Economics Midterm 1-10

There is only one gas station within hundreds of miles. The owner finds that when she charges $3 a gallon, she sells 199 gal a day, and when she charges $2.99 a gal, she sells 200 a day. The marginal revenue of the 200th gallon of gas is

$1

in exhibit 4-11 the equilibrium price for bushel of wheat is

$2

Refer to exhibit 8-2. Using the rule that focuses on the marginal approach to maximizing profits, the monopolist maximizes profit by choosing price equal to

$20

suppose there are only three people in the economy: jane harry and bob - the individual demand for corn for each of these consumers is given in exhibit 3-1. the total quantity demanded of corn if the market price is $5 is

$25

As shown in exhibit 6-9 the total cost of producing 5 units is

$250

in exhibit 3-8 the equilibrium market price in this radio market would be

$50

Exhibit 6-1 shows the change in the production of Pizzas as more workers are hired. The marginal product of the fifth employee equals

1

Nikki decides to work 5 hours the night before her Econ exam. She earns and extra $75, but her exam score is 10 points lower than it would have been had she stayed home and studied. Her opportunity cost is the:

10 points she lost on her exam

In exhibit 6-5 the marginal product of the second worker is

12

Currently, union membership in the United States is about

15 %

Suppose that 1000 identical sellers each set their profit maximizing output level at 18 units when price equals $10. Then what is market quantity supplied at a price of $10

18,000

Suppose an economy is faced with the production possibilities table. The first unit of capital goods will cost the economy blank units of consumption goods

2

If the price of pepsicola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles, then according to the averaging equation the value of price elasticity of demand for pepsicola is

3

A firm can produce 10,000 bushels of wheat per year with 5 workers and 13,000 a year with 6 workers. Marginal product if the with worker is

3,000

Sam quits his job as an airline pilot and opens his own pilot training school. He was earning $40,000 as a pilot. He withdraws $10,000 from his savings where he was earning 6 percent interest and uses the money in his new business. He uses a building he owns as a hanger and could rent it out for $5,000 per year. He rents a computer for $1,200 buys office supplies for $500 rents an airplane for 6,000.. implicit cost equal to

39,000

A firm can produce 450 gallons of milk per day with 4 workers and 500 gallons per day with 5 workers. The marginal product of the fifth worker expressed in gallons per worker per day is

50

If the firm represented in exhibit 6-15 is operating with a plant whose size corresponds to the short run average total cost curve, A, the level of output that would minimize its short run average total cost

500 Units per week

If the value of the price elasticity of demand is .2 this means that

A 5 percent decrease in price causes a 1 percent increase in quantity demanded

Price discrimination requires

A firm to be able to segment its customers based on different price elasticities of demand

During the short run period of the production process, a firm will be

Able to vary some of its factors of production

Using exhibit 5-3 whose elasticity of demand is greatest when the price falls from $7 to $6

Albert

According to the data given in exhibit 2-3, the production of 1 unit of capital goods and 14 units of consumer goods:

All of the above

Scarcity is a problem:

Becuase human wants are unlimited while resorces are limited

When economists want to hold a number of factors constant, they are demonstrating which of the following expressions

Ceteris paribus

Suppose an oil cartel has an agreement to restrict members production in order to maintain a price of $30 over barrel. A single cartel member may want to cheat and exceed its quota so that it can

Earn a bigger profit

A picture frame company operates in a Monopolistic ally competitive market. It's short run equilibrium price is $80 and its ATC is $65. It sells 100 picture frames/ week . From this we can tell:

Economic profits are $1500

Which of the following is the best definition of economics?

Economics is the study of how society chooses to allocate its scarce resources

Using exhibit 5-3 in general, whose demand for orange juice is the most elastic

Edward

In exhibit 5-5 the change in total revenue resulting for a change in price from A to D indicates that the demand curve is

Elastic

(Graph) If the firm in exhibit 7-14 minimizes its loss at 200 units of output, marginal cost is

Equal to marginal revenue

(Graph) In exhibit 10-3, suppose that in the interest of boosting incomes of the working poor, Congress imposes a minimum wage of $6.00 per hour. This minimum wage creates a(n)

Excess supply of labor of food services

Of the following demographic groups, which has the lowest poverty rates in the US?

