Econ 315 Midterm

Which curve does the marginal cost curve intersect at the (their) minimum point Average total cost curve Average fixed cost curve Average variable cost curve Average total cost curve and average variable cost curve

Average total cost curve and average variable cost curve

Fixed costs exist, only in The long run Capital intensive markets The short run Labor-intensive markets

The short run

If good a is an inferior good an increase in income leads to A decrease in the demand for good B A decrease in the demand for good A An increase in the demand for a good A No change in the quantity demanded a good A

A decrease in the demand for good A

Consumer-producer rivalry implies A lower price of a good favors both producers and consumers A higher price of a good hurts producers, while favoring consumers A higher price of a good favors producers while hurting consumers A lower price of a good hurts both producers and consumers

A higher price of a good favors producers while hurting consumers

The attempt by police union to take advantage of the specialized investment of 14, million by the city of Boston is example of

A hold up problem

The maximum legal price that can be charged in a market is A price floor An ad valorem tax The market equilibrium price A price ceiling

A price ceiling

If the absolute value of the own price elasticity of state is point for a decrease in price will lead to A reduction in total revenue An increase in total revenue No change in total revenue An increase or decrease in total revenue

A reduction in total revenue

Because of producer-producer rivalry, the price will tend to Be driven to a lower price Rise up to the maximum price the consumers are willing and able to pay Be the same as the competitive price Be the same as the monopoly price

Be driven to a lower price

A few years ago, the Boston Globe reported that the city of Boston plan to spend 14 million to convert the fleet center sports arena, an entertainment center into a appropriate venue for the Democratic national convention. The city engage Shawmut design and construction in contractual relationship to complete the work, which was supposed to start 48 days prior to the commencement of the DNC on July 26 however, when negotiations between Boston's mayor and the police union broke down the Boston police patrolman's association, took to the picket line surrounding the fleet center and prevented construction crews from beginning the work, the globe reported that a truck attempting to deliver. Steele turned around after a crowd of union members stood at a chain-link gate in front of the arena, shouting back it up and respect the line buddy. Moreover, the globe reported that on duty police officers who had been instructed to prevent pickets from restricting access, did not intervene. Given the tight construction schedule construction delays reportedly cost about $100,000 per day the above scenario was the result of a principal agent problem. Identify the principal in the situation The Democrati

Boston city officials

Generally when calculating profits as total revenue minus total cost, accounting profits are larger than economic profits, because economists take into account only explicit costs Only implicit costs Both explicit and implicit costs That both types of profits are always equal because the account for the same costs

Both explicit and implicit costs

The production function, Q equals L^5K^5 is called Cobb Douglas Leontief Linear Multiplicative

Cobb Douglas

If the cross price elasticity between goods, A and B is negative we know the goods are Inferior goods Complements Inelastic Substitutes

Complements

The behavior of bidders in an auction is an example of Consumer-consumer rivalry Consumer-producer rivalry Producer-producer rivalry Supplier-consumer rivalry

Consumer-consumer rivalry

Barnacle Inc. has a legal obligation to purchase 2 tons of structural steel per week to manufacture conveyor frames Contract Spot exchange Vertical integration

Contract

If a firms production function is Leontief and the wage rate goes up the Firm must use more labor, in order to minimize the cost of producing a given level of output Firm must used more capital in order to minimize the cost of producing a given level of output Firm must use less labor, in order to minimize the cost of producing a given level of output Cost minimizing combination of capital and labor does not change

Cost minimizing combination of capital and labor does not change

Assume that the price elasticity of demand is negative to for a certain firms products. if the firm raises price, the firms managers can expect total revenue to Decrease Increase Remain constant Either increase or remain constant, depending upon the size of the price increase

Decrease

Which of the following would not shift the demand for a good a? Drop in price of good A Drop in price of good B Consumer income Changing the level of advertising a good A

Drop in price of good A

Assuming La Niña does not impact the California wine producing region how will anemia impact the market for California wines Equilibrium quantity will increase and equilibrium price will decrease Equilibrium quantity and price will decrease Equilibrium price, and quantity will increase Equilibrium quantity will decrease and equilibrium price will increase

Equilibrium price, and quantity will increase

It is profitable to hire units of labor as long as the value of marginal product Is less than wage Exceeds average product Equals price Exceeds wage

