Econ final (quiz and homework questions)

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Refer to the Table above: If the price of a soda is $2, the price of a hamburger is $6, and George has $14 of income, George's utility maximizing combination of sodas and hamburgers per day is

4 sodas and 1 hamburger

In December 2014, the average price of gasoline in the United States was $2.50 per gallon and consumers bought 18 percent more gasoline than they had during April 2014, when the average price was $3.60 per gallon. Based on these numbers, what was the price elasticity of demand for gasoline from April 2014 to December 2014?

-0.5

Suppose a 5 percent increase in income results in a 6 percent decrease in the quantity demanded of beans. income elasticity of bean is equal to and bean are a good.

-1.2 and inferior

Refer to the Table above. Use the midpoint formula to calculate the absolute value of price elasticity of demand when price changes from $30 to $35. Round to 2 decimal places if necessary.

-1.86

If the current equilibrium price in the teapot market is $10. Veronica's maximum profit (or minimum loss) is $______

-17

Refer to the Table above. Use the midpoint formula to calculate the absolute value of price elasticity of demand when price changes from $35 to $40. Round to 2 decimal places if necessary.

-3

Refer to the Figure above. If the price of a hamburger is increased from $8 to $10, the price elasticity of demand equals ________. Use the midpoint formula.

-3.00

Refer to the Table above. Use the midpoint formula to calculate the absolute value of price elasticity of demand when price changes from $40 to $45. Round to 2 decimal places if necessary.

-5.7

Suppose that the quantity demanded of soda increases by 5% when the price of milk increases by 20%. a) The cross-elasticity between soda and milk is equal to b) Relationship between the two goods: Soda and milk are goods

0.25 and substitutes

Refer to the Table above. Use the midpoint formula to calculate the absolute value of price elasticity of demand when price changes from $10 to $15. Round to 2 decimal places if necessary.

0.32

Suppose the demand for parking at campus is given by P = 5 -0.02Q, where P is the price in dollars and Q is the quantity demanded. The price elasticity of demand at a price of $1.50 is _________. Correct!

0.43

Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to $20, the quantity sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand. Use the midpoint formula.

0.6

The owner of a local hot dog stand has estimated that if he lowers the price of hot dogs from $2.00 to $1.50, he will increase sales from 400 to 500 hot dogs per day. Using the midpoint formula, the absolute value of price elasticity of demand for hot dogs is __________.

0.78

Refer to the Table above. Use the midpoint formula to calculate the absolute value of price elasticity of demand when price changes from $20 to $25. Round to 2 decimal places if necessary.

0.82

When the price of radios decreases 5%, quantity demanded increases 5%. The absolute value of the price elasticity of demand for radios is ________.

1.00

Refer to the above Table. Use the midpoint formula to calculate the absolute value of price elasticity of demand when price changes from $25 to $30. Round to 2 decimal places if necessary.

1.22

If the current equilibrium price in the teapot market is $10. To maximize profit or minimize loss, Veronica will charge a price of $_____ per teapot.

Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. What is the average product of labor when the farm hires 5 workers?

10.8 pounds

Refer to the Figure above. The fixed cost of production is $_____

100

Suppose that the market for a children's book is given by the following demand and supply functions: Demand: QD= 70 - 2P Supply: QS= -10 + 2P Where: QD and QS are quantity demand and quantity supplied respectively, and P is the price. Now suppose that, in an attempt to support the book publisher, a minimum price per book (price floor) is set at $25. With the price floor in place, the new consumer surplus is equal to $ ____________ Correct!

100

Dane decides to give up a job earning $200,000 per year as a corporate lawyer and converts a duplex he owns into a UFO museum. The market rent for a similar duplex is $20,000 a year. He pays wages of $75,000 a year to his assistants and $10,000 a year for utilities. Fans flock to the museum to see his collection of extraterrestrial paraphernalia. Over the course of the year, the museum brings in revenues of $200,000. Dane's accounting profit is $ Dane's economic profit is $

1115000 and -105000

Refer to the Table above. The marginal utility of the third soda per day is

Refer to the above table. How much is total product when 4 units of labor are used?

1328

If the firm increases output from 15 to 20 units, the marginal cost of output is $_____.

Refer to the Figure above: The marginal utility of the first movie rental is

Refer to the Figure above. The average variable cost of production when the firm produces 20 units of output is $_____

17.5

Suppose the current equilibrium price in the teapot market is $10. To maximize profit (or minimize loss), Veronica will produce a quantity of _____ teapots.

Refer to the Table above. What is the absolute value of price elasticity of demand when price increases from $6.0 to $8? [Hint: use the midpoint method]

2.0

Suppose an assistant professor of economics is earning a salary of $75,000 per year. One day, she quits her job, sells $100,000 worth of bonds that had been earning her 3 percent per year, and uses the funds to open a bookstore. At the end of the year, she shows an accounting profit of $80,000. Her economic profit is $_____.

