose market demand and supply are given by Qd = 100 - 2P and Qs = 5 + 3P. the equilibrium price is: A. $20 B. $19 C. $15 D. $17

$19

Suppose market demand and supply are given by Q d = 100 - 2P and Q S = 5 + 3P. The equilibrium price is:

$19.

If the interest rate is 10% and cash flows are $1,000 at the end of year one and $2,000 at the end of year two, then the present value of these cash flows is: A. $439 B. $3,000 C. $2,562 D. $3,200

$2,562

A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $20. What will the new price be should the three firms coexist after entry?

$20

A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $20. What will the new price be should three firms coexist after the entry? A. $15 B. $25 C. $20 D. None of the answers are correct

$20

A monopoly produces widgets at a marginal cost of $8 per unit and zero fixed costs. It faces an inverse demand function given by P=38-Q. What are the profits of the monopoly at equilibrium?

$225

A monopoly produces widgets at a marginal cost of $8 per unit and zero fixed costs. It faces an inverse demand function given by P=38-Q. The monopoly price is:

$23

Suppose market demand and supply are given by Qd = 100 − 2P and Qs = 5 + 3P. If a price ceiling of $15 is imposed, what will be the resulting full economic price?

$25

You are the manager of a mom and pop store that can buy milk from a supplier at $2.00 per gallon. If you believe the elasticity of demand for milk by customers at your store is -3, then your profit-maximizing price is:

$3.00

You are the manager of a mom and pop store that can buy milk from a supplier at $3.00 per gallon. If you believe the elasticity of demand for milk by customers at your store is -4, then your profit maximizing price is:

$4.00

You are the manager in a perfectly competitive market. The price is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q^2. What level of profits will you make in the short run? A. $40 B. $60 C. $20 D. $80

$40

Suppose the cost function is C(Q) = 50 + Q - 10Q2 + 2Q3. What are the fixed costs?

$50

You are the manager a firm that sells its product in a competitive market with market (inverse) demand given by P = 50 - 0.5Q. The market equilibrium price is $50. Your firm's cost function is C = 40 + 5Q^2. Your firm's marginal revenue is: A. MR(Q) = 50 - Q B. $50 C. MR(Q) = 10Q D. There is insufficient information to determine the firm's marginal revenue.

$50

Suppose compensation is given by W = 512,000 + 217pi + 10.08S, where W = total compensation of the CEO, pi = company profits (in millions) = $200, and S = sales (in millions) = $400. How much will this CEO be compensated? A. $512,000 B. $43,400 C. $559,432 D. $812,431

$559,432

Consider a cournot oligopoly consisting of five identical firms producing good X. If the firms produce good X at a marginal cost of $7 per unit and the market elasticity of demand is -3, determine the profit-maximizing price.

$7.50 per unit

Effective managers must:

- Identify goals and constraints. - Recognize the nature and importance of profits. - Understand incentives. - Understand markets. - Recognize the time value of money. - Use marginal analysis.

Suppose you compete in a Cornet oligopoly market consisting of six firms. The equilibrium market price and quantity are $5 and 10 units, respectively. The marginal cost for each firm is $3. Based on this information, we know the price elasticity of the market demand is:

-.417

Suppose the equilibrium price in the market is $200 and the marginal revenue associated with the linear (inverse) demand function is -$200. Then we know that the own price elasticity of demand is: A. 2 B. -1 C. -0.5 D. It cannot be determined from the information contained in the question.

-0.5

The demand for good X has been estimated by Qxd = 12 - 3Px + 4Py. Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price elasticity. A. -0.3 B. -0.2 C. -0.5 D. -0.6

-0.6

In a monopoly where the marginal revenue and price are, respectively, given by $10 and $20, the price elasticity of demand is: A. -1 B. -0.5 C. -2 D. Cannot be determined based on the information in the question

-2

Suppose a consumer with an income of $100 is faced with Px = 1 and Py = 1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)? A. 0.50 B. -2 C. -4 D. -1

-2

What is the marginal net benefit of producing the fourth unit? units produces 0 1 2 3 4 5 total revenue 0 100 180 250 290 310 total costs 0 50 110 180 270 380 A.-50B. 0C. 60D. 40

-50

Which of the following cost functions exhibits cost complementarity?

-5Q1Q2 + 7Q1.

a

. If a worker receives a fixed payment of $100 plus $10 for every hour she works, what is the maximum total earnings the worker can receive if they are restricted to a maximum of 12 hours of work per day? a. $220 b. $120 c. $340 d. $125

c

. If you are in the business of selling chicken and the price of selling chicken and the price of beef both were to drop dramatically, what should you do with your inventory level of chicken? a. Keep it the same b. Decrease the inventory c. Increase the inventory d. Get into the beef business

c

. Suppose a consumer with an income of $100 who is faced with PX = 1 and PY = 1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)? a. 0.50 b. -1.0 c. -2.0 d. -4.0

b

. The difference between a price decrease and an increase in income is that a. A price decrease does not affect the consumption of other goods while an increase in income does b. An increase in income does not affect the slope of the budget line while a decrease in price does change the slope c. A price decrease decreases real income while an increase in income increases real income d. A price decrease leaves real income unchanged while an increase in income increases real income

What is the marginal net benefit associated with producing five units of the control variable, Q (identify point F in the table)?A. -100B. -75C.0D. 100

0

The demand for good X is estimated to be Q xd = 10,000 - 4PX + 5PY + 2M + AX, where PXis the price of X, PY is the price of good Y, M is income and AX is the amount of advertising on X. Suppose the present price of good X is $50, PY = $100, M = $25,000, and AX = 1,000 units. Based on this information, the cross price elasticity between goods X and Y is

0.008.

The production function for a competitive firm is Q = K^.5L^.5. The firm sells its output at a price of $10, and can hire labor at a wage of $5. Capital is fixed at one unit. The profit-maximizing quantity of labor is: A. 10 B. 2/5 C. 1 D. None of the answers are correct

1

You are the manager of a firm that produces output in two plants. The demand for your firm's product is P=78-15Q, where Q=Q1+Q2. The marginal costs associated with producing in the two plants are MC1=3Q1 and MC2=2Q2. How much output should be produced in plant 1 in order to maximize profits?

1

Given the linear production function Q = 10K + 5L, if Q = 10,000 and K = 500, how much labor is utilized? A. 800 units B. 600 units C. 500 units D. 1,000 units

1,000 units

If the annual interest rate is 0 percent, the present value of receiving $1.10 in the next year is: A. $1.00.B. $1.01.C. $1.11.D.$1.10.

1.10

if the production function is Q = K^.5L^.5 and capital is fixed at 1 unit, then the average product of labor when L = 25 is: A. 10 B. 2/5 C. 1/5 D. None of the answers are correct

1/5

You are the manager in a perfectly competitive market. The price is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q^2. What level of output should you produce in the short run? A. 15 B. 8 C. 10 D. 5

10

You are the manager of a firm that sells its product in a competitive market at a price of $60. Your firm's cost function is C=50+3Q^2. The profit-maximizing output for your firm is:

10

Suppose the growth rate of the firm's profit is 5 percent, the interest rate is 6 percent, and the current profits of the firm are $100 million. What is the value of the firm? A. $111.5 millionB. $1,766.6 millionC.$10,600 millionD. None of the statements associated with this question are correct.

10,600

Suppose total benefits and total costs are given by B(Y) = 100Y - 8Y2 and C(Y) = 10Y2. Then marginal benefits are: A.100 - 16Y.B. 100Y - 8Y2.C. 50 - 4Y.D. 200Y - 10Y.

100-16Y

What is the marginal cost of producing the fifth unit? A. 50 B. 270 C. 0 D. 110

110

Suppose compensation is given by W = 500,000 + 200pi + 17S, where W = total compensation of the CEO, pi = company profits (in millions) = $400, and S = sales (in millions) = $700. What percentage of the CEO's total earnings are tied to profits of the firm? A. 31.4% B. 19.6% C. 13.5% D. 2.0%

13.5%

You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit-maximizing price is: A. 110 B. 90 C. 150 D. 130

130

According to the table below, what is the average variable cost of producing 50 units of output? A. 34 B. 14 C. 20 D. 21

14

Two identical firms compete as a Cournot duopoly. The demand they face is P = 100 - 2Q. The cost function for each firm is C(Q) = 4Q. The equilibrium output of each firm is: A. 16 B. 36 C. 32 D. 8

16

Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. If the government sets a price floor of $30 and agrees to purchase all surplus at $30 per unit, the total cost to the government will be: A.$1,650.B. $1,375.C. $900.D. $1,125.

1650

Suppose the demand for good X is given by Qdx = 20 - 4Px + 2Py + M. The price of good X is $5, the price of good Y is $15, and income is $150. Given these prices and income, how much of good X will be purchased? A. 160.B.180.C. 220.D. None of the statements associated with this question are correct.

180

Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. The equilibrium price is: A. $15.B.$19.C. $17.D. $20.

19

Given the following table, how many workers should be hired to maximize profits? A. 1 B. 2 C. 3 D. 4

2

According to the table below, what is the total cost of producing 125 units of output? A. 2,400 B. 1,000 C. 2,050 D. 1,400

2,400

If the interest rate is 10 percent and cash flows are $1,000 at the end of year one and $2,000 at the end of year two, then the present value of these cash flows is: A.$2,562.B. $3,200.C. $439.D. $3,000.

2,562

SeaSide Industries currently spends 5 percent of its sales on advertising. Suppose that the elasticity of advertising for Seaside is 0.2. Determine the optimal profit margin over price (P-MC)/P. A. 10 percent B. 4 percent C. 25 percent D. None of the answers is correct

25 percent

At what level of output does marginal cost equal marginal revenue? units produces 0 1 2 3 4 5 total revenue 0 100 180 250 290 310 total costs 0 50 110 180 270 380 A. 1 B. 2 C.3 D. 4

3

A local video store estimates its average customer's demand per year is Q=20-4P, and it knows the marginal cost of each rental is $1.00. How much should the store charge for an annual membership in order to extract the entire consumer surplus via an optimal to part pricing strategy? 20 32 64 40

32

You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C=40+5Q^2. The profit-maximizing output for your firm is:

5

You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit-maximizing output for your firm is: A. 5 B. 4 C. 6 D. 7

5

You are the manager of a monopoly that faces a demand curve described by P=230-20Q. Your costs are C=5+30Q. The profit maximizing output of your firm is:

5

For the cost function C(Q) = 100 + 2Q + 3Q^2, the average fixed cost of producing 2 units of output is: A. 3 B. 2 C. 100 D. 50

50

For the cost function C(Q) = 100 + 2Q + 3Q2, the average fixed cost of producing 2 units of output is

50.

If the interest rate is 7 percent, $500 received at the end of nine years is worth how much today? A. 500/(0.07)^9B.500/(1 + .07)^9C. 500/(1 + 7)^9D. 500

500/(1 + .07)^9

Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. If a price floor of $30 is set, what will be size of the resulting surplus? A. 0.B. 45.C. 30.D.55.

55

Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. The equilibrium quantity is: A. 92.B. 81.C. 45.D.62.

62

Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed? A. 45 B. 7 C. 3 D. 4

7

If the interest rate is 5 percent and cash flows are $3,000 at the end of year one and $5,000 at the end of year two, then the present value of these cash flows is: A.$7,392.29.B. $8,400.34.C. $4,222.50.D. $400.74.

7,392.29

Suppose compensation is given by W = 512,000 + 217pi + 10.08S, where W = total compensation of the CEO, pi = company profits (in millions) = $200, and S = sales (in millions) = $400. What percentage of the CEO's total earnings are tied to profits of the firm? A. 7.8% B. 10.9% C. 5.1% D. 8.2%

7.8%

Suppose the production function is Q = min{K, 2L}. How much output is produced when 4 units of labor and 9 units of capital are employed? A. 9 B. 2 C. 8 D. 4

8

If the interest rate is 5 percent, what is the present value of $10 received one year from now? A. $9.50B. $10.05C.$9.52D. $9.77

9.52

In the generalized dividend model, if the expected sales price is in the distant future A) it does not affect the stock price. B) it is more important than dividends in determining a stockʹs price. C) it is equally important with dividends in determining the stockʹs price. D) it is less important than dividends but still affects a stockʹs price.

A

In the one-period valuation model, the current stock price increases if A) the expected sales price increases. B) the expected sales price falls. C) the required return increases. D) dividends are cut.

A

In the one-period valuation model, the value of a share of stock depends upon A) the present value of both dividends and the expected sales price. B) only the present value of the future dividends. C) the actual value of the dividends and expected sales price received in one year. D) the future value of dividends and the actual sales price.

A

New information about an asset can result in a decrease in the assetʹs price due to A) an expected decrease in the level of future dividends. B) a decrease in the required rate of return. C) an expected increase in the dividend growth rate. D) an expected increase in the future sales price.

A

The difference between a price increase and a decrease in income is that

A decrease in income does not affect the slope of the budget line while an increase in price does change the slope.

An increase in the price of good X will have what effect on the budget line on a normal X-Y graph? A. An increase in the vertical intercept B. A decrease in the horizontal intercept C. A parallel inward shift of the line D. A parallel outward shift of the line

A decrease in the horizontal intercept

a

A decrease in the price of good Y will have what effect on the budget line on a normal X-Y graph? a. Increase the vertical intercept b. Decrease the horizontal intercept c. Parallel outward shift of the line d. Parallel inward shift of the line

b

A firm manager with vertical indifference curves (output on the horizontal axis, profit on the vertical axis) views a. Only profits to be "goods." b. Only output to be "goods." c. Both profits and outputs to be "goods." d. None of the statements associated with this question are correct

Indifference curves further from the origin imply: A. The same level of satisfaction as any other curve B. A higher level of satisfaction C. A lower level of satisfaction D. None of the statements are correct

A higher level of satisfaction

Suppose perfectly competitive market conditions are characterized by the following inverse demand and inverse supply functions : P = 100 - 5Q and P = 10 + 5Q. The demand curve facing an individual firm operating in this market is: A. P/N = (100 - 5Q)/N, where N is the total number of firms in the competitive market B. P = 100 - 5Q C. a horizontal line at $9 D. a horizontal line at $55

A horizontal line at $55

A change in income will not lead to: A. A movement along the demand curve B. A rightward shift of the demand curve C. A leftward shift of the demand curve D. All of the statements associated with the question are correct

A movement along the demand curve

Suppose the demand for X is given by Qxd = 100 - 2Px + 4Py + 10M + 2A, where Px represents the price of good X, Py is the price of good Y, M is income and A is the amount of advertising on good X. Good X is: A. A Giffen good B. A complement C. A normal good D. An inferior good

A normal good

Manager

A person who directs resources to achieve a stated goal. -Directs the efforts of others - Purchases inputs used in the production of the firms output - Directs the product price or quality decisions

a

A price decrease causes a consumer's "real" income to: a. Increase b. Decrease c. Remain unchanged d. Decrease or increase depending on the size of the price change

a

A price increase causes a consumer's "real" income to: a. Decrease b. Increase c. Remain unchanged d. Vary along the budget line

b

A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of: a. More is be better b. Completeness c. Substitutability d. Complementarity

Excise Tax

A tax on each unit of output sold, where the tax revenue is collected from the supplier

d

A worker's total earnings for one day is $100. He received a $20 fixed payment and consumes 14 hours of leisure. What is the hourly wage rate? a. $10 b. $6 c. $4 d. $8

Incentives

Affect how resources are used and how hard workers work

c

After a price decrease for good X, the new consumer equilibrium level of good X will be: a. Higher than before the price change b. Lower than before the price change c. Indeterminate without more information d. The same as before the price change

Suppose the production function is given by Q = 2K+ L. If w = $4 and r = $4, how many units of K and L will be utilized in the production process? A. All K and no L B. A combination of K and L not represented above. C. Equal amounts of K and L D. All L and no K

All K and no L

The market demand in a Bertrand duopoly is P=10-3Q, and the marginal costs are $1. Fixed costs are zero for both firms. Which of the following statements is are true? A) Producers surplus for firm1=producers for firm 2 B) Profits of firm=profits of firm 2 C) P=$1 D) All of the above

All of the above

To engage in first-degree price discrimination, a firm must: A) prevent low-value consumers from reselling to high-value consumers. B) be able to set P>MC C) Know each consumers maximum willingness to pay. D) all of the answers are correct

All of the answers are correct

In a competitive industry with identical firms, long run equilibrium is characterized by: P=MC MR=MC P=AC All of the statements are correct

All of the statements are correct.