Exceeds wage

According to the principal agent problem, if performance base rewards to managers are reduce/removed the profits of the firm will Rise Fall Remain constant Neither rise fall, nor remain constant

Fall

Which of the following payment plans does not give an incentive to managers to stop shirking Flat salary with additional pay based on profits of the firm Pay schedule based solely on profits earned by the firm Flat salary, regardless of firm profits A salary, including a percentage of the firms revenues

Flat salary, regardless of firms profits

Donaville caters to its retirement population by selling over 10,000 donuts each week to produce that many donuts weekly Donaville uses 1000 pounds of flour which must be delivered by 5 AM every Friday morning. How should the manager of Donaville acquire flour?

Flour should be acquired through a contract

Which of the following are measures of industry concentration Four firm concentration ratio and producer surplus HHI and consumer surplus Consumer surplus and producer surplus Four firm concentration, ratio, and HHI index

Four firm concentration, ratio, and HHI index

The small car market will have Lower equilibrium prices, and lower equilibrium quantity Lower equilibrium prices and higher equilibrium quantity Higher equilibrium prices and higher equilibrium quantity Higher equilibrium, prices and lower equilibrium quantity

Higher equilibrium prices and higher equilibrium quantity

As a result of increased tensions in the Middle East oil, production is down by 1.21 million barrels per day a 5% reduction in the world supply of crude oil. Explain the likely impact of this event on the market for gasoline in the market for small cars. The gasoline market will have : Higher equilibrium prices and higher equilibrium quantity Higher equilibrium prices and lower equilibrium quantity Lower equilibrium prices and higher equilibrium quantity Lower equilibrium prices and lower equilibrium quantity

Higher equilibrium prices and lower equilibrium quantity

Which of the following mergers is example of vertical integration Betholm Steele purchases US steel IBM purchase is a California computer chip company AT&T purchases MCI GM purchases Ford

IBM purchase is a California computer chip company

Trade will take place 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 If the maximum that a consumer is willing and able to pay, is greater than the minimum price, the producers willing and able to accept for a good Only if the maximum that a consumer are willing and able to pay, is equal to the minimum price, the producers willing and able to accept for a good If the maximum amount that are consumers are willing to pay equals zero

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

As we move down along a linear demand curve, the price elasticity of demand becomes more Elastic Inelastic Log linear Variable

Inelastic

Isoquants are normally drawn with a convex shape because Inputs are perfectly substitutable Inputs are perfectly complementary Inputs are not perfectly substitutable Inputs are not perfectly complementary

Inputs are not perfectly substitutable

The combinations of inputs that produce a given level of output are depicted by Indifference curves Budget lines Isocost curves Isoquants

Isoquants

What happens to the optimal contract length when the marginal cost of writing a contract declines

It increases

For the first time in two years, big G (cereal division of General Mills) raised cereal prices by 4%. if as a result of this price increase the volume of all cereal sold by Big G changed by -5% what can you infer about the own price elasticity of demand for big G cereal?

It is elastic

Rapel valley in Chile is renowned for its ability to produce high-quality wine at a fraction of the cost of many other vineyards around the world. Rapel Valley produces over 20 million bottles of wine annually of which 5 million are exported to the United States. Each bottle entering the United States is subjected to a $.50 per bottle excise tax, which generates about 2.5 million tax revenues. strong La Niña weather patterns have caused unusually cold temperatures devastating many of the wine producers in that region of Chile. how will La Niña affect the supply and price of Chilean wine? It will cause supply to increase and price to decrease It will cause supply to decrease and price to increase It will cause supply to increase and price to increase It will cause supply to decrease and price to decrease

It will cause supply to decrease and price to increase

How will the demand for good Y change is consumer income increases? It will decrease It will increase It will stay the same

It will decrease

In an effort to stop the migration of many of the automobile manufacturing facilities from the Detroit area, Detroit city Council is considering passing a statute that would give investment tax credits to auto manufacturers effectively. This would reduce auto manufacturers cost of using capital and high tech equipment in their production processes. What is the likely impact of the statute on the number of workers this automaker hires?