2000

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 63 cookies together. What is the average product of the three workers?

21 cookies

Refer to the Table above: The marginal utility of the second hamburger is

Refer to the Figure above. The average total cost of production when the firm produces 20 units of output is $_____

22.5

225

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 63 cookies together. What is the marginal product of the 3rd worker?

28 cookies

Refer to the Figure above: The marginal utility of the third movie rental is

At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 5 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals using the midpoint formula.

3.38

Refer to the Table above: The total utility of one hamburger per day is

Suppose that the market for a children's book is given by the following demand and supply functions: Demand: QD= 70 - 2P Supply: QS= -10 + 2P Where: QD and QS are quantity demand and quantity supplied respectively, and P is the price. Now suppose that, in an attempt to support the book publisher, a minimum price per book (price floor) is set at $25. With the price floor in place, the new producer surplus is equal to $ ____________ Correct!

300

The table above gives the marginal social cost (which equals the price), marginal private benefit, and marginal social benefit of students attending Diablo Valley College (DVC) in Concord, California. If the market is competitive and left without government intervention, the number of students that will attend DVC is students and the price of a course will be dollars.

3625 and 65

Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. Diminishing marginal returns sets in when the ________ worker is hired.

3rd

If, as an entrepreneur, I am earning accounting profits of $75,000 per year and the opportunity cost of my time, the only implicit cost, is $60,000, ________.

I am earning economic profits of $15,000.

Which one of the following is FALSE?

MC = TC divided by Q

A utility-maximizing consumer buys so as to make ________ for all pairs of goods.

MUx/MUy = Px/Py

Which of the following describes a barrier to entry?

anything that protects a firm from the arrival of new competitors

In the above figure, if the market quantity is restricted to 500,000 and the price is allowed to rise to set the quantity demanded equal to the quantity supplied, then the producer surplus is equal to ___________.

area B + AREA D + AREA F

The total of consumer plus producer surplus is greatest

at the market equilibrium

Although patents are a ________, they also provide ________.

barrier to entry; an incentive for invention and innovation

The payment for a factor of production that is perfectly inelastic in supply is __________.

economic rent

The figure above represents the competitive market for slices of key lime pie. When 60 slices are produced, the marginal cost

equals the marginal benefit

In the long run, a firm in a perfectly competitive industry will supply output only if its total revenue covers its

explicit costs plus its implicit cost

Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is

facing constant returns to scale

Refer to the Table above: Diminishing marginal utility sets in after consuming the ________ soda per day.

first

In economics, the term "free rider" refers to

one who waits for others to produce or provide a good and then enjoys its benefits without paying for it.

The price elasticity of demand measures the ________ that results from a ________.

percentage change in the quantity demanded; percentage change in price

If we add successive laborers to work a given amount of land on a wheat farm, eventually

the increases in wheat harvested will get smaller and smaller.

When an entrepreneur invests his own financial capital in order to start a business __________.

the opportunity cost of capital should be included in the economic cost of doing business.

If a firm is producing where MR < MC,

the revenue gained by producing one more unit of output is less than the cost incurred by doing so.

Efficiency occurs in a market when _____________.

the sum of consumer surplus and producer surplus is maximized.

One of the requirements for a monopoly is that

there is a product with no close substitutes

A positive, but decreasing, value for the marginal product would indicate that

total output is increasing at a decreasing rate

Accounting profit can be calculated as __________.

total revenue - explicit costs.

In the above figure, the market is at its equilibrium. Area A + area B is equal to ____________

total surplus

Common pool resources differ from pure public goods in that

unlike public goods, common pool resources are rival in consumption.

When output is 100 units, the firm's total fixed cost is $1,000. What will this firm's total fixed cost be if output doubles to 200 units?

$1,000

Refer to the above table. When output rises from 2 units to 3 units, marginal costs are

$10

Suppose that Rihanna would sell 1,000 tickets to a concert at $480 each. If the equilibrium price is $600 per ticket for a fixed supply of 1,000 tickets, what is the value of the additional economic rent that Rihanna could earn if she charged the market clearing price?

$120,000

Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit (of labor) and fixed costs equal $65, what is the total cost of those 4 units of output? (Assume labor cost is the only variable cost)

$125

When Super Stuff Corporation produces 5,000 units, total costs equal $150,000 and total variable costs equal $70,000. At this level of output, what is Super Stuff's average fixed cost?

$16

Suppose the best investment you could make with $200,000 in cash is to purchase a government bond that pays 10 percent interest per year. If you decide to invest the money in your own business instead of buying the government bond, the opportunity cost of this financial capital is _________.