In a competitive industry with identical firms, long-run equilibrium is characterized by: A. P = MC B. P = AC C. MR = MC D. All of the statements associated with this question are correct

All of the statements associated with this question are correct

In the long run, monopolistically competitive firms produce a level of output such that: A. P = ATC B. P > MC C. ATC > minimum of average costs D. All of the statements associated with this question are correct

All of the statements associated with this question are correct

The market demand in a Bertrand duopoly is P = 10 - 3Q, and the marginal costs are $1. Fixed costs are zero for both firms. Which of the following statement(s) is/are true? A. P = $1 B. Producer's surplus of firm 1 = producer's surplus of firm 2 C. Profits of firm 1 = profits of firm 2 D. All of the statements associated with this question are correct

All of the statements associated with this question are correct

Which of the following is (are) true? A. Accounting costs generally understate economic costs. B. In the absence of any opportunity costs, accounting profits equal economic profits. C. Accounting profits generally overstate economic profits. D. All of the statements associated with this question are correct.

All of the statements associated with this question are correct

Which of the following is(are) true? A. Accounting costs generally understate economic costs.B. Accounting profits generally overstate economic profits.C. In the absence of any opportunity costs, accounting profits equal economic profits.D.All of the statements associated with this question are correct.

All of the statements associated with this question are correct.

c

Along the same indifference curve, MRS is a. Constant as more of one good is obtained b. Increasing as more of one good is obtained c. Decreasing as more of one good is obtained d. Varying irregularly as more of one good is obtained

d

An in-kind gift causes the budget line to a. Shift to the right in a parallel fashion b. Shift to the left in a parallel fashion c. Rotate counter-clockwise d. None of the statements associated with this question are correct

An increase in the price of steak will probably lead to: A. An increase in demand for chicken B. An increase in the supply for chicken C. No change in the demand for steak or chicken D. An increase in demand for steak

An increase in demand for chicken

The difference between a price decrease and an increase in income is that: A. An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope. B. A price decrease leaves real income unchanged, while an increase in income increases real income. C. A price decrease does not affect the consumption of other goods, while an increase in income does. D. A price decrease decreases real income, while an increase in income increases real income.

An increase in income does not not affect the slope of the budget line, while a decrease in price does change the slope.

Suppose a new contracting environment that requires greater specialized investments is considered. This new contract will result in: A. An increase in the marginal benefit and a longer optimal contract B. An increase in the marginal benefit and a shorter optimal contract C. A decrease in the marginal benefit and a shorter optimal contract D. A decrease in the marginal benefit and a longer optimal contract

An increase in the marginal benefit and a longer optimal contract

Which of the following can explain an increase in the demand for housing in retirement communities?

An increase in the population of the elderly.

c

An increase in the price of good X will have what effect on the budget line on a normal X-Y graph? a. Parallel outward shift of the line b. Increase the vertical intercept c. Decrease the horizontal intercept d. Parallel inward shift of the line

If an increase in income causes a decrease in the consumption of good Y, we know that good Y is: A. A complement B. An inferior good C. A Giffen good D. A normal good

An inferior good

Decisions

Are important because scarcity implies trade-offs

Number of Firms in Market

As more firms enter, more and more output is available and is reflected by a rightward shift

Law of Supply

As the price of a good rises (falls), the quantity supplied of the good rises (falls), holding other factors affecting supply constant

Input Prices

As these prices rise, producers are willing to produce less output at each given price

d

At any point on an indifference curve, the slope indicates a. The market rate of substitution between the two goods b. The way the consumer's budget is allocated between the two goods c. How the total satisfaction of the consumer changes with different market baskets d. None of the statements associated with this question are correct

a

At the equilibrium consumption bundle, which of the following holds? a. MRSX,Y = PX /PY b. MRSX,Y = -PX /PY c. MRSX,Y = -PY /PX d. MRSX,Y =PY /PX

c

At the point of consumer equilibrium the slope of the budget line is equal to the: a. Market rate of substitution b. Indifference curve c. Marginal rate of substitution d. Consumer preference

Which of the following are least likely to be substitutes? A. Chicken and beef.B. Cars and trucks.C. Automobile and housing.D.Automobile and gasoline.

Automobile and gasoline

Which curve(s) does the marginal cost curve intersect at the (their) minimum point? A. Average variable cost curve B. Average total cost curve C. Average fixed cost curve D. Average total cost curve and average variable cost curve

Average total cost curve and average variable cost curve

b

A≻B means a. Bundle A is not preferred to bundle B b. Bundle A is preferred to bundle B c. Bundle A is equally preferred to bundle B d. Bundle A is greater than bundle B

A stockholderʹs ownership of a companyʹs stock gives her the right to A) vote and be the primary claimant of all cash flows. B) vote and be the residual claimant of all cash flows. C) manage and assume responsibility for all liabilities. D) vote and assume responsibility for all liabilities.

B

A stockʹs price will fall if there is A) a decrease in perceived risk. B) an increase in the required rate of return. C) an increase in the future sales price. D) current dividends are high.

B

In the generalized dividend model, a future sales price far in the future does not affect the current stock price because A) the present value cannot be computed. B) the present value is almost zero. C) the sales price does not affect the current price. D) the stock may never be sold.

B

In the generalized dividend model, the current stock price is the sum of A) the actual value of the future dividend stream. B) the present value of the future dividend stream. C) the present value of the future dividend stream plus the actual future sales price. D) the present value of the future sales price.

B

Information plays an important role in asset pricing because it allows the buyer to more accurately judge ________. A) liquidity B) risk C) capital D) policy

B

Periodic payments of net earnings to shareholders are known as A) capital gains. B) dividends. C) profits. D) interest.

B

Using the Gordon growth formula, if D1 is $1.00, ke is 10% or 0.10, and g is 5% or 0.05, then the current stock price is A) $10. B) $20. C) $30. D) $40.

B

Oligopoly differs from monopoly as follows: A) Oligopoly involves a few firms; monopoly involves a single firm and oligopoly involves free entry; monopoly involves no free entry B) Oligopoly involves a few firms; monopoly involves a single firm C) Oligopoly involves free entry; monopoly involves free entry D) Oligopoly does use advertisement; monopoly does not use advertisement

B) Oligopoly involves a few firms; monopoly involves a single firm

From a consumer's point of view, which type of oligopoly is most desirable? A. Cournot B. Bertrand C. Stackelberg D. Sweezy

Bertrand

Tom and Jack are the only two local gas stations. Although they have different constant marginal costs, they both survive continued competition. Tom and Jack do NOT constitute a: A. Cournot oligopoly B. Sweezy oligopoly C. Bertrand oligopoly D. Stackelberg oligopoly

Bertrand oligopoly

a

By the completeness property, if neither A>B nor B>A hold, then a. The consumer is indifferent between A and B b. The consumer prefers bundle A c. The consumer prefers bundle B d. None of the statements associated with this question are correct

c

By the property of "more is better" and transitivity, indifference curves a. Can intersect one another only once b. Can intersect one another only twice c. Do not intersect one another d. May overlap one another

a

By the property of "more is better," the consumer views the products under consideration as a. Goods b. Bads c. Inferior goods d. Normal

b

By the transitivity property if and then a. A<C b. A>C c. A~C d. B~C

A change in perceived risk of a stock changes A) the expected dividend growth rate. B) the expected sales price. C) the required rate of return. D) the current dividend.

C

In the Gordon Growth Model, the growth rate is assumed to be ________ the required return on equity. A) greater than B) equal to C) less than D) proportional to

C

One of the assumptions of the Gordon Growth Model is that dividends will continue growing at ________ rate. A) an increasing B) a fast C) a constant D) an escalating

C

Using the Gordon growth formula, if D1 is $2.00, ke is 12% or 0.12, and g is 10% or 0.10, then the current stock price is A) $20. B) $50. C) $100. D) $150.

C

Using the one-period valuation model, assuming a year-end dividend of $0.11, an expected sales price of $110, and a required rate of return of 10%, the current price of the stock would be A) $110.11. B) $121.12. C) $100.10. D) $100.11

C

Which of the following cost functions exhibits economies of scope when three (3) units of good one and two (2) units of good two are produced?

C = 50 - 5Q1Q2 + .5Q12 + Q22

Firms have market power in: A) perfectly competitive markets B) monopolistic markets C) monopolistically competitive and monopolistic markets D) monopolistically competitive markets

C) monopolistically competitive and monopolistic markets

If the price of good X is $10 and the price of good Y is $5, how much of good X will the consumer purchase if her income is $15? A. 2 B. 0 C. 3 D. Cannot tell based on the above information

Cannot tell based on the above information

Change in QD

Changes in the price of a good lead to a change in the quantity demanded of that good. This corresponds to a movement along a given demand curve

Change in Supply

Changes in variables other than the price of a good that shift the entire supply curve to the right (increase) or left (decrease)

Change in Demand

Changes in variables other than the price of a good, such as income or the price of another good . This corresponds to a shift of the entire demand curve.

Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat and $50 for pants. Consumers of type B will pay $75 for a coat and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. The optimal commodity bundling strategy is: Charge $100 for a suit Charge $125 for a suit Charge $75 for a suit Charge $150 for a suit

Charge $150 for a suit

A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of: A. Complementarity B. Substitutability C. Completeness D. More is better

Completeness

Industry Rivalry

Concentration, Price, Quantity, Quality or Service Competition, Degree of Difference, Switching Costs, Timing of Decisions, Information, Government Restraints

a

Consider a two good world, with commodities X and Y. If X is an inferior good, then an increase in consumer income cannot a. Decrease the demand for Y b. Increase the demand for Y c. Decrease the demand for X d. Make the consumer better off

b

Consider a two good world, with commodities X and Y. If Y is an inferior good, then an increase in consumer income cannot a. Decrease the demand for Y b. Decrease the demand for X c. Increase the demand for X d. Make the consumer better off

c

Consider a two good world, with commodities X and Y. Which of the following statements is correct? a. Both X and Y must be normal goods b. If good X is a normal good, good Y must be an inferior good c. If good X is an inferior good, good Y must be a normal good d. Both good X and good Y can be inferior goods

Consumer-Producer Rivalry

Consumer attempt to negotiate low prices while producers negotiate high prices - provide a natural check and balance on the market process

The possible goods and services a consumer can afford to consume represents the: A. Consumer opportunities B. Consumer behavior C. Consumer status D. Consumer preferences

Consumer opportunities

d

Consumers adjust their purchasing behavior so that: a. They purchase as many scarce resources as possible b. Marginal rate of substitution is maximized c. Marginal rate of substitution is minimized d. The ratio of prices they pay equals their marginal rate of substitution

Stockholders are residual claimants, meaning that they A) have the first priority claim on all of a companyʹs assets. B) are liable for all of a companyʹs debts. C) will never share in a companyʹs profits. D) receive the remaining cash flow after all other claims are paid.

D

The value of any investment is found by computing the A) present value of all future sales. B) present value of all future liabilities. C) future value of all future expenses. D) present value of all future cash flows.

D

Using the one-period valuation model, assuming a year-end dividend of $1.00, an expected sales price of $100, and a required rate of return of 5%, the current price of the stock would be A) $110.00. B) $101.00. C) $100.00. D) $96.19.

D

Assume that the price elasticity of demand of -2 for a certain firm's product. If the firm raises price, the firm's managers can expect total revenue to: A. Increase B. Decrease C. Remain constant D. Either increase or remain constant, depending upon the size of the price increase

Decrease

Suppose the own price elasticity of demand for good X is -0.5, and the price of good X increases by 10 percent. We would expect the quantity demanded of good X to: A. Decrease by 5 percent B. Decrease by 20 percent C. Increase by 20 percent D. Increase by 5 percent

Decrease by 5 percent

If the price of a good falls, then the equilibrium consumption of that good: A. Decreases if it is an inferior good B. Decreases if it is a normal good C. Decreases if it is a Giffen good D. None of the statements are correct

Decreases if it is a Giffen good

When a demand curve is linear, A. Demand is elastic at high prices B. Demand is unitary elastic at low prices C. The elasticity is the same as the slope of the demand curve D. The elasticity is constant at all prices

Demand is elastic at high prices

a

Diminishing marginal rate of substitution implies that a. Indifference curves are convex from the origin b. Indifference curves are concave from the origin c. Indifference curves are either convex or concave from the origin d. Indifference curves are straight line

Which of the following would not shift the demand for good A? A. Drop in price of good A B. Consumer income C. Change in the level of advertising of good A D. Drop in price of good B

Drop in price of good A

Which of the following would not shift the demand for good A?

Drop in price of good A.

If the cross-price elasticity between ketchup and hamburgers is -1.2, a 4 percent increase in the price of ketchup will lead to a 4.8 percent: A. Increase in quantity demanded of ketchup B. Drop in quantity demanded of ketchup C. Drop in quantity demanded of hamburgers D. Increase in quantity demanded of hamburgers

Drop in quantity demanded of hamburgers

What is implied when the total cost of producing Q1 and Q2 together is less than the total cost of producing Q1 and Q2 separately?

Economies of scope

What contributes to the existence of multi product firms? Economies of scope and cost complementarity Cost complementarity Economies of Scope Economies of Scale

Economies of scope and cost complementarity

Point B in the figure below is: A. inefficient since it produces 20 units of output at a cost greater than the minimum cost B. efficient since it produces 10 units of output at the lowest possible cost C. efficient since it produces 20 units of output at the lowest possible cost. D. inefficient since it produces 10 units of output at a cost greater than the minimum cost

Efficient since it produces 10 units of output at the lowest possible cost

Suppose the demand for a product is lnQxd = 12 - 3lnPx. Then product x is: A. Unitary elastic B. Elastic C. Inelastic D. It cannot be determined without more information

Elastic

S^ only

Equilibrium Price: Decrease Equilibrium Quantity: Increase

Two firms compete in a Stackelberg fashion. If firm 2 is the leader, then: firm 2 views the output of firm 1 as given. Firm 1 views the output of firm 2 as given. Both of the above are correct. None of the answers are correct.

Firm 1 views the output of firm 2 as given.

d

Given that income is $200 and the price of good Y is $40. What is the vertical intercept of the budget line? a. 8,000 b. 20 c. 1/5 d. 5

b

Given that income is $500 and PX = $20 and PY = $5, what is the market rate of substitution between goods X and Y? a. 100 b. -4 c. -20 d. 25

c

Given that income is $750 and PX = $32 and PY = $8, what is the market rate of substitution between goods X and Y? a. -0.75 b. -3 c. -4 d. -25

Complements

Goods for which an increase (decrease) in the price of one good leads to a decrease (increase) in the demand for the other good (beer & pretzels)

b

How does a decrease in the price of good X affect the market rate of substitution between goods X and Y? a. It increases b. It decreases c. Remains unchanged d. Indeterminable without more information

Which of the following mergers is an example of vertical integration? A. IBM purchases a California computer chip company B. AT&T purchases MCI. C. GM purchases Ford. D. Bethlehem Steel purchases U.S. Steel.