It will decrease

The X corporation produces a good called X That is a normal good. it's competitor, Y corporation makes a substitute good that it markets under the name Y. Good Y is an inferior good. How will the demand for good X change if consumer income decreased It will stay the same It will decrease It will increase

It will decrease

How will the demand for good X change if the price of good Y increases It will increase It will stay the same It will decrease

It will increase

What would you expect to happen to the number of applicants if the starting salaries of managers with NBA degrees remained constant, but salaries of managers without such degrees increased by 22% It would increase It would not change There's no way of telling It would decrease

It would decrease

If A and B are complements an increase in the price of good A would Have no effect on the quantity demanded of B Lead to an increase in demand for B Lead to a decrease in demand for B Not lead to an effect on the quantity demanded of B, nor an increase or decrease in the demand for B

Lead to a decrease in demand for B

If A and B are complementary goods, a decrease in the price of good A would Have no effect on the quantity demanded of B Lead to an increase in demand for B Lead to a decrease in demand for B Not have an effect on the demand for B nor lead to an increase or decrease in the demand for B

Lead to an increase in demand for B

A lump sum or a fixed tax of one dollar on ticket rides in amusement parks will change the equilibrium price of ticket rides by One dollar Less than one dollar More than one dollar An indeterminable amount

Less than one dollar

The minimum average cost of producing alternate levels of output, allowing for optimal selection of all variables of production, is defined by the Long run average total cost curve Short run average fixed cost curve Short run marginal cost curve Long run marginal cost curve

Long run average total cost curve

Often owners of firms who hire managers must install incentive or bonus plans to ensure that the Company is financially secure Manager will work hard Manager will maintain employee morale Company will have positive economic profits

Manager will work hard

The absolute value of the slope of the Isoquant is the Marginal rate of technical substitution Marginal product of capital Marginal rate of substitution Value marginal, product of labor

Marginal rate of technical substitution

Would you answer change, if in addition to change in ram in food prices, the article indicated that consumer incomes are expected to fall over the next two years as economy dips into recession? Maybe price may ultimately increase or decrease Yes, price will now decrease No price will still increase Yes, price will now be unchanged

Maybe price may ultimately increase or decrease

Which of the following would most likely be scrutinized under the FTC and DOJ horizontal merger guidelines Merger a: two major players, in Internet services, and retailing- amazon.com, and eBay- merge Merger B: cigarette maker, Phillip Morris merges with the Molson Coors brewing Company Merger c: Lockheed Martin, a large firm that manufactures aircraft merges with United States steel

Merger a

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

More elastic than the demand for clothing

Suppose the marginal product of labor is eight in the marginal product of capitals to the wage rate is four dollars and the price of capital is two dollars and in order to minimize cost the firm should use More capital and less labor More labor and less capital Three times more capital than labor 1/2 as much labor as capital

More labor and less capital

Is good Y a lower quality product than good X? Yes, good Y is a lower quality product than good X No good Y is a higher quality product than good X Not necessarily, it could be higher or lower quality No good Y is a product of identical quality to good X

Not necessarily, it could be higher or lower quality

Identify the agent in the situation Shama design and construction On duty police officers The Democratic national convention Boston city officials

On duty police officers

If the last unit of input increases total product, we know that the marginal product is Positive Negative Zero Indeterminate

Positive

The value of a firm is the Current value of profits Present discounted value of all future profits Average value of all future profits Total value of all future profits

Present discounted value of all future profits

Southwest airlines begins a "bags fly free" campaign, charging no fees for the first and second checked bags This situation best represents

Producer-producer rivalry

The recipe that defines the maximum amount of output that can be produced with K units of capital and L units of labor is the Production function Technological constraint Research and development schedule Total product

Production function

Technological advances will cause the supply curve to Shift to the left Shift to the right Become flatter Become steeper

Shift to the right

Boat lifts R us purchases, generic AC motors from a local distributor Contract Spot exchange Vertical integration

Spot exchange

Casper construction a home building contractor purchases 50 pounds of nails from the local Home Depot Vertical integration Spot exchange Contract

Spot exchange

Is consumers expect future prices to be higher They substitute current purchases for future purposes, a perishable products Stockpiling will happen when the products are durable in nature The position of the demand will not change The demand for automobiles today will not change

Stockpiling will happen when the products are durable in nature

Costs that are forever lost after they have been paid are Production costs Fixed costs Sunk costs Variable costs

