Econ exam 2 review

The figure below shows a single consumer's demand for ice cream at the student union An increases in the number of students on this campus would cause;

The market demand curve for ice cream from the student union to shift to the right.

In general, when the price of a variable factor of production increases:

The profit-maximizing level of output falls.

Which of the following is the most likely to be a fixed factor of production at a pizza restaurant?

The size of the seating area.

Accounting profit is equal to;

Total revenue minus explicit costs.

A firm should shut down if its total revenue is less than its _______ even when the firm produces the level of output at which price equals marginal cost.

Variable cost

The long run is best defined as:

a period of time sufficiently long that all factors of production are variable

One implications of the shape of the demand curve facing a perfectly competitive firm is that:

If the firm increases its price above the market price, it will earn zero revenue.

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price good Y is rising, it will:

Shift into producing good Y.

Which of the following is defining characteristics of all perfectly competitive markets.

All firms sell the same standardized product.

A market equilibrium is only efficient if:

All relevant costs and benefits are reflected in the market supply and demand curves.

If all firms in a perfectly competitive industry are experiencing economics losses, then:

Some firms will exit the industry, until economic profits equal zero.

The price elasticity of demand is a measure of:

The change in quantity demanded for a good that results from a change in its price.

The price elasticity is a measure of:

The change in quantity of a good that results from a change in its price.

The tendency for consumers to purchase more of a good or service as its price falls is captured by:

The law of demand

To produce 150 units of output, a firm use 3 employee-hours. To produce 300 units of output, the firm must use 8 employee-hours. Apparently, the firm is:

experiencing diminishing returns

Suppose two demand curves and so have a point in common. At that point, demand shown by the steeper curve will be ___________ the flatter curve.

less elastic than

If the percentage change in the price of a good is equal to the percentage change in the quantity demanded of that good, then the demand for that good is:

unit elastic

Individual supply curves generally slope _______ because ________.

upward; of increasing opportunity costs.

The following graph depicts demand. The slope of the demand curve (ignoring the negative sign) is:

0.5

When Acme Dynamite produces 250 units of output, its variable cost is $2000, and its fixed cost is $500. It sells each unit of output for $25. when Acme Dynamite produces 250 units of output, its profit.

$3750

For a given seller, the figure below shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. what is this seller's reservation price for the 250th unit.

$4

The table below shows a pizzeria's fixed cost and variable cost at different levels of output. Pizza's sell for $20 each. When the pizzeria makes 100 pizzas a day, its fixed cost is ________ and its total cost is _________.

$500; $1,350

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in table below. The first hour John spends cleaning windows costs him __________ that he could earned in the grocery store.

$7

John is trying to decide how to divide his time between his jobs as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is different between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below:

$8

A demand curve that is drawn as a vertical line has a price elasticity of demand equal to:

0

When the price of hot dogs is $1.50 each, 500 hot dogs are sold every day. After the price falls to $1.35 each, 510 hot dogs are sold every day. At the original, what is the price elasticity of demand for hot dogs?

0.2

If the absolute value of slope the demand curve is 2.5 price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is

0.3

If 10% decrease in the price of a good leads to a 20% increase in the quantity demanded, then what is the price of demand?

2

The following graph depicts demand The price elasticity of demand at point D is:

2/5

If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to:

3.0

Refer to the table below. As the firm increases the number of employee-hours each day from 1 to 2, output increases by:

33 units

If a one percent increase in the price of oranges leads to a five percent increase in the quantity supplied, the price elasticity of supply for oranges is _______.

5

If a one person increase in the price of oranges to a five percent in the quantity supplied, the price elasticity of supply for orange is __________.

5

The following graph depicts demand The price elasticity of demand at point A is:

5/2

Refer to the below. If Laura and Chris are only two consumers in this market, then at a price of $2.00 per pound, the market demand for hamburger is:

6 pounds per week

Fran runs a doughnut shop in a tiny 3-person town. The table below shows the quantity by the three townspeople at various prices. When the price of a doughnut is 50 cents, what is the market demand for doughnuts?

9 doughnuts

Which of the following will cause an increase market supply?

A technological innovation that lowers the marginal cost of producing the good.

A rational seller will sell another unit of output:

If the cost of making another unit is less that revenue gained from selling another unit.