IBM purchases a California computer chip company

a

If a consumer is given a $10 gift certificate, good only for items in store X and all items in store X are normal goods, then the consumer desires to consume a. More goods in store X b. Less goods in store X c. The same amount of goods in store X d. None of the statements associated with this question are correct

d

If a consumer's income decreases, what will happen to the budget line? a. It will shift outward b. It will become steeper c. It will become flatter d. It will shift inward

b

If a firm offers to pay a worker $10 for each hour of leisure the worker gives up the $10 implies the a. Marginal rate of substitution between leisure and income b. Market rate of substitution between leisure and income c. Market rate of transformation between leisure and income d. Marginal rate of transformation between leisure and income

c

If a firm offers to pay a worker $10 for each hour of leisure the worker gives up then the opportunities confronting the worker will be given by the a. Convex curve from the origin b. Concave curve from the origin c. Straight line with a negative slope d. Straight line with a positive slope

d

If an increase in income causes a decrease in the consumption of good Y we know that good Y is: a. A normal good b. A substitute c. A complement d. An inferior good

b

If an increase in the price of good X leads to a decrease in the consumption of good Y, then goods X and Y are called a. Substitutes b. Complements c. Normal goods d. Inferior goods

Consider a two-good world, with commodities X and Y. Which of the following statements is correct? A. If good X is a normal good, good Y must be an inferior good. B. Both good X and good Y can be inferior goods. C. If good X is an inferior good, good Y must be a normal good. D. Both X and Y must be normal goods

If good X is an inferior good, good Y must be a normal good

b

If sugar and Nutrasweet are substitutes, then we can be certain that a decrease in the price of sugar will lead to an increase in the consumption of a. Nutrasweet b. Sugar c. Sugar and Nutrasweet d. None of the statements associated with this question are correct

Short-term and long-term profits principle

If the growth rate in profits is less than the interest rate and both are constant, maximizing current (short-term) profits is the same as maximizing long-term profits

a

If the price of a good purchased by a utility maximizing consumer goes down, all other things remain the same, and the consumer's income is adjusted so that he can just barely attain his previous level of satisfaction, and if the consumer had indifference curves of the usual shape it will be found that a. More of the good will be purchased than before b. Less of the good will be purchased than before c. The same amount of the good will be purchased as before d. The consumer will stop purchasing the good at all

b

If the price of a good rises, then the equilibrium consumption of that good a. Increases if it is an inferior good b. Decreases if it is a normal good c. Remains the same d. None of the statements associated with this question are correct

a

If the price of computers decreases, then the a. Sales of a substitute, such as a telephone, decreases b. Sales of a substitute, such as a telephone, increases c. Inventory of computers increases d. Inventory of computer software increases

d

If the price of good X decreases, what will happen to the budget line? a. It will have a parallel shift inward b. It will have a parallel shift outward c. It will become steeper d. It will become flatter

b

If the price of good X increases, what will happen to the budget line? a. It will shift outward b. It will become steeper c. It will become flatter d. It will shift inward

d

If the price of good X is $10 and the price of good Y is $5, how much of good X would the consumer purchase if her income is $15? a. 0 b. 2 c. 3 d. Cannot tell based on the above information

a

If the slope of the indifference curve is steeper than the slope of the budget line, and X is on the horizontal axis a. The consumer is willing to give up more of good Y to get an additional unit of good X than is necessary under the current market prices b. MRS < PX /PY c. MRS < - PX /PY d. The consumer is willing to give up more of good X to get an additional unit of good Y than is necessary under the current market prices

b

If widgets and gidgets are complements and both are normal goods, then a decrease in the demand for widgets will result from a. An increase in the price of widgets b. A decrease in income c. A decrease in the price of gidgets d. An increase in the price of widgets and a decrease in income

c

If widgets and gidgets are complements and both are normal goods, then an increase in the demand for widgets will result from a. An increase in the price of widgets b. A decrease in income c. A decrease in the price of gidgets d. An increase in the price of widgets and a decrease in income

a

If you include in your offerings some inferior goods, the demand for these products will increase a. During bad economic times b. During economic booms c. When incomes are high d. All of the statements associated with this question are correct

b

If you sell an inferior good, offering to sell gift certificates to those looking for a gift may result in a. A greater quantity sold than before the customer is given a gift certificate b. A greater quantity sold than if the customer resorts to giving a cash gift c. The same quantity sold than before the customer is given a gift certificate d. The same quantity sold as if the customer resorts to giving a cash gift

b

If you were running an advertising campaign for designer men's suits, you should target families with: a. Lower incomes b. Higher incomes c. Poor taste in clothing d. Similar tastes and preferences

b

If you wish to open a store and you do not like risk, it would be wise to sell: a. Only normal goods b. A mix of normal and inferior goods c. All inferior goods d. None of the statements associated with this question are correct

Market Demand Curve

Illustrates the relationship between the total quantity and price per unit of a good all consumers are willing and able to purchase, holding other variables constant

am positive

Increase in M (income) will increase the consumption of good X, meaning it is a normal good

Rightward shift of demand curve:

Increase in demand

After a price decrease for good X, the new consumer equilibrium level of good X will be: A. lower than before the price change B. Higher than before the price change C. The same as before the price change D. Indeterminate without more information

Indeterminate without more information

Power of Buyers

Industry profits tend to be lower when customers or buyers have the power to negotiate favorable terms for the products or services produced in the industry - Buyer Concentration, price/value substitute producer or services, relationship specific investments, customer switching costs, government restraints

Input of Suppliers

Industry profits tend to be lower when suppliers have the power to negotiate favorable terms for their inputs - Supplier concentration, price/productivity of alternate inputs, relationship specific investments, supplier switching costs, government restraints

Point A in the figure below is: A. efficient since it produces 20 units of output at the lowest possible cost. B. inefficient since it produces 20 units of output at a cost greater than the minimum cost C. efficient since it produces 10 units of output at the lowest possible cost D. inefficient since it produces 10 units of output at a cost greater than the minimum cost

Inefficient since it produces 20 units of output at a cost greater than the minimum cost

If there are few close substitutes for a good, demand tends to be relatively: A. Unitary elastic B. Elastic C. Inelastic D. Neither elastic, inelastic, nor unitary elastic

Inelastic

Demand is perfectly elastic when the absolute value of the own price elasticity of demand is: A. One B. Infinite C. Zero D. Unknown

Infinite

Explicit Cost

Is a direct payment made to others in the course of running a business, such as wage, rent and materials

Second-degree price discrimination: Is the practice of posting a discrete schedule of declining prices for different ranges of quantities. results in transfer pricing. eliminates the problem of double marginalization. none of the answers are correct.

Is the practice of posting a discrete schedule of declining prices for different ranges of quantities.

The combinations of inputs that produce a given level of output are depicted by: A. Isocost curves B. Budget lines C. Isoquants D. Indifference curves

Isoquants

Consumer-Consumer Rivalry

It reduces the negotiating power of consumers in the marketplace. When limited quantities of goods are available, consumers compete with each other for the right to purchase the available goods

a

Joe consumes 10 units of food and 12 units of clothing. Since food is an inferior good, a gift to Joe of a $12 gift certificate at a clothing store will a. Induce Joe to eat more than 10 units of food b. Make Joe better off than a gift of $12 in cash c. Make Joe worse off than a gift of $12 in cash d. None of the statements associated with this question are correct

b

Joe consumes 48 units of food and 12 units of clothing. If food is an inferior good, a. Joe would strictly prefer receiving a $10 gift certificate at a clothing store to receiving $10 in cash b. Joe would strictly prefer receiving $10 in cash to receiving a $10 gift certificate at a clothing store c. Joe would be indifferent between receiving a $10 gift certificate at a clothing store and receiving $10 in cash d. Upon receiving a $10 gift certificate at a clothing store, Joe would consume less clothing and more food

c

Joe prefers a three pack of soda to a six-pack. What properties does this preference violate? a. Completeness b. Transitivity c. More is better d. Diminishing MRS

The Leontief production function implies: A. A positive MRTS B. L-shaped isoquants C. Straight-line isoquants D. Convex-shaped isoquants

L-shaped isoquants

For the multiproduct cost function C(Q1,Q2) = 100 + 2Q1Q2 + 4Q12,what is the marginal cost function for good one?

MC1 = 2Q2 + 8Q1.

Which of the following sets of economic data is minimizing the cost of producing a given level of output? A. MPL = 40, MPK = 20, w = $16, r = $32 B. MPL = 20, MPK = 40, w = $32 r = $16 C. MPL = 20, MPK = 40, w = $16, r = $32 D. MPL = 40, MPK = 40, w = $16, r = $32

MPL = 20, MPK = 40, w = $16, r = $32

Consider a monopoly where the inverse demand for its product is given by P = 200 - 5Q. Based on this information, the marginal revenue function is: A. MR(Q) = 400 - 10Q B. MR(Q) = 200 - 10Q C. MR(Q) = 200 - 2.5Q D. MR(Q) = 400 - 2.5Q

MR(Q) = 200 - 10Q

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q1 - 2Q2. The firms' marginal costs are identical and are given by MCi = 2. Based on this information, the Stackelberg follower's marginal revenue function is: A. MRF(QL,QF) = 100 - QL - 2QF B. MRF(QL,QF) = 100 - 2QL - QF C. MRF(QL,QF) = 100 - 4QL - 2QF D. MRF(QL,QF) = 100 - 2QL - 4QF

MRF(QL,QF) = 100 - 2QL - 4QF

c

Managers can get workers to work longer hours a. By increasing wages on all hours worked b. By lowering wages on all hours worked c. With higher overtime pay in excess of regular hourly pay d. With lower overtime pay in excess of regular hourly pay

a

Managers can get workers to work longer hours by: a. Offering overtime pay b. Offering a higher flat wage rate on all hours worked c. Decreasing the hourly wage scale d. None of the statements associated with this question are correct

Which of the following is incorrect? A. Accounting profits generally overstate economic profits.B. Accounting profits do not take opportunity cost into account.C. Economic costs include not only the accounting costs but also the opportunity costs of the resources used in production.D.Managers should only be interested in accounting profits.

Managers should only be interested in accounting profits.

b

Many gourmet shops go out of business during recessions since they sell almost exclusively a. Inferior goods b. Normal goods c. Substitutes d. Complements

The optimal amount of studying is determined by comparing: A. Total benefit and the total cost of studying. B. Marginal benefit and the marginal cost of studying C. Marginal benefit and the total cost of studying D. Marginal benefit and the total benefit of studying

Marginal benefit and the marginal cost of studying

Firm managers should use inputs at levels where:

Marginal benefit equals marginal cost and Value marginal product of labor equals wage.

The change in total output attributable to the last unit of an input is the: A. average product B. marginal return C. marginal product D. total product

Marginal product

Total product begins to fall when:

Marginal product is zero.

At the point of consumer equilibrium, the slope of the budget line is equal to the: A. Indifference curve B. Marginal rate of substitution C. Market rate of indifference D. Consumer preferences

Marginal rate of substitution

The absolute value of the slope of the isoquant is the:

Marginal rate of technical substitution.

Profit Maximization Principle

Maximizing profits means maximizing the value of the firm, which is the present value of current and future profits

a

Mitchell's money income is $150, the price of X is $2, and the price of Y is $2. Given these prices and income, Mitchell buys 50 units of X and 25 units of Y. Call this combination of X and Y bundle J. At bundle J Mitchell's MRS is 2. At bundle J, if Mitchell increases consumption of Y by 1 unit how many units of X can he give up and still reach the same level of utility? a. ½ b. 1 c. 2 d. 4

b

Mitchell's money income is $150, the price of X is $2, and the price of Y is $2. Given these prices and income, Mitchell buys 50 units of X and 25 units of Y. Call this combination of X and Y bundle J. At bundle J Mitchell's MRS is 2. At bundle J, if Mitchell increases consumption of Y by 1 unit how many units of X must he give up in order to satisfy his budget constraint? a. ½ b. 1 c. 2 d. 4

c

Mitchell's money income is $150, the price of X is $2, and the price of Y is $2. Given these prices and income, Mitchell buys 50 units of X and 25 units of Y. Call this combination of X and Y bundle J. At bundle J Mitchell's MRS is 2. Given these prices and income, what is Mitchell's equilibrium consumption of X? a. X < 50 b. X = 50 c. X > 50 d. None of the statements associated with this question are correct

Which of the following market structures would you expect to yield the greatest product variety? A. Bertrand Oligopoly B. Perfect competition C. Monopolistic competition D. Monopoly

Monopolistic competition

Which of the following market structures would you expect to yield the greatest product variety? perfect competition monopoly bertrand oligopoly monopolistic competition

Monopolistic competition

We would expect the demand for jeans to be: A. More elastic than the demand for clothing B. The same as the demand for clothing C. Less elastic than the demand for clothing D. Neither more elastic, less elastic, nor the same elasticity as that of the demand for clothing.

More elastic than the demand for clothing

In a perfectly competitive market, each firm has the following cost function: C = 49 + 5Q + Q^2. The market price is $35 and the market demand is Qd = 185 - P, where P is the market price. Given the cost function and the market price, will more firms enter or leave the market in the long run? A. More firms will leave the market B. More firms will enter the market C. No firms will enter nor leave the market D. We cannot tell

More firms will enter the market

Joe prefers a three-pack of soda to a six-pack. What properties does this preference violate? A. More is better B. Completeness C. Diminishing MRS D. Transitivity

More is better

Joe prefers a three pack of soda to a six-pack. What properties does this preference violate?

More is better.

Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use: A. Three times more capital than labor B. More labor and less capital C. More capital and less labor D. None of the answers are correct

More labor and less capital

When firm 1 enjoys a first mover advantage in a stackelberg duopoly, it will produce: A) less output and charge the same price as firm 2 B) Less output and charge a higher price than firm 2 C) more output and charge a lower price than firm 2 D) more output and charge the same price as firm 2

More output and charge the same price as firm 2

Suppose that production for good X is characterized by the following production function, Q = K^.5L^.7. Suppose both K and L are multiplied by 3. Then output Q will be multiplied by: A. More than 3 B. Less than 3 C. Exactly 3 D. There is insufficient information to determine the change in output

More than 3

a

Most workers view leisure and income as a. Goods b. Bads c. Goods and bads, respectively d. Bads and goods, respectively

The higher the interest rate, the greater the: A. present value.B. net present value.C. Both present value and net present value are correct.D.Neither present value nor net present value is correct.

Neither present value nor net present value is correct.

In a sweezy oligopoly, a decrease in a firm's marginal cost generally leads to: Increased output and a lower price reduced output and a higher price higher output and a higher price none of the above

None of the Above

For a cost function C = 100 + 10Q + Q^2, the marginal cost of producing 10 units of output is: A. 200 B. 10 C. 210 D. None of the answers are correct

None of the answers are correct

If the production function is Q = KL and capital is fixed at 1 unit, then the marginal product of labor when L = 25 is: A. 15 B. 1/10 C. 1/4 D. None of the answers are correct

None of the answers are correct

In a Sweezy Oligopoly, a decrease in a firm's marginal cost generally leads to: A. Increased output and a lower price B. Higher output and a higher price C. Reduced output and a higher price D. None of the answers are correct

None of the answers are correct

Which of the following is true? A. In oligopoly a change in marginal cost has an effect on output or price B. In Cournot oligopoly firms produce an identical product at a constant marginal cost and engage in price competition C. In Bertrand oligopoly each firm believes that its rivals will hold their output constant if it changes it output D. None of the answers are correct

None of the answers are correct

Which of the following is true? in oligopoly a change in marginal cost never has an effect on output or price. In Bertrand oligopoly each firm believes that its rivals will hold their output constant if it changes its output. In cournot oligopoly firms produce an identical product at a constant marginal cost and engage in price competition. None of the answers is correct.

None of the answers is correct

Which of the following is true? A. If income increases, a consumer will always consume more of a good. B. Indifference curves may intersect. C. At any point of consumer equilibrium, the MRS always equals 1. D. None of the statements are correct.

None of the statements are correct

A farm must decide whether or not to purchase a new tractor. The tractor will reduce costs by $2,000 in the first year, $2,500 in the second, and $3,000 in the third and final year of usefulness. The tractor costs $9,000 today, while the above cost savings will be realized at the end of each year. If the interest rate is 7 percent, what is the net present value of purchasing the tractor? A. $6,764B. $9,362C. $18,362D.None of the statements associated with this question are correct.

None of the statements associated with this question are correct.

Suppose that supply increases and demand decreases. What effect will this have on price and quantity? A. Price will decrease and quantity will increase B. Price will increase and quantity may rise or fall C. Price will decrease and quantity will decrease D. None of the statements associated with this question are correct.

None of the statements associated with this question are correct.

Suppose that supply increases and demand decreases. What effect will this have on price and quantity? A. Price will increase and quantity may rise or fall.B. Price will decrease and quantity will increase.C. Price will decrease and quantity will decrease.D.None of the statements associated with this question are correct.

None of the statements associated with this question are correct.

Suppose the demand for good X is given by Qdx = 10 - 2Px + Py + M. The price of good X is $1, the price of good Y is $10, and income is $100. Given these prices and income, how much of good X will be purchased?

None of the statements associated with this question are correct.

Suppose the demand for good X is given by Qdx: 10 - 2Px + Py + M. The price of good X is $1, the price of good Y is $10, and income is $100. Given these prices and income, how much of good X will be purchased? A. 515 B. 1,000 C. 115 D. None of the statements associated with this question are correct.

None of the statements associated with this question are correct.

Suppose the supply of good X is given by QSx = 10 + 2Px. How many units of good X are produced if the price of good X is 20? A. 10.B. 20.C. 30.D.None of the statements associated with this question are correct.

None of the statements associated with this question are correct.

Which of the following statements is incorrect? A. As the population rises, the market demand curve shifts to the right.B. As a greater fraction of the population becomes elderly, the demand for medical services will tend to increase.C. Changes in the composition of the population affect the demand for a product.D.None of the statements associated with this question are incorrect.