Sunk costs

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output The MRTS is equal to the ratio of input prices The marginal product for dollars spent on all inputs is equal The marginal product of all inputs are equal The MRTS is equal to the ratio of input prices in the marginal product for dollar spent on all input is equal

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

Consider the market for bicycles (a normal good). all else being constant when income decrease The demand curve shift to the left and less bicycles are demanded at each given price The supply curve shifts to the right and more bicycles are available at each given price The supply curve shifts to the left and less bicycles are available at each given price The demand curve shifts to the right and more bicycles are demanded at each given price

The demand curve shift to the left and less bicycles are demanded at each given price

A manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is $15 per hour and capital is rented at nine dollars per hour. If the marginal product of labor is 40 units of output per hour and the marginal product of capital is 80 units of output per hour. Should the firm increase decrease or leave unchanged the amount of capital using its production process The Firm should leave capital unchanged The firm should increase capital The firm should decrease capital

The firm should increase capital

Spot exchanges are generally preferred when Transaction costs are high The input market is competitive There is opportunism Bargaining costs are high

The input market is competitive

A property of a production function, stating that as less of one input is used, increasing amounts of another input must be employed to produce the same level of output is known as The law of diminishing marginal labor The law of diminishing marginal rate of technical substitution The law of diminishing marginal utility The law of diminishing marginal returns

The law of diminishing marginal rate of technical substitution

The decline in marginal productivity experience when input usage increases holding all other inputs constant is known as The law of diminishing marginal rate of technical substitution The law of diminishing marginal utility The law of diminishing marginal labor The law of diminishing marginal returns

The law of diminishing marginal returns

In general, what happens to the level of consumer surplus is the price of good falls?

The level of consumer surplus increases as the price of a good falls

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 input is equal The MRTS is equal to the ratio of quantity of inputs The marginal products of all inputs are equal The marginal product per dollar spent on all inputs is equal and the MRTS is equal to the ratio of quantity of inputs

The marginal product per dollar spent on all input is equal

You are the manager of a midsize company that assembles personal computers. You purchase most components such as random access, memory (RAM) - in a competitive market. based on your marketing research consumers earning over $80,000 purchase 1.5 times more ram than consumers with lower incomes. one morning, you pick up a copy of the Wall Street Journal and read an article indicating that input components for RAM are expected to rise in price, forcing manufacturers to produce ram at a higher unit cost Based on this information, What can you expect to happen to the price you pay for random access memory?

The price will increase for random access memory

The industry elasticity of demand for gadget is -2. The elasticity of demand for an individual gadget manufacturers product is -2. based on the Rothschild approach to measuring market power we conclude that There is little monopoly power in this industry There is significant monopoly power in this industry The herfindahl index for this industry is -2 The herfindahl index for this industries 2

There is significant monopoly power in this industry

Exxon mobile uses the oil extracted from its wells as to produce raw, polypropylene a type of plastic Contract Vertical integration Spot exchange

Vertical integration

In electronics company takes over one of its original suppliers in a merger this an example of Vertical integration Horizontal integration Cointegration Conglomerate integration

Vertical integration

It is estimated that over 100,000 students were applied to the top 30 MBA programs in the United States this year. using the concept of net present value and opportunity cost, when is it rational for an individual to pursue an MBA degree When the cost of attending school are near zero When the net present value of attending graduate school is greater than zero When the benefits of attending school are greater than zero When the net present value of attending graduate school is at least $100,000

When the net present value of attending graduate school is greater than zero

A potential problem with piece-rate plans is that Workers will have a tendency to underproduce the good Workers have no incentive to work hard Workers may put a little emphasis on the quality of the good It is difficult for managers to enforce

Workers may put little emphasis on the quality of the good

Can you predict whether revenues on sales if it's lucky charms brand increased, or decreased? No, you can't tell Yes, it decreased Yes, it increased

Yes, it decreased

Suppose the firm achieves total revenue of $1000 by selling 100 units while facing total cost of $900. if the firm produces and sells 101 units, their total revenue is $1009 and their total cost is $905. Should the firm produce and sell the extra unit? No, since marginal profits are declining Yes, since marginal profits are positive Yes, since profits are positive No, since profits are declining

Yes, since marginal profits are positive