Families in which the "head of the household" has not attained at least a bachelor's degree from a college or university

The social security tax is called FICA, which stands for

Federal Insurance Contributions Act

Which firm in exhibit 6-16 displays a long run average cost curve with diseconomies beginning at 2,000 units of output per week

Firm A

Some economists argue that monopolistically competitive markets are inefficient because

Firms do not produce the output rate that would minimize their average total cost

The law of increasing opportunity costs caused the production possibilities curve to

Have a bowed-out shape

In a perfectly competitive industry, assume the short run average total cost increases as the output of the industry expands. In the long run, the industry supply curve will

Have a positive slope

Macroeconomics deals with the analysis of all following questions except

How does Microsoft price its software packages

Which of the following is an implication of the law of diminishing returns

In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost

In exhibit 5-7 if promoters raise their prices from $10 to $40 per ticket, then their total revenue will;

Increase

Microeconomics approaches the study of economics from the viewpoint of

Individual economic units, such as consumers, firms, and units of government

Consider a firm with the following cost and revenue information: ATC=$8, AVC=$7, and MC=MR=$6. If the firm produces Q=60 in the short run, it

Is making a mistake and should shut down

If a firm is operating at a loss in the short run and finds that its price is greater than average variable cost, then in the short run

It should produce where MR=MC

The amount of a good that is given up to produce another good is

Its opportunity cost

the principal that the opportunity cost increases as the production of one output expands along the production possibilities curve is the

Law of increasing opportunity costs

A monopoly firm can sell its fourth unit of output for a price of $250. In order to sell more than five units, it must expect to receive a price

Less than $250

A point inside the production possibilities curve is:

Less than full use of resources and technology

If product price increases, then

MRP will increase

A perfectly competitive firm sells its output for $100 per unit and marginal cost is $100 per unit. To maximize short run profit, the firm should

Maintain its current output

Economists believe that scarcity forces everyone to

Make choices

Economics is the study of how people

Make choices to produce and consume goods and services

If ABC Printing is producing an output level of 100, where MR is $5 and MC is $3, then the firm is

Making an unknown amount of profit or loss

Profit is maximized when which of the following conditions occurs?

Marginal revenue equals marginal cost

The profit maximizing, or loss minimizing quantity of output for any firm to produce exists at that output level in which

Marginal revenue equals marginal cost

Under both perfect condition and monopoly, a firm

Maximizes profit by seeking marginal cost equal to marginal revenue

Normal profit is defined as

Minimum necessary to keep a firm in operation

As shown in exhibit 6-3 the law of diminishing returns Applies where there are

More than 5 workers per day

In exhibit 2-13, point H is

Not achievable today bc of inadequate production capacity

The law of increasing costs holds that the opportunity cost

Of a good increases as more of the good is produced

Under perfect competition, a business firm can accept losses

Only in the short run

an entrepreneur is an

Organizer who seeks profitable opportunities and is willing to accept risks

Which of the following is a distinction between perfectly competitive and monopolistic competition?

Perfectly competitive firms confront a perfectly elastic demand curve, monopolistically competitive firms face a downward sloping demand curve

The supply curve of a price taker firm in the short run is the

Portion of the firms marginal cost curve that lies above average variable cost curve

If a decrease in the price of theater tickets increases the total revenue earned by the theater, this is evidence that demand is

Price elastic

The production possibilities curve depicts the various combinations of two goods that can be

Produced with a given technology

Elasticity measures how sensitive consumers are by measuring their change in __ as the price of the product changes

Quantity Demanded

Opportunity cost

Represents the best alternative sacrificed for chosen alternative

Diseconomies of scale exist over the range of output for which the long run average cost curve is

Rising

price discrimination occurs when

Sellers charge two separate prices for the same product to two different groups.

(Graph) In the long run, the demand curve for the monopolistic competitive firms shown in Exhibit 9-1:

Shifts leftward

For the economy shown in exhibit 2-7, which of the following is true when the economy is at point A

Some car production must be forgone in order to produce more grain in the same period

What happens to the MP of labor when the market price of the good produced increases?

Stays the same

Which of the following is true for a pure monopolist

The demands curve is above the marginal revenue curve

The Law of diminishing returns applies to which of the following segments of the marginal product of labor curve?

The downward sloping segment only

Is an economy is producing at full employment, it means that

The economy is producing along its production possibilities curve

Which of the following is an example of a positive economic statement

The economy's real output increased at about 3 percent last year and the unemployment rate decreased

Which of the following is true of a perf. Competitive firm?