None of the statements associated with this question are incorrect

The primary difference between monopolistic competition and perfect competition is: A. The number of firms in the market B. The ease of entry and exit into the industry C. Both the ease of entry and exit into the industry and the number of firms in the market are correct. D. None of the answers are correct

None of these answers are correct

c

Normally owners of firms should try to induce their managers to care: a. Solely about output b. About profits and output c. Solely about profits d. None of the statements associated with this question are correct

Linear Supply Function

One simple, but useful, representation of a supply function is the linear supply function: __𝑄_𝑋__𝑠_=_𝛽_0_+_𝛽_𝑋__𝑃_𝑋_+_𝛽_𝑊_𝑊+_𝛽_𝑟__𝑃_𝑟_+_𝛽_𝐻_𝐻 , where: __𝑄_𝑋__𝑠_ is the number of units of good X produced; _𝑃_𝑋_ is the price of good X; 𝑊 is the price of an input; _𝑃_𝑟_ is price of technologically related goods; 𝐻 is the value of any other variable affecting supply.

Consider the following inverse market demand function: P = 120 - (Q1 + Q2). The cost functions are C1(Q1) = 2Q1 for firm 1 and C2(Q2) = 4Q2 for firm 2. Now suppose that the two firms operate as a Stackelberg duopoly where firm 1 is the leader and firm 2 is the follower. The market price is: A. P = 4 B. P = 88 C. P = 32 D. P = 2

P = 32

Consider the following inverse market demand function: P = 120 - (Q1 + Q2). The cost functions are C1(Q1) = 2Q1 for firm 1 and C2(Q2) = 4Q2 for firm 2. Suppose the two firms operate as a Cournot duopoly. The market price is: A. P = 42 B. P = 78 C. P = 4 D. P = 2

P = 42

You are the manager of a monopoly firm with (inverse) demand given by P = 50 - 0.5Q. Your firm's cost function is C = 40 + 5Q^2. Your firm's marginal revenue is: A. P = 100 - Q B. P = 50 - 0.5Q C. P = 50 - Q D. there is insufficient information to determine the firm's marginal revenue.

P = 50 - Q

Which of the following is true of a perfectly contestable market? A. P > MC B. P > MC and P < ATC C. P = MC D. P < MC

P = MC

Which of the following is true under monopoly? A. P > MC B. P = MR C. P > ATC D. P = ATC

P > MC

Which of the following is true under monopoly? A. Profits are always positive B. P = MR C. P > MC D. All of the choices are true for monopoly

P > MC

S ^ D^

P: Ambiguous Q: Increases

S^ Dv

P: Decreases Q: Ambiguous

Sv D^

P: Increase Q: Ambiguous

Which of the following statements is true regarding profit-maximizing markup for a Cornet oligopoly with N identical firms? P=((1+NEf)/NEf)MC P(NEf/(1+NEf))=MC P=(NEf/(1+NEf))MC P(N(1+Ef)/NEf)=MC

P=(NEf/(1+NEf))MC

Which of the following is true for perfect competition but not true for monopolistic competition and monopoly? P=MC and positive long run profits P=MC Positive long run profits MC=MR

P=MC

Given a linear supply function of the form QXS = 3,000 + 3PX - 2Pr - Pw, find the inverse linear supply function assuming Pr = $1,000 and Pw = $100. A. QXS = 900 + 3PX.B. PX = 300 + 0.3333QX.C.PX = -300 + 0.3333QX.D. PX = 2,900 + 3PX.

PX = -300 + 0.3333QX

Given a linear supply function of the form QXS = -10 + 5PX, find the inverse linear supply function. A.PX = 2 + 0.2QX.B. PX = -10 + 0.2QX.C. PX = -10 + 5QX.D. PX = 2 + 5QX

PX = 2 + 0.2QX.

Given a linear demand function of the form QXd = 100 - 0.5PX, find the inverse linear demand function. A.PX = 200 - 2QX.B. PX = 100 - 0.5QX.C. PX = 100 - 2QX.D. PX = 100QX - 0.5PX

PX = 200 - 2QX.

Given a linear demand function of the form QXd = 500 - 2PX - 3PY + 0.01M, find the inverse linear demand function assuming M = 20,000 and PY = 10. A. PX = 500 - 2QX - 3PY + 0.01M.B.PX = 335 - 0.5QX.C. PX = 335 - 2QX.D. PX = 500 - 2QX

PX = 335 - 0.5QX.

With a linear production function there is a: A. Fixed proportion relationship between all inputs B. Variable-proportion relationship between all inputs C. Perfect complementary relationship between all inputs D. Perfect substitutable relationship between all inputs

Perfect substitutable relationship between all inputs

Consider firms operating in an industry where the own price elasticity of demand is infinite; that is, Eq,p = -infinity. Use this information to determine the type of industry in which these firms operate and the optimal advertising-to-sales ratio. A. Perfectly competitive industry and 0 B. Perfectly competitive industry and infinity C. Monopolistic industry and 0 D. Monopolistically competitive industry and infinity

Perfectly competitive industry and 0

Differentiated goods are NOT a feature of a: A. Monopolistic market B. Perfectly competitive market and monopolistic market C. Perfectly competitive market D. Monopolistically competitive market

Perfectly competitive market and monopolistic market

The Bertrand model of oligopoly reveals that: A. Capacity constraints are not important in determining market performance. B. Changes in marginal cost do not affect prices C. Perfectly competitive prices can arise in markets with only a few firms. D. All of the statements associated with this question are true.

Perfectly competitive prices can arise in markets with only a few firms

Consider the following inverse market demand function: P = 120 - (Q1 + Q2). The cost functions are C1(Q1) = 2Q1 for firm 1 and C2(Q2) = 4Q2 for firm 2. Suppose the two firms operate as a Cournot duopoly. The profit of each firm is: A. Pi1 = 1800 and Pi2 = 1600 B. Pi1 = 2050 and Pi2 = 1966 C. Pi1 = 1600 and Pi2 = 1444 D. Pi1 = 1700 and Pi2 = 1666

Pi1 = 1600 and Pi2 = 1444

Consider the following inverse market demand function: P = 120 - (Q1 + Q2). The cost functions are C1(Q1) = 2Q1 for firm 1 and C2(Q2) = 4Q2 for firm 2. Now suppose that the two firms operate as a Stackelberg duopoly where firm 1 is the leader and firm 2 is the follower. The profit of each firm is: A. Pi1 = 1800 and Pi2 = 1600 B. Pi1 = 987 and Pi2 = 1500 C. Pi1 = 1600 and Pi2 = 1444 D. Pi1 = 1800 and Pi2 = 784

Pi1 = 1800 and Pi2 = 784

Substitutes and Complements

Price value of surrogate product or services, price/value of complementary products or services, network effects, government restraints

With a linear inverse demand function and the same constant marginal costs for both firms in a homogeneous product Stackelberg duopoly, which of the following will result? A. QL = 2QF B. PL > PF C. Profits of leader > Profits of follower and QL = 2QF D. Profits of leader > Profits of follower

Profits of leader > profits of follower and QL = 2QF

With a linear inverse demand function and the same constant marginal costs for both firms in a homogenous product stackelberg duopoly, which of the following will result? PL>PF QL=2QF Profits of leader>Profits of follower Profits of leader>Profits of follower and QL=2QF

Profits of leader>Profits of follower and QL=2QF

Informative Advertising

Provides consumers with info about the existence or quality of a product

Consider the following inverse market demand function: P = 120 - (Q1 + Q2). The cost functions are C1(Q1) = 2Q1 for firm 1 and C2(Q2) = 4Q2 for firm 2. Suppose the two firms operate as a Cournot duopoly. The firms profit maximizing quantities are: A. Q1 = 40 and Q2 = 38 B. Q1 = 38.7 and Q2 = 37.5 C. Q1 = 39.3 and Q2 = 39.3 D. Q1 = 40 and Q2 = 40

Q1 = 40 and Q2 = 38

d

Sam Voter prefers Ronald to Joe, Joe to Gary, and Gary to Ronald. Sam's preferences a. Are consistent with our assumptions about consumer behavior b. Indicate that he is a liberal c. Are not complete d. Are not transitive

For a steel factory, a decrease in the cost of electricity to the plant will cause the supply curve to: A. Shift to the left B. Become flatter C. Shift to the right D. Become parallel to the price axis

Shift to the left

In a competitive market, the market demand is Qd = 60 - 6P and the market supply is Qs = 4P. A price ceiling of $3 will result in a: A. Surplus of 12 units B. Shortage of 15 units C. Shortage of 30 units D. Surplus of 30 units

Shortage of 30 units

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 the firm: A. Is cost minimizing B. Should use more L and less K to cost minimize C. Is profit maximizing but not cost minimizing D. Should use less L and more K to cost minimize

Should use more L and less K to cost minimize

Changes in the price of an input cause: A. Changes in both the isoquants and isocosts of equal magnitude B. Parallel shifts of the isocost lines C. Isoquants to become steeper D. Slope changes in the isocost line

Slope changes in the isocost line

Changes in the price of an input cause:

Slope changes in the isocost line.

You are the manager in a perfectly competitive market. The price is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q^2. What will happen in the long run if there is no change in the demand curve? A. There will be neither entry nor exit from the market B. Some firms will enter the market eventually C. Some firms will leave the market eventually D. None of the answers are correct

Some firms will enter the market eventually

b

Some individuals choose to undertake risky prospects while others choose safer ones, because they have different a. Degrees of transitivity b. Marginal rates of substitution between risk and reward c. Income elasticities d. Marginal utilities

Which would you expect to make the highest profits, other things equal? Cournot oligopolist Bertrand Oligopolist Stackelberg follower Stackelberg leader

Stackelberg leader

Market Supply Curve

Summarizes the relationship between the total quantity all producers are willing and able to produce at alternative prices, holding other factors affecting supply constant

d

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day. What are the maximum total earnings the worker can earn in a day? a. $492 b. $392 c. $192 d. $292

c

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day. What is the equation for the worker's opportunity set? (E is total earnings and L is leisure) a. E = 100 - 8L b. E = 192 - 8L c. E = 292 - 8L d. None of the statements associated with this question are correct

b

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day. What is the market rate of substitution between leisure and income? a. $5 b. $8 c. $10 d. None of the statements associated with this question are correct

b

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day. What is the minimum the worker can earn in a day? a. $50 b. $100 c. $192 d. $200

d

Suppose earnings are given by E = $50 + $20(24 - L), where E is earnings and L is the hours of leisure. What is the price to the worker of consuming an additional hour of leisure? a. $30 b. $26 c. $24 d. $20

b

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. How much is this person working if their daily earnings are $116? a. 18 hours b. 16 hours c. 12 hours d. 6 hours

c

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. The fixed payment for this worker is: a. $7 b. $24 c. $60 d. $0

d

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. What is the maximum this worker can earn in three (3) days? a. $519 b. $417 c. $228 d. $684

b

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. What is the price to the worker of consuming an additional hour of leisure? a. $24 b. $7 c. $12 d. $10

b

Suppose that a consumer's preferences are well behaved in that properties 4-1-4-4 are satisfied and the initial budget constraint is given by 300 = 2X + 4Y. At the initial budget constraint, this consumer purchases 100 units of good X and 25 units of good Y. Suppose the price of X increases to $4 per unit resulting in a new consumption bundle consisting of 60 units of X and 15 units of Y. Then, slope of the inverse demand for good X over this consumption range is a. 0.05 b. -0.05 c. -0.267 d. -0.444

a

Suppose that a consumer's preferences are well behaved in that properties 4-1-4-4 are satisfied and the initial equilibrium consumption bundle consists of 100 units of X and 50 units of Y. If PX increases such that the new equilibrium consumption bundle is 150 units of X and 75 units of Y, then goods X and Y are a. Complements b. Substitutes c. Inferior goods d. Unrelated

a

Suppose that consumers' preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good and that the price of good Y decreases. Then, which of the following effect is known with certainty. a. The income and substitution effect reinforce one another leading to an overall decrease the consumption of good X b. The income and substitution effect will have competing effects leading to an indeterminate impact on the consumption of good Y c. The income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y d. The income and substitution effect will reinforce one another leading to an overall decrease in the consumption of good Y e. The income and substitution effect will reinforce one another leading to an overall increase in the consumption of good X

d

Suppose that consumers' preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good and that the price of good Y increases. Then, which of the following effect is known with certainty. a. The income and substitution effect reinforce one another leading to an overall decrease the consumption of good X b. The income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y c. The income and substitution effect will reinforce one another leading to an overall increase in the consumption of good X d. The income and substitution effect will have competing effects leading to an indeterminate impact on the consumption of good Y

d

Suppose that consumers' preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that both X and Y are inferior goods and the price of good Y increases. Then the substitution effect will lead consumers to consume a. More of good X and more of good Y b. Less of good X and more of good Y c. Less of good X and less of good Y d. More of good X and less of good Y

b

Suppose that consumers' preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that both X and Y are normal goods and that the price of good X increases. Then, which of the following effect is known with certainty. a. The income and substitution effect reinforce one another leading to an overall increase the consumption of good X b. The income and substitution effect reinforce one another leading to an overall decrease the consumption of good X c. The income and substitution effect will have competing effects leading to an indeterminate impact on the consumption of good X d. The income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y

d

Suppose that consumers' preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that both X and Y are normal goods and that the price of good Y decreases. Then, which of the following effect is known with certainty. a. The income and substitution effect reinforce one another leading to an overall increase the consumption of good X b. The income and substitution effect reinforce one another leading to an overall decrease the consumption of good X c. The income and substitution effect will have competing effects leading to an indeterminate impact on the consumption of good X d. The income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y

c

Suppose that consumers' preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that both X and Y are normal goods and that the price of good Y increases. Then, which of the following effect is known with certainty. a. The income and substitution effect reinforce one another leading to an overall increase the consumption of good X b. The income and substitution effect reinforce one another leading to an overall decrease the consumption of good X c. There will be an indeterminate effect on the consumption of good X d. The income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y

a

Suppose that three consumers are in the market for good X. Consumer 1's (inverse) PX = 20 - QX; Consumer 2's (inverse) demand is PX = 20 - 2QX; and Consumer 3's (inverse) demand is PX = 20 - 4QX. When PX = $10, the market will demand a. 17.5 units and the inverse market demand curve is PX = 20 - 0.5714QX b. -30 units and the inverse market demand curve is PX = 60 - 7QX c. 17.5 units and the inverse market demand curve is PX = 60 - 7QX d. None of the statements associated with the questions are correct

A

Suppose the utility function for a firm manager is U = π + bQ, where Q is output, π is profit, and b is a positive constant. How would the firm's output compare with what it would be if the manager's objective was to maximize profit? a. It would be greater than the profit-maximizing output b. It would be less than the profit-maximizing output c. It would be the same as the profit-maximizing output d. None of the statements associated with this question are correct

Incremental Costs

The additional costs that stem from a yes-or-no decision

b

The affordable bundle that yields the greatest satisfaction to the consumer is: a. The maximum bundle b. The equilibrium consumption bundle c. The allowable purchasing bundle d. The most popular bundle

Producer Surplus

The amount producers receive in excess of the amount necessary to induce them to produce the good; the area above the supply curve but below the market price of the good

b

The budget set defines the combinations of good X and Y that a. Are desirable to the consumer b. Are affordable to the consumer c. Maximizes consumer's utility d. Maximizes supplier's profit

Marginal Cost

The change in the total costs arising from a change in the managerial control variable, 𝑄

Marginal Benefit

The change in total benefits arising from a change in the managerial control variable, 𝑄 - additional benefits that arise by using an additional unit of the managerial control variable

d

The combinations of goods X and Y that are affordable to the consumer are defined by the: a. Consumption set b. Income line c. Budget constraint d. Budget set

a

The difference between a price increase and a decrease in income is that a. A decrease in income does not affect the slope of the budget line while an increase in price does change the slope b. A price increase does not affect the consumption of other goods while a decrease in income does c. A price increase will increase real income while a decrease in income will increase real income d. None of the statements associated with this question are correct

Economic Profit

The difference between total revenue and the total opportunity cost of producing goods or services.

Which of the following is the incorrect statement? A. The marginal benefits curve is the slope of the total benefits curve.B. dB(Q)/dQ = MB.C. The slope of the net benefit curve is horizontal where MB = MC.D.The difference in the slope of the total benefit curve and the total cost curve is maximized at the optimal level of Q.