$20,000 per year

In the figure above, if the market price is $12, then the total consumer surplus is ________

$240

Suppose that when the level of output for the firm increases from 100 to 110 units, its variable costs increase from $500 to $750. What is the firm's marginal cost?

$25

Refer to the above graph: If government set a price floor at $4, the deadweight loss created would be equal to _____.

$40

A firm in a perfectly competitive industry is producing 55 units, its profit-maximizing quantity. Industry price is $2, total fixed costs are $25, and total variable costs are $40. The firm's economic profit is

$45

In the above table, when output is 2 units, average variable costs are

$5.50

Refer to the Figure above. If Buffy gives 17 perms per day, her daily profit is

$51

Refer to the Table above. Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basket is $15. Exotic Fruit's maximum profit (or minimum loss) is ________.

-$21

The table above gives the marginal social cost (which equals the price), marginal private benefit, and marginal social benefit of students attending Diablo Valley College (DVC) in Concord, California. The socially efficient number of students attending DVC is ______.

4,250

The table above gives the marginal social cost (which equals the price), marginal private benefit, and marginal social benefit of students attending Diablo Valley College (DVC) in Concord, California. If the government can set the price per course, in order to have the efficient quantity of students attending DVC, the government should set the price equal to ___________.

Suppose the price elasticity of demand for a basket of fruits is -5.0. You are currently charging $42 per basket. If you want to increase the quantity of fruit baskets sold by 20 percent, you should charge a price equal to $_____.

40.35

400

Suppose that the market for a children's book is given by the following demand and supply functions: Demand: QD= 70 - 2P Supply: QS= -10 + 2P Where: QD and QS are quantity demand and quantity supplied respectively, and P is the price. At the market equilibrium price, total surplus is equal to $ _______________ Correct!

450

Refer to the above Table: Diminishing marginal product of labor sets in when the _____ worker is employed

4th

Refer to the Figure above. The average fixed cost of production when the firm produces 20 units of output is $_____

Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. What is the marginal product of the 4th worker?

5 pounds

Suppose that the market for a children's book is given by the following demand and supply functions: Demand: QD= 70 - 2P Supply: QS= -10 + 2P Where: QD and QS are quantity demand and quantity supplied respectively, and P is the price. Now suppose that, in an attempt to support the book publisher, a minimum price per book (price floor) is set at $25. The efficiency loss (deadweight loss) resulting from the price floor is equal to $ ____

The table above gives the marginal social cost (which equals the price), marginal private benefit, and marginal social benefit of students attending Diablo Valley College (DVC) in Concord, California. When 4,625 students attend DVC, marginal external benefit is equal to ________.

Refer to the Figure above. The average fixed cost of production when the firm produces 15 units of output is $_____

6.67

a) Werner is selling in a perfectly competitive market at a price of $40. The profit maximizing or loss-minimizing output is binders. b) Werner is selling in a perfectly competitive market at a price of $40. The firm's maximum profit (or minimum loss) is $ . c) If the price of three-ring binders falls to $20, the profit-maximizing or loss-minimizing output will be binders. d) If Werner is selling in a perfectly competitive market at a price of $20. The firm's maximum profit (or minimum loss) is $ . e)If Werner is selling in a perfectly competitive market at a price of $20. Should the firm continue to produce in the short run? (Simply type in "Yes" or "No") f) If Werner is selling in a perfectly competitive market, a price of $ corresponds to the shut-down point. g) If Werner is selling in a perfectly competitive market, a price of $ corresponds to the break-even point.

8, 54, 5, -60, yes, 16, 31.67,

Jane has $500 a week to spend on clothing and food. The price of clothing is $25 and the price of food is $10. The clothing and food pairs in Jane's choice set include ________ units of clothing and ________ units of food.

8; 30

Suppose the demand for parking at campus is given by P = 5 -0.02Q, where P is the price in dollars and Q is the quantity demanded. The price elasticity of demand at a price of $4.50 is _________.

Refer to the figure above: At equilibrium, consumer surplus is equal to area ________.

A + B + C

Refer to the figure above: If price is P1, consumer surplus is equal to area ________.

A + B + E

Which one of the following about a monopoly is false?

A monopoly must have some kind of government privilege or government-imposed barrier to maintain its monopoly.

Refer to the above figure: At equilibrium, producer surplus is equal to area _______.

E + F + G

The Hawaiian island of Lana'i is privately owned by Castle & Cooke and for generations most of its land was used to grow pineapples. Now, many of the pineapple fields have been replaced by tourist accommodations, including a pair of world-class hotels and a top-rated golf course. What would an economist say about this change in land-use patterns?

Economic rent has allocated the island's resources to their highest valued use: tourism.