The firm will not not earn an economic profit in the long run

Total fixed costs are costs that are fixed with respect to

The rate of output

Paul's plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm

The wages paid to the 12 employees

An example of price discrimination is the price charged for

Theatre tickets that offer lower prices for children

The production possibilities curve demonstrates the basic economic principle that

To produce more of any one thing, assuming full employment, the economy must produce less of something else

The sum of the explicit and implicit costs incurred in the production process is called

Total cost

(Graph) In exhibit 4, this firm is currently operating at its profit maximizing level of output. How much profit is the firm earning?

Unable to determine with this info

If a 5 percent decrease in the price of a good produces a 5 percent increase in the quantity demanded, the price elasticity of demand is

Unitary Elastic

If the percentage change in the quantity demanded of a good equals the percentage change in price, price elasticity of demand is

Unitary elastic

Exhibit 6-13 ATC is shown by the graph labeled

V

In exhibit 2-16, which of the following points on the production possibilities curve are efficient production points

abcd

The purpose of a cartel is to

act like a monopoly

Which of the following statements is true?

all of the above

each year around valentines day we would expect

all of the above

market failure can result from market outcomes that

all of the above

which of the following would decrease the price of packaged hot dogs

all of the above

Which of the following statements are false?

b and d

In an oligopoly industry, price

cannot be predicted exactly, because it is likely to lie between the competitive and monopoly prices

ceteris paribus which of the following would cause a decrease in demand for HD TVs

decrease in consumers' income

assuming that chicken and beef are substitutes a decrease in the price of beef, other things being equal, will

decrease the demand for chicken

a decrease in demand leads to a

decreased equilibrium price and a decreased equilibrium quantity

two goods x and y are complementary goods if the demand for x

decreases when the price of y increases

how would a decrease in consumer income affect the market for new automobiles

demand would decrease leading to a reduction price and a reduction in quantity sold

in exhibit 4-3 an increase in quantity supplied would cause a movement from which equilibrium point to another other things being equal

e1 to e4

If the percentage change in quantity demand it of a good is greater than the percentage change in price price elasticity of demand is

elastic

if you were a government official that wanted to raise the equilibrium price of milk which of the following actions would you take

encourage farmers to produce less milk

which of the graphs in exhibit 3-3 depicts the effect of an increase in income on the demand for DVDs (a normal good)

graph A

consider the market for chicken assuming that chicken and beef are substitutes an increase in the price of beef will

increase the demand for chicken creating a higher price and greater amount of chicken purchased in the market

assuming that dry cleaning is a normal good an increase in consumer income, other things being equal, will

increase the demand for dry cleaning

One source of economic growth is:

increasing capital

Suppose the president of a textbook publisher argues that a 10 percent increases in the price of a textbooks will raise total revenue for the publisher. It can be concluded that the company president thinks that demand for textbooks is

inelastic

A perfectly elastic demand curve has a price elasticity of demand coefficient of

infinity

which of the following changes could cause the computer market to change as shown in exhibit 4-5

lower costs for computer chips and mother boards

if market supply decreases and simultaneously market demand increases the new equilibrium will show

market price will increase and the quantity exchanged could increase decrease or remain the same

which of the following is the best example of a public good

national defense

Which of the following statements is correct?

none of the above

a demand curve for the steel porcupines concert tickets would show the

number of concert tickets that will be purchased at each price

Implicit costs are best thought of as

opportunity costs

Other things constant, the price elasticity of demand for a product will be smarter (more inelastic) if: people spend an insignificant share of their income on the product

people spend an insignificant share of their income on the product

A monopolist will maximize profits by

producing the output where marginal revenue equals marginal cost.

Another word for elasticity is

responsiveness

Marginal revenue product is defined as the extra

revenue earned by hiring one more unit of resource

if the cost of fertilizer rises then the price of corn will

rise

the development of new technology typically

shifts the supply curve to the right

when the price of a good is below its equilibrium level a

shortage puts upward pressure on the price

the use of a price system eliminates

shortages and surpluses

when the price of a good is above its equilibrium price a

surplus puts downward pressure on the price

The long run is a period of time

that is long enough to permit changes in all the firm's inputs, both fixed and variable

which of the following is true if the price of coffee increases

the demand for tea, a substitute good, will increase

externalities are unintended costs or benefits that are imposed on unsuspecting people and that result from

the economic activity of others

in exhibit 3-15 if the market price of good x is initially $1.50 a movement toward equilibrium requires

the price to fall below $1.50 the quantity supplied to fall and the quantity demanded to rise

if equilibrium is present in a market

the quantity demanded equals quantity supplied

how would a decrease in the price of the feed grains used to feed cattle affect the market for beef

the supply of beef would increase decreasing beef prices