The difference in the slope of the total benefit curve and the total cost curve is maximized at the optimal level of Q.

a

The firm manager with horizontal indifference curves (output on the horizontal axis, profit on the vertical axis) views a. Only profits to be "goods." b. Only output to be "goods." c. Both profits and outputs to be "goods." d. None of the statements associated with this question are correct

The opportunity cost of receiving $10 in the future as opposed to getting that $10 today is: A.the foregone interest that could be earned if you had the money today.B. the taxes paid on any earnings.C. the value of $10 relative to the total income of that person.D. the value of $10 relative to the total income of all persons.

The foregone interest that could be earned if you had the money today.

a

The idea that a consumer is limited to selecting a bundle of goods that is affordable is captured by the: a. Budget constraint b. Indifference curve c. Consumer equilibrium d. Price changes

The substitution effect isolates the change in the consumption of a good caused by: A. The change in the relative prices of two goods B. The lower "real" income C. The change in consumer preferences D. None of the statements are correct

The lower "real" income

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?

The marginal product per dollar spent on all inputs are equal.

c

The marginal rate of substitution (MRS) determines the rate at which a consumer is willing to substitute between two goods in order to achieve a. A higher level of satisfaction b. A lower level of satisfaction c. The same level of satisfaction d. None of the statements associated with this question are correct

c

The maximum quantity of good X that is affordable is: a. M/PY b. M/X c. M/PX d. PYY

c

The maximum quantity of good Y that is affordable is: a. M/PX b. M/X c. M/PY d. M/Y

Price Floor

The minimum legal price that can be charged in a market ex. Minimum Wage. More is produced than consumers are willing to purchase, so it leads to a surplus

Change in Quantity Supplied

The movement along a supply curve, slope reflects law of supply

Implicit Cost

The opportunity cost equal to what a firm must give up in order to use a factor of production for which it already owns and thus does not pay rent

Total Expenditure

The per-unit market price times the number of units consumed

d

The possibility of the endless cyclical preference is eliminated by the property of a. Completeness b. More and better c. Diminishing marginal rate of substitution d. Transitivity

d

The possible goods and services a consumer can afford to consume represents the: a. Consumer behavior b. Consumer preferences c. Consumer status d. Consumer opportunities

Net Present Value (NPV)

The present value of the income stream generated by a project minus the current cost of the project- if positive the project is profitable

d

The property that implies that indifference curves are convex to the origin is: a. More is better b. Completeness c. Transitivity d. Diminishing marginal rate of substitution

B

The property that rules out indifference curves that cross is: a. Completeness b. Transitivity c. Diminishing marginal rate of substitution d. Independence

Law of Demand

The quantity of a good consumers are willing and able to purchase increases (decreases) as the price falls (rises).

c

The rate at which a consumer is willing to substitute one good for another, while still maintaining a given level of satisfaction is called the a. Market rate of substitution b. Average rate of substitution c. Marginal rate of substitution d. Budget constraint

Economics

The science of making decisions in the presence of scarce resources. -Resources & Decisions

Fixed costs exist only in: A. Labor-intensive markets B. Capital-intensive markets C. The short run D. The long run

The short run

b

The slope of the budget line represents a. The marginal rate of substitution b. The market rate of substitution c. The budget rate of substitution d. The opportunity rate of substitution

The higher the interest rate: A. The greater the level of inflation. B. The greater the present value of a future amount. C. The smaller the present value of a future amount. D. None of the statements associated with this question are correct.

The smaller the present value of a future amount

Managerial Economics

The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal

Comparative Statistic Analysis

The study of the movement from one equilibrium to another; we assume there are no legal restraints and that the system is free to work to allocate goods among consumers

c

The substitution affect isolates the change in the consumption of a good caused by: a. The lower "real" income b. The change in consumer preferences c. The change in the market rate of substitution d. None of the statements associated with this question are correct

b

The substitution affect isolates the change in the consumption of a good caused by: a. The lower "real" income b. The change in the relative prices of two goods c. The change in consumer preferences d. None of the statements associated with this question are correct

b

The substitution effect reflects how a consumer will react to a different a. Marginal rate of substitution b. Market rate of substitution c. Level of real income d. Level of nominal income

Total Consumer Value

The sum of the maximum amount a consumer is willing to pay at different quantities

Supply Function

The supply function for good X is a mathematical representation describing how many units will be produced at different prices for X, different prices of inputs W, prices of technologically related goods, and other factors that affect the supply for good X

a

The total earnings of a worker are represented by E = 100 + $10(24 - L), where E is earnings and L is the number of hours of leisure. How many hours of leisure are consumed if this worker's total earnings are $160? a. 18 hours b. 16 hours c. 12 hours d. 10 hours

d

The total earnings of a worker are represented by E = 100 + $10(24 - L), where E is earnings and L is the number of hours of leisure. How much will the worker earn if he takes 14 hours of leisure per day? a. $150 b. $240 c. $100 d. $200

b

The total earnings of a worker are represented by E = 150 + $12(24 - L), where E is earnings and L is the number of hours of leisure. How much will the worker earn if he takes 16 hours of leisure per day? a. $96 b. $246 c. $278 d. $342

c

The upper boundary of the budget set is the: a. Indifference curve b. Origin c. Budget line d. Vertical intercept

Marginal Principal

To maximize net benefits, the manager should increase the managerial control variable up to the point where marginal benefits equal marginal costs. This level of the managerial control variable corresponds to the level at which marginal net benefits are zero; nothing more can be gained by further changes in that variable

Which of the following is the main goal of a continuing company? A.To maximize the value of the firm B. To minimize costs C. To improve product quality D. To enhance service to its customers

To maximize the value of the firm

What is the main role of economic profits? A.To signal where resources are most highly valuedB. To help firms cover their production costsC. To help consumers cover their opportunity costD. None of the statements associated with this question are correct.

To signal where resources are most highly valued

Accounting profits are: A. Total cost minus total revenue B. Total revenue minus marginal cost C. Total revenue minus total cost D. Marginal revenue minus total cost

Total revenue minus total cost

Economic profits are: A. Marginal revenue minus marginal cost B. Total revenue minus total opportunity cost C. Total revenue minus total cost D. Total profits of the economy as a whole

Total revenue minus total opportunity cost

The property that rules out indifference curves that cross is: A. Independence B. Completeness C. Diminishing marginal rate of substitution D. Transitivity

Transitivity

c

Under the buy one, get one free regime, the a. Budget line rotates counter-clockwise b. Price is reduced by 50% c. Budget set expands d. Indifference curve is changed

The demand for labor by a profit-maximizing firm is determined by: A. VMPL = W B. MPL = W C. VMPL = MC D. MPL = MC

VMPL = W

Costs that change as output changes are: A. Fixed costs B. Variable costs C. Sunk costs D. None of the statements are correct

Variable costs

A price elasticity of zero corresponds to a demand curve that is:

Vertical

d

What are the advantages to a firm of selling gift certificates? a. Greater quantity sold if your good is a normal good b. Greater quantity if your good is an inferior good c. Reduced strain on the refund department and greater quantity sold if your good is a normal good d. Reduced strain on the refund department and greater quantity if your good is an inferior good

b

What is the horizontal intercept of the budget line, given that M = $1,000, PX = $50, and PY = $40? a. 2000.0 b. 20.0 c. 25.0 d. 11.11

d

What is/are the important things that must be developed when characterizing consumer behavior? a. Individual goals of the firm b. Consumer opportunities c. Individual goals of the firm and consumer opportunities d. Consumer preferences and consumer opportunities

a

Which is more preferred between a cash gift and an in-kind gift? a. A cash gift b. An in-kind gift c. Both are equally preferred d. None of the statements associated with this question are correct

d

Which of the following pairs of goods is probably not an example of substitutes? a. Raincoats and umbrellas b. Chicken and steak c. Potatoes and stuffing d. Hamburgers and ketchup

Each week Bill buys exactly 10 hot dogs regardless of their price. Bill's own price elasticity of demand for hot dogs IN ABSOLUTE VALUE is: A. Zero B. Greater than 1 C. Less than 1 D. 1

Zero

Linear Demand Function Formula

__𝑄_𝑋__𝑑_=_𝛼_0_+_𝛼_𝑋__𝑃_𝑋_+_𝛼_𝑌__𝑃_𝑌_+_𝛼_𝑀_𝑀+_𝛼_𝐻_𝐻 , where: __𝑄_𝑋__𝑑_ is the number of units of good X demanded; _𝑃_𝑋_ is the price of good X; _𝑃_𝑌_ is the price of a related good Y; 𝑀 is income; 𝐻 is the value of any other variable affecting demand.

Suppose the production function is given by Q = 4K + 3L. Both K and L are multiplied by a. Then output will be multiplied by: A. a B. 4a C. 3a D. 7a

a

Changes in the price of other goods lead to A. a change in quantity demanded.B.a change in demand.C. no change in the demand curve.D. a movement along the demand curve.

a change in demand

If good A is an inferior good, an increase in income leads to: A. a decrease in the demand for good B.B.a decrease in the demand for good A.C. an increase in the demand for good A.D. no change in the quantity demanded of good A.

a decrease in the demand of good A

The substitution effect reflects how a consumer will react to

a different market rate of substitution.

Demand Function

a mathematical representation describing how many units will be purchased at different prices for good X, different prices of a related good Y, different levels of income, and other factors that affect the demand for good X

A change in income will not lead to: A.a movement along the demand curve.B. a leftward shift of the demand curve.C. a rightward shift of the demand curve.D. all of the statements associated with the question are correct.

a movement along the demand curve

The maximum legal price that can be charged in a market is: A. a price floor.B. an ad valorem tax.C. the market equilibrium price.D.a price ceiling.

a price ceiling

The minimum legal price that can be charged in a market is: A.a price floor.B. a price ceiling.C. non-pecuniary price.D. full economic price.

a price floor

Producer surplus is measured as the area A. below the demand curve and above the market price.B. above the demand curve and below the market price.C.above the supply curve and below the market price.D. below the supply curve and above the market price.

above the supply curve and below the market price

Producer surplus is measured as the area:

above the supply curve and below the market price.

Basic principles that comprise good management include: A. identifying goals and constraints.B. recognizing the nature and importance of profits.C. understanding incentives.D.All of the statements associated with this question are correct.

all of the statements associated with this question are correct

Persuasive advertising influences demand by:

altering the underlying tastes of consumers.

An increase in the price of steak will probably lead to: A.an increase in demand for chicken.B. an increase in demand for steak.C. no change in the demand for steak or chicken.D. an increase in the supply for chicken.

an increase in demand for chicken

If sugar and Nutrasweet are substitutes, then we can be certain that a decrease in the price of sugar will lead to

an increase in the consumption of sugar.

Good X is a normal good if an increase in income leads to A. an increase in the supply for good X.B.an increase in the demand for good X.C. a decrease in the demand for good X.D. a decrease in the supply for good X.

an increase in the demand for good X

Good X is an inferior good if a decrease in income leads to A. an increase in the supply of good X.B. a decrease in the supply of good X.C.an increase in the demand for good X.D. a decrease in the demand for good X.

an increase in the demand for good X

Suppose that good X is a substitute for good Y. Then an increase in the price of good Y leads to

an increase in the demand for good X.

Suppose that good X is a substitute for good Y. Then an increase in the price of good Y leads to A.an increase in the demand of good X.B. a decrease in the demand of good X.C. a decrease in the supply of good X.D. an increase in the supply of good X.

an increase in the demand of good X

Which of the following can explain an increase in the demand for housing in retirement communities? A. A drop in real estate prices.B.An increase in the population of the elderly.C. A drop in the average age of retirees.D. Mandatory government legislation.

an increase in the population of the elderly

Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. If aM is negative, then good y is: A. a normal good.B.an inferior good.C. a complement.D. a substitute.

an inferior good

Suppose good X is a normal good. Then a decrease in income would lead to A. an outward shift of the demand curve.B.an inward shift of the demand curve.C. no shift of the demand curve.D. a movement along the demand curve.

an inward shift of the demand curve

Producer surplus is the A. area above the supply curve but below the demand curve.B.area above the supply curve but below the market price of the good.C. minimum amount required by a producer for producing the good.D. maximum amount a producer can collect from consumers.

area above the supply curve but below the market price of the good

Producer surplus is the:

area above the supply curve but below the market price of the good

Population

as population rises the demand curve shifts to the right

The law of demand states that, holding all else constant: A. as price falls, demand will fall also.B. as price rises, demand will also rise.C. price has no effect on quantity demanded.D.as price falls, quantity demanded rises.

as price falls, quantity demanded rises

Which of the following is not a supply shifter? A. Level of technology.B. Prices of inputs.C.Average income level.D. Weather.

average income level

An ad valorem tax causes the supply curve to: A. shift to the right.B. become flatter.C.become steeper.D. shift to the left.

become steeper

Generally when calculating profits as total revenue minus total costs, accounting profits are larger than economic profits because economists take into account: A. only explicit costs.B. only implicit costs.C.both explicit and implicit costs.D. Both types of profits are always equal because they account for the same costs.

both explicit and implicit costs.

The law of demand indicates that as the price of a good increases, the quantity that A. producers are willing to produce of an item increases.B. producers are willing to produce of an item decreases.C. buyers are able to purchase increases.D.buyers are able to purchase decreases.

buyers are able to purchase decreases

An ad valorem tax shifts the supply curve A. down by the amount of the tax.B. up by the amount of the tax.C.by rotating it counter-clockwise.D. by rotating it clockwise.

by rotating it counter-clockwise.

When there are economies of scope between products, selling off an unprofitable subsidiary

could lead to only a minor reduction in costs.

When dealing with present value, a higher interest rate: A. does not affect the present value of the future amount.B. increases the present value of a future amount.C.decreases the present value of a future amount.D. None of the statements associated with this question are correct.

decreases the present value of a future amount.

Along the same indifference curve, MRS is

decreasing as more of one good is obtained.

The marginal benefit in the table is: table A. increasing at a constant rate.B.decreasing at a constant rate.C. increasing at a decreasing rate.D. decreasing at an increasing rate.

decreasing at a constant rate

As more firms enter an industry: A. accounting profits increase.B.economic profits decrease.C. prices rise.D. None of the statements associated with this question are correct

economic profits decrease

Chris raises cows and produces cheese and milk because he enjoys: economies of scope economies of scale cost complementarity none of the answers are correct

economies of scope

If supply increases, then the A. supply curve shifts to the left.B.equilibrium price goes down.C. equilibrium quantity goes down.D. demand curve shifts to the right.

equilibrium price goes down

With linear demand and constant marginal cost, a Stackelberg leader's profits are ________ the follower. less than equal to greater than either less than or greater than

greater than

Which of the following pairs of goods are probably complements? A. Televisions and roller skates.B. Frozen yogurt and ice cream.C. Steak and chicken.D.Hamburgers and ketchup.

hamburgers and ketchup

Monopolistic competition is characterized by: employing labor from a perfectly competitive labor market no free entry heterogenous products large markets

heterogenous products

For given input prices, isocosts farther from the origin are associated with

higher costs.

If you were running an advertising campaign for designer men's suits, you should target families with:

higher incomes.

The market supply curve indicates the total quantity all producers in a competitive market would produce at each price, A. holding only input price fixed.B. allowing input price to vary.C.holding all supply shifters fixed.D. allowing all supply shifters to vary.

holding all supply shifters fixed

The average product of labor depends on

how many units of labor and capital are used.

Incentive plans imply: A. if managers get highly paid, then they work hard.B.if managers put forth little effort, they receive little pay; if they put forth much effort and hence generate many sales, they receive a lot of pay.C. managers are not selfish.D. managers should be watched all the time.

if managers put forth little effort, they receive little pay; if they put forth much effort and hence generate many sales, they receive a lot of pay.

Producer Expectations

if producers think that future prices will be higher, they will hold back their output today and sell it later at a higher price which would shift the curve to the left

Trade will take place: A. if the maximum that a consumer is willing and able to pay is less than the minimum price the producer is willing and able to accept for a good.B.if the maximum that a consumer is willing and able to pay is greater than the minimum price the producer is willing and able to accept for a good.C. only if the maximum that a consumer is willing and able to pay is equal to the minimum price the producer is willing and able to accept for a good.D. None of the statements associated with this question are correct

if the maximum that a consumer is willing and able to pay is greater than the minimum price the producer is willing and able to accept for a good.

If marginal benefits exceed marginal costs, it is profitable to: A.increase Q.B. decrease Q.C. stay at that level of Q.D. All of the statements associated with this question are correct.

increase Q

Suppose the demand for X is given by Qxd = 100 - 2PX + 4PY + 10M + 2A, where PX represents the price of good X, PY is the price of good Y, M is income and A is the amount of advertising on good X. If advertising on good X increases by $10,000, then the demand for X will A. decrease by $20,000.B. decrease by $100,000.C. increase by $100,000.D.increase by $20,000.

increase by $20,000.