One implication of the shape of the demand curve facing a perfectly competitive firm is that:

If the firm increase its price above the market price, will will earn zero revenue.

The following graph depicts demand At point A, demand is:

Elastic

According to the law of demand, when the price of shoes _________ people will consume ________ shoes.

Falls, more

One difference between the long run and the run in a perfectly competitive industry is that:

Firms necessarily earn zero economic profit in the long run but may earn positive or negative economic profit in the short run.

One difference between the long run and the short run in a perfectly competitive industry is that:

Firms necessarily earns zero economic profit in the long run but may earn positive or negative economic profit in the short run.

Mary Jane is willing to babysit for $6 an hour. Her neighbor has asked her to babysit for $8 an hour. Assuming Mary Jane accepts the offer:

Her economic rent will be $2 per hour

Angelina Jolie's economic rent from starring in a movie is equal to the difference between:

Her final salary and the least she would be willing to accept to star in the movie.

If your income elasticity of demand for hot dogs is negative, then:

Hot dogs are an inferior good for you.

The championship game will be held next weekend in your 40,000-seat stadium. The supply of tickets to the game:

Is the perfectly inelastic.

A firm that produces a good with many substitutes will most likely find that:

Lowering its price will increase total revenue

In general, perfectly competitive firms maximize their profit by producing the level of output at which:

Marginal cost equals price.

Economic theory assumes that a firm's goal is to:

Maximize its economic profit

On a given linear demand curve, as price increases demand becomes _____________.

More elastic

The Price elasticity of supply for the hope diamond is zero because there is only one. Therefore, the supply curve for the hope diamond is? Perfectly elastic unit elastic perfectly inelastic Elastic

Perfectly inelastic

The price elasticity of demand equals 1:

at the midpoint of a straight-line demand curve.

As one moves down along a linear demand curve ( from high price, low quantity pairs to low price, high quantity), demand:

becomes less elastic

Which of the following would be considered a factor of production in the provision of bus service?

bus drivers

If the cross-price elasticity of demand between blueberries and yogurt is negative, then the two goods

complements

Demand tends to be __________ in the short run than in the long run.

less elastic

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by %1, quantity demanded would:

decrease by %3

If the owners of a business are receiving total revenues just sufficient to cover all of their explicit and implicit costs, then they are:

earning a normal profit

If the owners of a business are receiving total revenues just sufficient to cover all of their explicit and implicit costs, then they are:

earning a normal profit.

A firm earns a normal profit when its:

economic profit is zero

Generally , __________ motivates firms to enter an industry, while _________ motivates firms to exit an industry.

economic profit; economic loss

If consumers can easily switch to a close substitute when the price of a good increase, demand for that good is likely to be:

elastic

To increase total revenue, firms with _______ demand should lower price, and firms with __________ demand should increase price.

elastic; inelastic

Suppose a 10% increase in the price of aspirin leads to 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is:

inelastic

Suppose 30 employee-hours can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units would require:

more than 30 additional employee-hours

A situation is efficient if it is:

not possible to find a transaction that will make at least one person better off without harming others.

Adam Smith coined the term "invisible hand" to describe the process by which actions of independent, self-interested buyers and sellers will:

often lead to the most efficient allocation of resources.

One assumption of the perfectly competitive model is free entry and exit, this assumption most directly leads to the implications that:

positive economic profit is only possible in the short run.

An increase in consumers demand for espresso will lead to an increase in ________, while an increase in the number of firms producing espresso will lead to a(n)________.

quantity supplied; increase in supply

The role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the ________ function of price.

rationing

Oil and oil products remain the main fuel for cars, planes, ships, and power plants. The amount of oil still in the earth is finite. Given this information, the supply of gasoline is __________.

relatively inelastic

Suppose all firms in a perfectly industry are earning an economic profit. One would expect that, over time, the number of firms in the industry will ______ and the market price will __________.

rise; rise

If a firm's total revenue is less that its variable cost when the film produces the level of output at which price equals marginal cost, then the firm should:

shut down

When the price of a perfectly competitive firm's output rises;

the firm will produce more

In general , when the price of a fixed factor of production increases:

the profit-maximizing level of output does not change.