Refer to the figure above: If price is P1, producer surplus is equal to area _______

If a firm's demand curve is perfectly elastic, then at the profit maximizing level of output

P = MR = MC.

a pure public good is

a good that is nonrivalrous in consumption and nonexcludable.

Mylan Pharmaceuticals holds a patent on the EpiPen - designed to inject epinephrine into shock victims. In 2016, Mylan received criticism for charging $600 for this life-saving drug. The market for EpiPens is considered ________ which means that the price of an Epipen ________ its marginal cost.

a monopoly; is greater than

economic rent is

a payment for the use of any resource above its opportunity cost.

A monopoly is an industry with

a single firm in which the entry of new firms is blocked.

Marginal utility is the ________ satisfaction gained by consuming ________ of a good.

additional; one more unit

Refer to the Table above: Assume that a store is giving hamburgers and sodas away for free. Consumers can have as many sodas and hamburgers as they want, but the food has to be consumed one unit at a time. If George has already had one soda and two hamburgers, then George should

be indifferent between consuming the second soda or the third hamburger.

When efficiency is attained, the consumer surplus ________.

can be smaller than, equal to, or larger than the producer surplus.

In the above figure, if the market is in equilibrium, area A + area B + area C equals __________.

consumer surplus

In the above figure, if the quantity is restricted to 500,000 and the price is allowed to rise to set the quantity demanded equal to the quantity supplied, then area A is equal to

consumer surplus

In the above figure, the market is at its equilibrium. Area A is equal to

consumer surplus

The principal feature of private goods is that

consumption by one person reduces the quantity available to others.

In the above figure, if the quantity is restricted to 500,000 and the price is allowed to rise to set the quantity demanded equal to the quantity supplied, then area C + area E is equal to _______.

deadweight loss

Wheat is produced in a perfectly competitive market. Market demand for wheat decreases. This will cause the individual wheat farmer's marginal revenue to ________ and their profit maximizing level of output to ________.

decerase; decrease

The ABC Computer Company wants to increase the quantity of computers it sells by 5%. If the price elasticity of demand is -2.5, the company must _________

decrease by 2.0%

The price elasticity of demand for beef is estimated to be 3.0 (in absolute value). This means that a 20 percent increase in the price of beef, holding everything else constant, will cause the quantity of beef demanded to

decrease by 60 percent

Refer to the Table above. Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basket is $15. To maximize profits, Exotic Fruit should sell ________ fruit baskets.

five

In the above table, diminishing marginal product sets in when the ________ worker is employed.

fourth

Ben's Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if

his Shoppe's total revenue exceeds his variable cost.

If the demand curve is the same as the marginal benefit curve and the supply curve is the same as the marginal cost curve, then the quantity at which they cross is i. the equilibrium quantity. ii. the efficient quantity. iii. the quantity with no deadweight loss.

i, ii, and iii

If the firm can vary all factors of production, it is operating

in the long run

Strawberries, a normal good, are produced in a perfectly competitive market. Average consumer incomes increase. This will cause the individual strawberry farmer's marginal revenue to ________ and their profit maximizing level of output to ________.

increase; increase

Suppose Argyle Sachs has to choose between building a smaller sweater factory and a larger sweater factory. In the following graph, the relationship between costs and output for the smaller factory is represented by the curve ATC1, and the relationship between costs and output for the larger factory is represented by the curve ATC2.

larger

Mylan Pharmaceuticals holds a patent on the EpiPen - designed to inject epinephrine into shock victims. In 2016, Mylan received criticism for charging $600 for this life-saving drug. Mylan's patent is a ________ Mylan to charge a price ________.

legal barrier to entry and allows; greater than marginal cost

A perfectly competitive firm's supply curve is its

marginal cost curve above its minimum average variable cost.

When total product is decreasing,

marginal product must be negative

Kathy eats five slices of pizza on a Saturday night but admits each slice of pizza doesn't taste as good as the previous one. This suggests that for Kathy the

marginal utility of a slice of pizza is positive but decreasing.

The figure above represents the competitive market for slices of key lime pie. If the production is 80 slices per day, the cost of the 80th slice is___________.

more than anyone is willing to pay for it.

The figure above shows the competitive market for slices of key lime pie. If the production is 40 slices per day, someone is willing to buy another slice of pie for

more than it costs to produce the slice

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell

nothing at all; the firm shuts down.

In the above figure, the market is at its equilibrium. Area B is equal to _______.

producer surplus

In the absence of government,

public goods are likely to be underprovided.

As a firm decreases the level of output that it produces, short-run average fixed cost

rises

smaller

The less sensitive quantity demanded is to a change in price, the

smaller the absolute price elasticity of demand.

If a typical firm in a perfectly competitive industry is incurring losses, then

some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms.

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