Suppose the demand for X is given by Qxd = 100 − 2PX + 4PY + 10M + 2A, where PX represents the price of good X, PY is the price of good Y, M is income, and A is the amount of advertising on good X. If advertising on good X increases by $10,000, then the demand for X will:

increase by $20,000.

If you are in the business of selling chicken and the price of selling chicken and the price of beef both were to drop dramatically, what should you do with your inventory level of chicken?

increase the inventory.

A price decrease causes a consumer's "real" income to:

increase.

Maximizing the lifetime value of the firm is equivalent to maximizing the firm's current profits if the: A.interest rate is larger than the growth rate in profits and both are constant.B. growth rate in profits is constant and is larger than the interest rate.C. interest rate is smaller than the growth rate of profits.D. growth rate of profits and the interest rate are equal.

interest rate is larger than the growth rate in profits and both are constant

A firm will maximize the present value of future profits by maximizing current profits when the: A. growth rate in profits is constant.B. growth rate in profits is larger than the interest rate.C.interest rate is larger than the growth rate in profits and both are constant.D. growth rate and interest rate are constant and equal.

interest rate is larger than the growth rate in profits and both are constant.

The minimum wage A.is an example of a price floor.B. leads to an increase in the number of people employed in unskilled jobs.C. leads to a decrease in the number of people employed in skilled jobs.D. causes an increase in social welfare.

is an example of a price floor

Competitive market equilibrium A.is determined by the intersection of the market demand and supply curves.B. implies that quantity supplied is sufficiently larger than quantity demanded.C. is determined by the intersection of the excess demand and excess supply curves.D. implies that quantity demanded is sufficiently larger than quantity supplied.

is determined by the intersection of the market demand and supply curves

Managerial economics: A. has little to say about day-to-day decisions.B.is valuable to the coordinator of a shelter for the homeless.C. is not relevant for managers of not-for-profit groups.D. is the study of how to get rich in the stock market.

is valuable to the coordinator of a shelter for the homeless

Which of the following pairs of goods are probably complements? A. Electricity and natural gas.B. Butter and margarine.C. Steak and chicken.D.Ketchup and French fries.

ketchup and french fries

If A and B are complements, an increase in the price of good A would: A. have no effect on the quantity demanded of B.B. lead to an increase in demand for B.C.lead to a decrease in demand for B.D. none of the statements associated with this question are correct.

lead to a decrease in demand for B

If the price of an input rises, producers are willing to produce A. more output at each given price.B.less output at each given price.C. the same output at each given price.D. none of the statements associated with this question are correct.

less output at each given price

Maximizing the present value of all future profits is the same as maximizing current profits if the growth rate in profits is: A. greater than the interest rate.B.less than the interest rate.C. equal to the interest rate.D. not constant over time.

less than the interest rate

Which of the following is probably not a normal good? A. designer dresses.B. lobster.C.macaroni and cheese.D. expensive automobiles.

macaroni and cheese

The additional benefits that arise by using an additional unit of the managerial control variable is defined as the: A. total benefit.B. opportunity cost.C.marginal benefit.D. present value of benefits.

marginal benefit

The optimal amount of studying is determined by comparing: A. marginal benefit and the total cost of studying.B. marginal benefit and the total benefit of studying.C.marginal benefit and the marginal cost of studying.D. total benefit and the total cost of studying.

marginal benefit and the marginal cost of studying

In order to maximize net benefits, firms should produce where: A. total benefits equal total costs.B. profits are zero.C. marginal cost is minimized.D.marginal benefits equal marginal costs.

marginal benefits equal marginal costs.

The additional cost incurred by using an additional unit of the managerial control variable is defined as the: A. total cost.B. net cost.C. net benefit.D.marginal cost.

marginal cost

The change in net benefits that arises from a one-unit change in quantity is the: A.marginal net benefits.B. total net benefits.C. variable benefits.D. present value benefits.

marginal net benefits

The difference between marginal benefits and marginal costs is the: A. profits.B.marginal net benefits.C. opportunity cost.D. accounting cost.

marginal net benefits

To maximize profits, a firm should continue to increase production of a good until: A. total revenue equals total cost.B. profits are zero.C.marginal revenue equals marginal cost.D. average cost equals average revenue.

marginal revenue equals marginal cost.

The curve which summarizes the total quantity producers are willing and able to produce at differing prices is the: A. market demand curve.B. consumer surplus curve.C. average cost curve.D.market supply curve.

market supply curve

To an economist, maximizing profit is: A.maximizing the value of the firm.B. maximizing the current year's profits.C. minimizing the permanent total costs.D. minimizing the future risks.

maximizing the value of the firm

There is no market supply curve in: a monopolistic market monopolistically competitive and monopolistic markets a perfectly competitive market a monopolistically competitive market

monopolistically competitive and monopolistic markets

All else held constant, as additional firms enter an industry A.more output is available at each given price.B. less output is available at each given price.C. the same output is available at each given price.D. output could increase or decrease at each given price.

more output is available at each given price

In order to maximize net benefits, the managerial control variable should be used up to the point where: A. total costs equal total benefits.B. average costs equal marginal benefits.C. average benefits equal marginal costs.D.net marginal benefits equal zero.

net marginal benefits equal zero.

Maximizing total benefits is equivalent to maximizing net benefits if and only if there are: A. constant marginal costs associated with achieving more benefits.B.no costs associated with achieving more benefits.C. increasing costs associated with achieving more benefits.D. decreasing costs associated with achieving more benefits.

no costs associated with achieving more benefits.

The idea of charging two different groups of consumers two different prices is practiced in: commodity bundling two-part pricing price matching none of the answers are correct

none of the answers are correct

The spirit of equating marginal cost with marginal revenue is not held by: oligopolistic firms perfectly competitive firms and oligopolistic firms perfectly competitive firms none of the answers are correct

none of the answers are correct

Suppose the demand for good X is given by Qdx = 10 - 2Px + Py + M. The price of good X is $1, the price of good Y is $10, and income is $100. Given these prices and income, how much of good X will be purchased? A. 115.B. 515.C. 1,000.D.None of the statements associated with this question are correct.

none of the statements associated with this question are correct

The supply function for good X is given by Qxs = 1,000 + PX - 5PY - 2PW, where PX is the price of X, PY is the price of good Y and PW is the price of input W. If the price of input W increases by $10, then the supply of good X A. will increase by 10 units.B. will increase by 20 units.C. will decrease by 10 units.D.none of the statements associated with this question are correct.

none of the statements associated with this question are correct

First-degree price discrimination: A) results in the firm extracting all surplus from consumers B) occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased and results in the firm extracting all surplus from consumers. C) Occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased D) None of the above

occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased and results in the firm extracting all surplus from consumers.

Producer-producer rivalry functions: A.only when multiple sellers for a product compete in the market.B. only when single sellers for a product compete in the market.C. regardless of the number of sellers.D. even when customers are not scarce.

only when multiple sellers for a product compete in the market.

If firms compete in a cournot fashion then each firm views the: output of rivals as given profits of rivals as given prices of rivals as given All of the statements are corrrect

output of rivals as given

The bertrand model of the oligopoly reveals that: perfectly competitive prices can arise in markets with only a few firms. capacity constraints are not important in determining market performance. changes in marginal cost do not affect prices. All of the statements associated with this question are true.

perfectly competitive prices can arise in markets with only a few firms.

Advertising can influence demand by altering tastes of consumers. This type of advertising is known as A.persuasive advertising.B. informative advertising.C. strategic advertising.D. influential advertising.

persuasive advertising

New firms have incentive to enter an industry when there is(are): A. new production technologies.B.positive economic profits.C. an abundance of labor.D. high capital costs.

positive economic profits

The primary inducement for new firms to enter an industry is: A. increased technology.B. availability of labor.C. low capital costs.D.presence of economic profits.

presence of economic profits

The value of the firm is the: A. current value of profits.B.present discounted value of all future profits.C. average value of all future profits.D. total value of all future profits.

present discounted value of all future profits.

If steak is a normal good, what do you suppose would happen to price and quantity during an economic recession? A. Price would increase and quantity decrease.B. Price and quantity would both increase.C.Price and quantity would both decrease.D. Price would decrease and quantity increase.

price and quantity would both decrease

Demand shifters do not include the A.price of the good.B. consumer's tastes and preferences.C. the price of the other related goods.D. consumer's expectations about future prices of the good.

price of the good

If a shortage exists in a market, the natural tendency is for: A. demand to increase.B.price to increase.C. quantity supplied to decrease.D. no change in the market.

price to increase

Suppose you produce wooden desks, and government legislation protecting the spotted owl has made it more expensive for you to purchase wood. What do you expect to happen to the equilibrium price and quantity of wooden desks? A. Price and quantity will increase.B.Price will increase but quantity will decrease.C. Price and quantity will decrease.D. Price will decrease but quantity will increase.

price will increase but quantity will decrease

Which of the following are signals to the owners of scarce resources about the best uses of those resources? A.Profits of businesses B. Government regulations C. Economic indicators D. The accounting cost of those resources

profits of businesses

In a perfectly competitive market, each firm has the following cost function: C = 49 + 5Q + Q^2. The market price is $35 and the market demand is Qd = 185 - P, where P is the market price. The short run profit maximizing output is: A. q* = 10 B. q* = 15 C. q* = 20 D. q* = 0 (In the short run, the firm shuts down)

q* = 15

The law of demand states that if the price of a good falls and all other things remain the same, the A. quantity demanded of the good falls.B.quantity demanded of the good rises.C. demand of the good rises.D. all of the statements associated with this question are correct.

quantity demanded of the good rises

The law of supply states that, holding all else constant, as the price of a good falls: A. quantity demanded rises.B.quantity supplied falls.C. quantity supplied rises.D. quantity demanded falls.

quantity supplied falls

The demand function A. describes how much of good X will be purchased at the alternative price of good X, given all the other variables being constant.B.recognizes that the quantity of a good consumed depends on its price and demand shifters.C. shows the relationship between the quantity demanded of X and variables other than its price.D. does not include expectations.

recognizes that the quantity of a good consumed depends on its price and demand shifters

The supply function A. describes how much of good X will be produced at an alternative price of good X, given all the other variables being constant.B.recognizes that the quantity of a good produced depends on its price and supply shifters.C. shows the relationship between the quantity supplied of X and variables other than its price.D. does not include technology.

recognizes that the quantity of a good produced depends on its price and supply shifters

Consumer-consumer rivalry: A. increases the negotiating power of consumers in the marketplace.B. reduces the negotiating power of producers in the marketplace.C.reduces the negotiating power of consumers in the marketplace.D. increases the likelihood of government intervention in the marketplace.

reduces the negotiating power of consumers in the marketplace.

Graphically, a decrease in advertising will cause the demand curve to: A. become steeper.B. shift rightward.C. become flatter.D.shift leftward.

shift leftward

Graphically, a decrease in advertising will cause the demand curve to:

shift leftward.

Graphically, an increase in the number of vegetarians will cause the demand curve for Tofu (a meat substitute) to A.shift rightward.B. shift leftward.C. become flatter.D. become steeper.

shift rightward

For a wood furniture manufacturer, an increase in the cost of lumber will cause the supply curve to: A. become flatter.B. become steeper.C.shift to the left.D. shift to the right.

shift to the left

For a wood furniture manufacturer, an increase in the cost of lumber will cause the supply curve to:

shift to the left.

Firms advertise in order to cause the demand for their products to A.shift to the right.B. shift to the left.C. remain unchanged.D. all of the statements associated with this question are correct.

shift to the right

For a steel factory, a decrease in the cost of electricity to the plant will cause the supply curve to: A. become flatter.B. shift to the left.C.shift to the right.D. become parallel to the price axis.

shift to the right

Technological advances will cause the supply curve to: A. shift to the left.B.shift to the right.C. become flatter.D. become steeper.

shift to the right

For a steel factory, a decrease in the cost of electricity to the plant will cause the supply curve to:

shift to the right.

As additional firms enter an industry, the market supply curve A.shifts to the right.B. shifts to the left.C. remains the same.D. none of the statements associated with this question are correct.

shifts to the right

If an excise tax is imposed on a good, then the supply curve A. shifts up by the amount of the demand elasticity.B. does not change.C. shifts down by the amount of the tax.D.shifts up by the amount of the tax.

shifts up by the amount of the tax

In a competitive market, the market demand is Qd = 60 - 6P and the market supply is Qs = 4P. A price ceiling of $3 will result in a A.shortage of 30 units.B. shortage of 15 units.C. surplus of 30 units.D. surplus of 12 units.

shortage of 30 units

In a competitive market, the market demand is Qd = 60 - 6P and the market supply is Qs = 4P. A price ceiling of $3 will result in a

shortage of 30 units.

In a competitive market, the market demand is Qd = 70 - 3P and the market supply is Qs = 6P. A price ceiling of $4 will result in a A. shortage of 24 units.B.shortage of 34 units.C. surplus of 58 units.D. surplus of 34 units.

shortage of 34 units

"Our marginal revenue is greater than our marginal cost at the current production level." This statement indicates that the firm: A. is maximizing profits.B.should increase the quantity produced to increase profits.C. should decrease the quantity produced to increase profits.D. None of the statements associated with this question are correct.

should increase the quantity produced to increase profits.

Non-fed ground beef is an inferior good. In economic booms, grocery managers

should reduce their orders of non-fed ground beef.

The demand for good X is estimated to be Q xd = 10,000 - 4PX + 5PY + 2M + AX, where PXis the price of X, PY is the price of good Y, M is income and AX is the amount of advertising on X. Suppose the present price of good X is $50, PY = $100, M = $25,000, and AX = 1,000 units. Based on this information, goods X and Y are

substitutes.

When the government imposes a price floor above the market price, the result will be that A.surpluses occur.B. shortages become a problem.C. supply and demand will shift up to the new equilibrium.D. a price floor set above the equilibrium price will have no effect on the market equilibrium.

surpluses occur

The budget set defines the combinations of good X and Y

that are affordable to the consumer.

The demand for an input is

the VMP of the input.

Marginal benefit refers to: A. the average benefits that arise by using an additional unit of the managerial control variables.B.the additional benefits that arise by using an additional unit of the managerial control variables.C. the change in average benefits arising from a change in the control variable.D. None of the statements associated with this question are correct.

the additional benefits that arise by using an additional unit of the managerial control variables.

If firms expect prices to be higher in the future and the product is not perishable, then:

the current supply curve shifts to the left.

If marginal costs exceed marginal benefits, then: A. the firm ends up with a net loss.B. the firm's average costs exceed average benefits.C.the firm should decrease its production level.D. None of the statements associated with this question are correct.

the firm should decrease its production level.

The value of marginal product of an input is the value of

the output produced by the last unit of an input.

When quantity demanded exceeds quantity supplied A. there exists a surplus of a good.B. the price tends to fall.C.the price is below the equilibrium price.D. there is no excess demand.

the price is below the equilibrium price

Demand shifters do not include A.the price of the good.B. the consumer's income.C. the level of advertising.D. the price of the other goods.

the price of the good

A cash gift causes the budget line

to shift to the right in a parallel fashion.

Accounting profits are: A.total revenue minus total cost.B. total cost minus total revenue.C. marginal revenue minus total cost.D. total revenue minus marginal cost.

total revenue minus total cost

Economic profits are: A. total revenue minus total cost.B. marginal revenue minus marginal cost.C.total revenue minus total opportunity cost.D. total profits of the economy as a whole.

total revenue minus total opportunity cost.

An excise tax of $1.00 per gallon of gasoline placed on the suppliers of gasoline would shift the supply curve A. down by $1.00.B. down by more than $1.00.C.up by $1.00.D. up by less than $1.00.

up by 1.00

An excise tax shifts the supply curve A. down by the amount of the tax.B.up by the amount of the tax.C. by rotating it counter-clockwise.D. by rotating it clockwise

up by the amount of the tax

An excise tax shifts the supply curve

up by the amount of the tax.

The economic principle that producers are willing to produce more output when price is high is depicted by the: A.upward slope of the supply curve.B. extreme steepness of the supply curve.C. downward slope of the supply curve.D. interaction of the supply and demand curves.

upward slope of the supply curve

It is profitable to hire units of labor as long as:

value marginal product exceeds wage

The opportunity cost of an action is the: A. monetary payment the action required.B.value of the most highly valued alternative action given up.C. cost of all alternative actions that could have been taken.D. None of the statements associated with this question are correct.

value of the most highly valued alternative action given up.

If a producer offers a price that is in excess of a consumer's valuation of the good, the consumer: A. must buy the good at that price.B.will refuse to purchase the good.C. must revalue the good.D. None of the statements associated with this question are correct.

will refuse to purchase the good

Managers can get workers to work longer hours

with higher overtime pay in excess of regular hourly pay.

Good X is a normal good and its demand is given by Qxd = α0 + αXPX + αYPY + αMM + αHH. Then we know that A. αH > 0.B. αX > 0.C. αY > 0.D.αM > 0.

αM > 0.

Suppose X and Y are complements and demand for X is Qxd = α0 + αXPX + αYPY + αMM + αHH. Then we know A. αH > 0.B. αX > 0.C.αY < 0.D. αM < 0.

αY < 0.

Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. If a price ceiling of $15 is imposed, what will be the resulting full economic price? A. $19.B. $21.C. $6.D.$25.

25

Suppose the market demand for good X is given by QXd = 20 - 2PX. If the equilibrium price of X is $5 per unit then consumer surplus is A. $100.B. $75.C. $50.D.$25.

25

During spring break, students have an elasticity of demand for a trip to Cancun, Mexico, of -4. How much should an airline charge students for a ticket if the price it charges the general public is $420? assume the general public has an elasticity of -2.

280

Suppose the production function is given by Q = 3K + 4L. What is the marginal product of capital when 10 units of capital and 10 units of labor are employed? A. 11 B. 45 C. 3 D. 4

3

You are the manager of a popular shoe company. You know that the advertising elasticity of demand for your product is .15. How much will you have to increase advertising in order to increase demand by 10%?

66.7%.

Suppose that production for good X is characterized by the following production function, Q = K^.5L^.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $15, and the per-unit wage, w, is $125, then the average fixed cost of using 16 units of capital and 25 units of labor is: A. $12 B. $56 C. $9 D. There is insufficient information to determine the average fixed costs.

$12

If you put $1,000 in a savings account at an interest rate of 10 percent, how much money will you have in one year? A. $1,200B. $909C. $950D.$1,100

1,100

If the interest rate is 5 percent, $100 received at the end of seven years is worth how much today? A. 100/(0.05)7B.100/(1 + 0.05)7C. 100/(1 + 5)7D. 100

100/(1 + 0.05)^7

Suppose total benefits and total costs are given by B(Y) = 100Y - 8Y2 and C(Y) = 10Y2. What level of Y will yield the maximum net benefits? A. 75/36B. 75/18C. 50/18D.100/36

100/36

Suppose total benefits and total costs are given by B(Y) = 100Y - 8Y^2 and C(Y) = 10Y^2. What level of Y will yield the maximum net benefits? A. 100/36 B. 75/18 C. 50/18 D. 75/36

100/36

What is the marginal cost of producing the fifth unit? units produces 0 1 2 3 4 5 total revenue 0 100 180 250 290 310 total costs 0 50 110 180 270 380 A. 270 B.110 C. 50 D. 0

110

Suppose total benefits and total costs are given by B(Y) = 100Y - 8Y2 and C(Y) = 10Y2. What is the maximum level of net benefits (rounded to the nearest whole number)? A. 92B.139C. 78D. None of the statements associated with this question are correct.

139

The production function is Q = K^.6L^.4. The marginal rate of technical substitution is: A. 2/3K^-1L B. K^.4L^-.6 C. 2/3KL^-1 D. K^-1L^-1

2/3KL^-1

What is the level of net benefits when four units are produced? units produces 0 1 2 3 4 5 total revenue 0 100 180 250 290 310 total costs 0 50 110 180 270 380 A. 0 B. 70 C. -70 D.20

20

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $15, X = 30, and M = 600?

20

Given the benefit function B(Y) = 200Y - 3Y2, the marginal benefit is: A. 600Y.B. 200 - 3Y.C. 200 - 6Y2.D.200 - 6Y.

200-6Y

Suppose total benefits and total costs are given by B(Y) = 100Y - 8Y2 and C(Y) = 10Y2. Then marginal costs are: A. 20Y2.B. 40.C. 5Y.D.20Y.

20Y

The average product of capital of producing 2,991 units of output (find point B) in the table below is: A. 11.1 B. 37 C. 21.9 D. 73

21.9

If the annual interest rate is 0 percent, the present value of receiving $210 in the next year is: A. $221.B. $200.C. $201.D.$210.

210

When MB = 300 - 12Y and TC = 12Y + 108, the optimal level of Y is: A. 25.B. 4.5.C. 8.D.24.

24

If you put $700 in a savings account at an interest rate of 3 percent, how much money will you have in one year? A. $370B. $679.61C. $703.00D.$721

721

Using the Gordon growth model, a stockʹs price will increase if A) the dividend growth rate increases. B) the growth rate of dividends falls. C) the required rate of return rises. D) the expected sales price rises.

A

Present Value (PV)

The amount that would have to be invested today at the prevailing interest rate to generate the given future value

b

The equilibrium consumption bundle is a. The bundle where the budget line and the indifference curve meet b. The affordable bundle that yields the greatest satisfaction to the consumer c. Any bundle that is the farthest from the origin d. Any affordable bundle in the budget set

Opportunity Cost

The explicit cost of a resource plus the implicit cost of giving up its best alternative.

Consumer Surplus

The extra value consumers get from a good but do not have to pay for

Good Y is a complement to good X if an increase in the price of good Y leads to A. an increase in the demand for good X.B. an increase in the supply for good X.C.a decrease in the demand for good X.D. a decrease in the supply for good X.

a decrease in the demand for good X

Suppose the demand for X is given by Qxd = 100 - 2PX + 4PY + 10M + 2A, where PX represents the price of good X, PY is the price of good Y, M is income and A is the amount of advertising on good X. Good X is A. an inferior good.B.a normal good.C. a Giffen good.D. a complement.

a normal good

The revenues earned by the firm from the consumer may be maximized under

the buy one get one free offer.

The substitution affect isolates the change in the consumption of a good caused by:

the change in the market rate of substitution.

Consumer-producer rivalry occurs because of: A. consumers' high valuation and producers' low production cost of a good.B. producers' high production cost and consumers' low valuation of a good.C.the competing interests of consumers and producers.D. None of the statements associated with this question are correct.

the competing interests of consumers and producers.

If firms expect prices to be higher in the future and the product is not perishable, then A.the current supply curve shifts to the left.B. the current supply curve shifts to the right.C. producers produce more output to hold back for the future.D. none of the statements associated with this question are correct.

the current supply curve shifts to the left

If the own price elasticity of demand is infinite in absolute value, then

the demand curve is horizontal.

Because of producer-producer rivalry, the price will tend to: A.be driven to a lower price.B. rise up to the maximum price the consumers are willing and able to pay.C. be the same as the competitive price.D. be the same as the monopoly price.

be driven to a lower price

Which of the following is least likely to be a normal good? A. Steak.B. Airline travel.C.Bologna.D. A house.

bologna

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 4, and MPK = 40:

the firm should use more K and less L to cost minimize.

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40:

the firm should use more L and less K to cost minimize.

Other things equal, the greater the interest rate: A.the lower the NPV.B. the higher the NPV.C. the higher the PV.D. None of the statements associated with this question are correct.

the lower the NPV

A floor price is A.the minimum legal price that can be charged in a market.B. the maximum legal price that can be charged in a market.C. below the initial market equilibrium price.D. equal to the initial market equilibrium price.

the minimum legal price that can be charged in a market

Changes in the price of good A lead to a change in: A. demand of good A.B. demand of good B.C.the quantity demanded of good A.D. the quantity demanded of good B.

the quantity demanded of good A

Under producer-producer rivalry, individual firms want to sell the product at the maximum price consumers will pay, but they are unable to do this because of: A. cost considerations.B. the scarcity of resources.C.competition among sellers.D. competition among buyers.

competition among sellers

Jane pays the market price of $69 for a new pair of running shoes, even though she would be happy to pay a maximum of $100 for the same pair of shoes. This is an example of the concept of A. producer surplus.B. price ceilings.C. full economic prices.D.consumer surplus.

consumer surplus

The behavior of bidders in an auction is an example of: A.consumer-consumer rivalry.B. consumer-producer rivalry.C. producer-producer rivalry.D. None of the statements associated with this question are correct.

consumer-consumer rivalry

Negotiation between the buyer and seller of a new ski boat is an example of: A.consumer-producer rivalry.B. consumer-consumer rivalry.C. producer-producer rivalry.D. None of the statements associated with this question are correct.

consumer-producer rivalry

Negotiations between the buyer and seller of a new house are an example of: A. consumer-consumer rivalry.B.consumer-producer rivalry.C. producer-producer rivalry.D. monopoly.

consumer-producer rivalry

Property owners move scarce resources toward the production of goods most valued by society because: A. government controls the allocation of resources.B.consumers demand inexpensive goods and services.C. managers are solely pursuing the interests of society.D. firms attempt to maximize profits.

consumers demand inexpensive goods and services

Suppose the own-price elasticity of demand for good X is -0.5, and that the price of good X increases by 10%. We would expect the quantity demanded of good X to

decrease by 5%.

If demand increases, then the A. demand curve shifts to the left.B.demand curve shifts to the right.C. equilibrium price goes down.D. equilibrium quantity goes down.

demand curve shifts to the right

The demand function recognizes that the quantity of a good consumed depends on: A. the prices of other goods only.B. price and supply shifters.C.demand shifters and price.D. demand shifters only.

demand shifters and price

The buyer side of the market is known as the: A. income side.B.demand side.C. supply side.D. seller side.

demand side

Which of the following would not shift the demand for good A? A.Drop in price of good A.B. Drop in price of good B.C. Consumer income.D. Change in the level of advertising of good A.

drop in price of good A

If you include in your offerings some inferior goods, the demand for these products will increase

during bad economic times.

It is profitable to hire units of labor as long as the value of marginal product: exceeds wage exceeds average product equals price is less than wage

exceeds wage

Scarce resources are ultimately allocated toward the production of goods most wanted by society because: A.firms attempt to maximize profits.B. they are most efficiently utilized in these areas.C. consumers demand inexpensive goods and services.D. managers are benevolent.

firms attempt to maximize profits

Which of the following is an implicit cost to a firm that produces a good or service? A. Labor costs B. Costs of operating production machinery C.Foregone profits of producing a different good or service D. Costs of renting or buying land for a production site

foregone profits of producing a different good or service

Which of the following is an implicit cost of going to college? A. Tuition B. Cost of books and supplies C. Room and board D.Foregone wages

foregone wages

Consumer-consumer rivalry arises because of: A. human nature.B. the limited number of suppliers.C.the scarcity of goods available.D. None of the statements associated with this question are correct.

the scarcity of goods available

As the interest rate increases, the opportunity cost of waiting to receive a future amount: A.increases.B. decreases.C. may rise or fall.D. remains the same.

increases

Marginal benefits are the: A.incremental benefits of a decision.B. average benefits of a decision.C. total benefits of a decision.D. present discounted benefit of a decision.

incremental benefits of a decision.

Advertising provides consumers with information about the underlying existence or quality of a product. These types of advertising messages are called A. persuasive advertising.B.informative advertising.C. green advertising.D. influential advertising.

informative advertising

Advertising provides consumers with information about the underlying existence or quality of a product. These types of advertising messages are called:

informative advertising.

Suppose there is a simultaneous increase in demand and decrease in supply, what effect will this have on the equilibrium price? A.It will rise.B. It will fall.C. It may rise or fall.D. It will remain the same.

it will rise

The Cournot theory of oligopoly assumes rivals will: decrease output whenever a firm increases its output. increase their output whenever a firm increases its output. follow the learning curve. keep their output constant.

keep their output constant

Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. From the law of demand we know that ax will be: A.less than zero.B. greater than zero.C. zero.D. none of the statements associated with this question are correct.

less than zero

When an effective price ceiling is in place A. every consumer is better off.B. every consumer is worse off.C.some consumers are better off and others are worse off.D. on average the net change in consumer surplus is zero.

some consumers are better off and others are worse off

When an effective price ceiling is in place

some consumers are better off and others are worse off.

Suppose the demand for X is given by Qxd = 100 - 2PX + 4PY + 10M + 2A, where PX represents the price of good X, PY is the price of good Y, M is income and A is the amount of advertising on good X. Based on this information, we know that good X is a A.substitute for good Y and a normal good.B. complement for good Y and an inferior good.C. complement for good Y and a normal good.D. substitute for good Y and an inferior good.

substitute for good Y and a normal good

The higher the interest rate: A. the greater the present value of a future amount.B.the smaller the present value of a future amount.C. the greater the level of inflation.D. None of the statements associated with this question are correct.

the smaller the present value of a future amount

Consumer surplus is A. the value consumers get from a supplier.B. the value consumers do not pay because of a discount by supplier.C.the value consumers get from a good but do not pay for.D. equal to the amount consumers pay for a good.

the value consumers get from a good but do not pay for

Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. If a price ceiling of $15 is imposed, A. there will be a surplus of 40 units.B. there will be neither a surplus or shortage.C. there will be a shortage of 40 units.D.there will be a shortage of 20 units.

there will be a shortage of 20 units

c

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and PX = $10, PY = $15, X = 30, and M = 600? a. 10 b. 15 c. 20 d. 25

a

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and PX = $5, PY = $10, X = 20, and M = 500? a. 40 b. 25 c. 50 d. 75

An inferior good is a good A. that has low quality.B.that consumers purchase less of when their incomes are higher.C. that consumers purchase more when their incomes are higher.D. of high quality.

that consumers purchase less of when their incomes are higher

Other things held constant, the greater the price of a good A. the lower the demand.B. the higher the demand.C. the greater the consumer surplus.D.the lower the consumer surplus.

the lower the consumer surplus

If a firm offers to pay a worker $10 for each hour of leisure the worker gives up the $10 implies

the market rate of substitution between leisure and income.

b

. If a consumer is given a $10 gift certificate, good for items in store X and all items in store X are inferior goods, then consumer desires to consume a. More goods in store X b. Less goods in store X c. The same amount of goods in store X d. None of the statements associated with this question are correct

Given the cost function C(Y) = 6Y2, what is the marginal cost? A. 6YB. Y2C. 3YD.12Y

12Y

For the cost function C(Q) = 100 + 2Q + 3Q^2, the marginal cost of producing 2 units of output is: A. 3 B. 12 C. 14 D. 2

14

What is the net benefit associated with producing two units of the control variable, Q (identify point C in the table)?A. 600B. 800C. 1,200D.1,400

1400

If the interest rate is 5 percent, the present value of $200 received at the end of five years is: A. $121.34.B.$156.71.C. $176.41.D. $132.62.

156.71

For the cost function C(Q) = 100 + 2Q + 3Q^2, the total variable cost of producing 2 units of output is: A. 4 B. 16 C. 12 D. None of the answers are correct

16

What is the marginal cost associated with producing three units of the control variable, Q (identify point E in the table)?A. 50B. 100C. 200D.300

300

What is the total benefit associated with producing four units of the control variable, Q (identify point A in the table)?A. 600B. 2,600C.3,000D. 3,400

3000

What is the marginal revenue of producing the third unit? A. 0 B. 70 C. 90 D. 250

70

A firm has a marginal cost of $20 and charges a price of $40. The Lerner index for this firm is:

.5

Suppose the market demand for good X is given by QXd = 20 - 2PX. If the equilibrium price of X is $5 per unit, then the total value a consumer receives from consuming the equilibrium quantity is A. $100.B.$75.C. $50.D. $25.

75

If the interest rate is 3 percent, the present value of $900 received at the end of four years is: A. $792.00.B.$799.64.C. $873.79.D. $927.40.

799.64

In a competitive market, the market demand is Qd = 60 - 6P and the market supply is Qs = 4P. The full economic price under a price ceiling of $3 is A. 6.B. 7.C.8.D. 9.

8

Suppose the growth rate of the firm's profit is 5 percent, the interest rate is 6 percent, and the current profits of the firm are $80 million. What is the value of the firm? A. $89.2 millionB. $1,413.3 millionC.$8,480 millionD. None of the statements associated with this question are correct.

8,480

You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q^2. Your firm's maximum profits are: A. 250 B. 100 C. 85 D. 125

85

You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C=40+5Q^2. Your firm's maximum profits are:

85

In the Gordon growth model, a decrease in the required rate of return A) increases the current stock price. B) increases the future stock price. C) reduces the future stock price. D) reduces the current stock price.

A

From a consumers point of view, which type of oligolpoly is most desirable? Betrand Cournot Sweezy Stackelberg

Bertrand

The producer's surplus of all firms in a oligopoly is usually the least in the case of a: Bertrand Sweezy Stackelberg Cournot

Bertrand

a

If an increase in the price of good X leads to an increase in the consumption of good Y, then goods X and Y are called a. Substitutes b. Complements c. Normal goods d. Inferior goods

d

If bundles A, B and C lie on the same indifference curve, then a. A>B>C b. B>C>A c. A~B>C d. A~B~C

Consumer Expectations

If consumers expect future prices to be higher, they will substitute current purchases for future purchases

b

If income decreases, then a. The budget line remains the same b. The vertical intercept of the budget line shifts downward c. The horizontal intercept of the budget line shifts upward d. The slope of the budget line becomes steeper

a

If income increases, the budget line a. Shifts to the right b. Shifts to the left c. Rotates clockwise d. Rotates counter-clockwise

c

If income increases, then the a. Budget line rotates counter-clockwise b. Budget line rotates clockwise c. Budget line shifts to the right d. Opportunity set contracts

b

If money income doubles and the prices of all goods triples, then the a. Budget line remains unchanged b. Consumer is worse off due to inflation c. Consumer will buy more of normal goods d. Budget line will shift out

a

Indifference curves further from the origin imply a. A higher level of satisfaction b. A lower level of satisfaction c. The same level of satisfaction as any other curve d. None of the statements associated with this question are correct

a

Individuals who purchase services and goods for the purpose of consumption are: a. Consumers b. Managers c. Workers d. Agents

You are the manager a firm that sells its product in a monopolistically competitive market with market (inverse) demand given by P = 50 - 0.5Q. Your firm's cost function is C = 40 + 5Q^2. Your firm's marginal revenue is: A. MR = 100 - Q B. MR = 50 - 0.5Q C. MR = 50 - Q D. There is insufficient information to determine the firm's marginal revenue.

MR = 50 - Q

Which of the following is a profit-maximizing condition for a Cournot oligopolist? A. Q1 = Q2 = ... = Qn B. P = MR C. MR = MC D. All of the statements associated with this question are correct

MR = MC

Which of the following are least likely to be complements? A. Peanut butter and jelly.B. Bread and butter.C. Sports coats and dress slacks.D.Cars and trucks.

cars and trucks

Changes in the price of a good lead to: A.changes in the quantity supplied of the good.B. changes in supply.C. changes in demand.D. no effects in quantity supplied or demanded.

changes in the quantity supplied of the good

If an increase in the price of good X leads to a decrease in the consumption of good Y, then goods X and Y are called

complements.

Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. If ay is positive, then: A. goods y and x are complements.B. goods y and x are inferior goods.C. goods y and x are normal goods.D.goods y and x are substitutes.

goods y and x are substitutes

If the price of good X becomes lower, then the level of consumer surplus becomes A. lower.B.higher.C. unchanged.D. lower in the short-run but higher in the long run.

higher

Under a price ceiling, the full economic price is A. the dollar price paid to the firm.B. the opportunity cost of not being able to buy a good when a consumer needs it.C. lower than the free-market price.D.higher than the free-market price.

higher than the free market price

The marginal cost in the table is: table A. increasing at an increasing rate.B. decreasing at an increasing rate.C.increasing at a constant rate.D. decreasing at a decreasing rate.

increasing at a constant rate.

As the usage of an input increases, marginal product

initially increases then begins to decline.

If the interest rate is 12.5 percent, what is the present value of $200 received in one year? A. $25B.$177.78C. $197D. $225

177.78

Inferior Good

A good for which an increase (decrease) in income leads to a decrease (increase) in the demand for that good (Bologna)

Marginal Analysis

Managerial decisions involve copra g the marginal benefits of a decision with the marginal costs

Shortage Exists:

Natural tendency for prices to rise

Which of the following are quantity-setting oligopoly models? A. Stackelberg B. Stackelberg and Cournot C. Cournot D. Bertrand

Stackelberg and Cournot

c

The absolute value of the slope of the indifference curve is called the: a. Marginal revenue b. Average rate of substitution c. Marginal rate of substitution d. Marginal cost

Accounting Profit

Total amount of money taken in from sales (total revenue) minus the dollar cost of producing goods or services - Found on an income statement

If you wish to open a store and you do not like risk, it would be wise to sell:

a mix of normal and inferior goods.

The costs of production include

accounting costs and opportunity costs.

Suppose both supply and demand decrease. What effect will this have on price? A. It will fall.B. It will rise.C.It may rise or fall.D. It will remain the same.

it may rise or fall

A price ceiling is A. the minimum legal price that can be charged in a market.B.the maximum legal price that can be charged in a market.C. above the initial equilibrium price.D. equal to the initial equilibrium price.

the maximum legal price that can be charged in a market

The value of marginal product of an input is the value of

the output produced by the last unit of an input

If the last unit of input increases total product, we know that the marginal product is: A. Positive B. Negative C. Indeterminate D. Zero

Negative

Changes in the price of an input cause

slope changes in the isocost line.

You are the manager of a gas station and your goal is to maximize profits. Based on your past experience, the elasticity of demand by Texans for a car wash is -4, while the elasticity of demand by non-Texans for a car wash is -6. If you charge Texans $20 for a car wash, how much should you charge a man with Oklahoma license plates for a car wash?

$18.00

In a perfectly competitive market, each firm has the following cost function: C = 49 + 5Q + Q^2. The market price is $35 and the market demand is Qd = 185 - P, where P is the market price. What is the long run price in this market? A. $35 B. $39 C. $19 D. None of the above

$19

Five Forces Framework

-Entry, Power of Input Suppliers, Power of Buyers, Industry Rivalry, Substitutes and Complements

A firm will have constant profits of $100,000 per year for the next four years, and the interest rate is 6 percent. Assuming these profits are realized at the end of each year, what is the present value of these future profits? A. $325,816B. $376,741C. $400,000D.$346,511

346,511

Suppose the interest rate is 5 percent, the expected growth rate of the firm is 2 percent, and the firm is expected to continue forever. If current profits are $1,000, what is the value of the firm? A. $31,000B. $30,000C. $26,500D.$35,000

35,000

What is the total cost associated with producing eight units of the control variable, Q (identify point B in the table)?A. 3,000B.3,600C. 3,800D. 4,200

3600

Given the production function Q = min{4K, 3L}, what is the average product of capital when 8 units of capital and 16 units of labor are used? A. 32 B. 16 C. 4 D. 2

4

Suppose the growth rate of the firm's profit is 7 percent, the interest rate is 10 percent, and the current profits of the firm are $120 million. What is the value of the firm? A. $44 millionB. $4,280 millionC.$4,400 millionD. $6,800 million

4,400

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px = $5, Py = $10, X = 20, and M = 500? A. 40 B. 75 C. 25 D. 50

40

What is the marginal benefit associated with producing six units of the control variable, Q (identify point D in the table)?A. 600B.400C. 200D. 100

400

Given the benefit function B(Y) = 400Y - 2Y2, the marginal benefit is: A. 200Y.B. 400 - 2Y2.C.400 - 4Y.D. 800 - 2Y.

400-4Y

You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. Your firm's maximum profits are: A. 475 B. 415 C. 495 D. 480

495

You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q^2. The profit-maximizing output for your firm is: A. 4/5 B. 45 C. 5 D. 10

5

a

A cash gift causes the budget line to a. Shift to the right in a parallel fashion b. Shift to the left in a parallel fashion c. Rotate clockwise d. None of the statements associated with this question are correct

Normal Good

A good for which an increase (decrease) in income leads to an increase (decrease) in the demand for that good (steak)

Refer to the figure below. Suppose that the marginal benefit of writing a contract is $100 and the marginal cost of that contract is $50. Based on this information, the optimal contract length should: A. Be held constant at the contract length where MB = 100 and MC = 50 B. Be increased C. Be decreased by two-thirds D. Be decreased by half

Be increased

Dv only

Equilibrium Price: Decreases Equilibrium Quantity: Decreases

Sv only

Equilibrium Price: Increases Equilibrium Quantity: Decreases

D^ only

Equilibrium Price: Increases Equilibrium Quantity: Increases

In perfect competition, which is NOT true? Firms produce homogenous goods Firms are price-takers There are a large number of firms Every firm has a small but perceivable market power

Every firm has a small but perceivable market power

Substitutes

Goods for which an increase (decrease) in the price of one good leads to an increase (decrease) in the demand for the other good. (Pepsi & Coke)

Which is the correct statement about the relationship between government and the market? A. Government should intervene on the consumers' behalf.B. Government should intervene on the producers' behalf.C. Government should not intervene on any party's behalf.D.Government often plays a role in disciplining the market process.

Government often plays a role in disciplining the market process.

Which of the following is NOT a source of rivalry in economic transactions? A. Consumer-producer rivalryB. Producer-producer rivalryC.Government-producer rivalryD. All of the statements associated with this question are correct

Government-producer rivalry

Demand is more inelastic in the short term because consumers: A. Have no time to find available substitutes B. Are impatient C. Are present-oriented D. None of the statements are correct

Have no time to find available substitutes

Entry

Heightens competition and reduces the margins of existing firms in a wide a variety of industry settings - Includes: entry costs, speed of adjustment, sunk costs, economies of scale, network effects, reputation, switching costs, government restraints

Surplus Exists:

Natural tendency for the price to fall to equate QS with QD

Demand Shifters:

Income, Prices of Related Goods, Advertising and Consumer Taste, Population, Consumer Expectations and Other Factors

If marginal benefits exceed marginal costs, it is profitable to: A. Stay at that level of A B. Increase Q C. Decrease Q D. All of the statements associated with this question are correct

Increase Q

am negative

Increase in M (income) will lead to a decrease in the consumption of good X, meaning it is an inferior good

ay negative

Increase in the price of good Y will lead to a decrease in the consumption of good X, then good X is a complement to good Y

ay positive

Increase in the price of good Y will lead to an increase in the consumption of good, the good X is a substitute for good Y

Producer-Producer Rivalry

Only occurs when multiple sellers of a product compete. The firms with the best quality and prices win the right to serve customers.

Sv Dv

P: Ambiguous Q: Decreases

Consider the following inverse market demand function: P = 120 - (Q1 + Q2). The cost functions are C1(Q1) = 2Q1 for firm 1 and C2(Q2) = 4Q2 for firm 2. Now suppose that the two firms operate as a Stackelberg duopoly where firm 1 is the leader and firm 2 is the follower. The firms profit maximizing quantities are: A. Q1 = 40 and Q2 = 38 B. Q1 = 60 and Q2 = 28 C. Q1 = 30 and Q2 = 56 D. Q1 = 120 and Q2 = 56

Q1 = 60 and Q2 = 28

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q1 - 2Q2. The firms' marginal costs are identical and are given by MCi = 2. Based on this information, the Stackelberg follower's reaction function is: A. QF = 24.5 - QL B. QF = 24.5 - 0.25QL C. QF = 49 - 0.25QL D. QF = 24.5 - 0.5QL

QF = 24.5 - 0.5QL

Two firms compete as a Stackelberg duopoly. The demand they face is P = 100 - 3Q. The cost function for each firm is C(Q) = 4Q. The outputs of the two firms are: A. QL = 12; QF = 8 B. QL = 20; QF = 15 C. QL = 16; QF = 8 D. QL = 24; QF = 12

QL = 16; QF = 8

Two firms compete as a Stackelberg duopoly. The demand they face is P=100-3Q. The cost function for each firm is C(Q)=4Q. The outputs of the two firms are: QL=20; QF=15 QL=24; QF= 12 QL=12; QF=8 QL=16; QF=8

QL=16; QF=8

Which of the following is a linear demand function?

Qxd = α0 + αXPX + αYPY + αMM + αHH.

Which of the following is a linear demand function? A.Qxd = α0 + αXPX + αYPY + αMM + αHH.B. Qxd = αPXαX PYαY MαM HαH.C. Qxd = α0 + αXPX2 + αYPY2 + αMM2 + αMH2.D. Qxd = α + αX log PX + αY log PY + αM log M + αM log H.

Qxd = α0 + αXPX + αYPY + αMM + αHH.

The supply function for good X is given by Qxs = 1,000 + PX - 5PY - 2PW, where PX is the price of X, PY is the price of good Y and PW is the price of input W. If PX = 100, PY = 150, PW = 50, then the supply curve is A. Qxs = 550.B.Qxs = 150 + Px.C. Qxs = 550 + Px.D. Qxs = 350 + Px.

Qxs = 150 + Px

A production function: A. defines the average amount of output that can be produced with inputs such as capital and labor B. is determined only by the expenditures on R and D C. defines the minimum amount of output that can be produced with inputs such as capital and labor D. represents the technology available for turning inputs into output

Represents the technology available for turning inputs into output

d

Sam Voter prefers Jack to Rob, Rob to Mark, and Jack to Mark. Sam's preferences a. Are not consistent with our assumptions about consumer behavior b. Indicate that he is a liberal c. Are not complete d. Are transitive

d

Suppose that consumers' preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume goods X and Y are normal goods and the price of good X decreases. Then the substitution effect will lead consumers to consume a. More of good X and more of good Y b. Less of good X and more of good Y c. Less of good X and less of good Y d. More of good X and less of good Y

b

Suppose that consumers' preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good and the price of good X increases. Then the substitution effect will lead consumers to consume a. More of good X and more of good Y b. Less of good X and more of good Y c. Less of good X and less of good Y d. More of good X and less of good Y

Incremental Revenues

The additional revenues that stem from a yes-or-no decision

c

The firm manager with indifference curves which are convex from the origin (output on the horizontal axis and profit on the vertical axis) views a. Only profits to be "goods." b. Only outputs to be "goods." c. Both profits and outputs to be "goods." d. None of the statements associated with this question are correct

b

The horizontal intercept of the budget line is: a. -PX/PY b. M/PX c. M/PY d. PYY

b

The revenues earned by the firm from the consumer may be maximized under a. The regular price offer b. The buy one get one free offer c. 50% discount offer d. 40% discount offer

An isoquant defines the combination of inputs that yield the producer: A. Lower levels of output than the desired level of output B. The same level of output C. Higher levels of output than the desired level of output D. None of the statements are correct

The same level of output

c

When the price of a good increases with other things unchanged, the real income of the consumer a. Is unchanged b. Increases c. Decreases d. None of the statements associated with this question are correct

c

When the price of one good decreases, the associated substitution effect is represented by a a. Move from one indifference to a higher indifference curve since real income is now higher b. Move from one indifference to a lower indifference curve since real income is now lower c. Move along a given indifference curve holding real income constant d. Move along a given indifference curve since real income increases

b

When the price of one good increases, the associated income effect is represented by a move from one indifference curve to a a. Lower indifference curve since real income is now higher b. Lower indifference curve since real income is now lower c. Higher indifference curve since real income is now higher d. Higher indifference curve since real income is now lower

b

Which combination of the properties given below rules out indifference curves that intersect one another? a. Completeness and diminishing marginal rate of substitution b. Transitivity and more-is-better c. More-is-better and diminishing marginal rate of substitution d. Completeness and more-is-better

c

Which of the following cases violates the property of transitivity a. A~B, B~C, A~C b. A>B, B>C, A>C c. A>B, B>C, C>A d. None of the statements violates the transitivity property

c

Which of the following is most likely not to be an example of a normal good? a. Lobster b. Sports cars c. Bus travel d. Jacuzzis

d

Which of the following is true? a. Indifference curves may intersect b. At a point of consumer equilibrium, the MRS equals 1 c. If income increases, a consumer will always consume more of a good d. None of the statements associated with this question are correct

Suppose the demand for X is given by Qxd = 100 - 2PX + 4PY + 10M + 2A, where PX represents the price of good X, PY is the price of good Y, M is income and A is the amount of advertising on good X. Based on this information, we know that good Y is A.a substitute for good X.B. a complement for good X.C. an inferior good.D. a normal good.

a substitute for good X.

Persuasive advertising influences demand by: A. providing information about the availability of a product.B. offering reduced prices for the product.C.altering the underlying tastes of consumers.D. none of the statements are correct.

altering the underlying tastes of consumers

ax<0

an increase in Px (price) leads to a decrease in the quantity demanded of good X

Managers can get workers to work longer hours

with higher overtime pay in excess of regular hourly pay


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