Lesson 5-7 Practice Q

Use the following table of total cost (TC) related to output (quantity produced) to answer this question: For an out put of 4 units, what is the Average Total Cost ?

$80

If the coefficient of elasticity equals 2.7 on a product's demand line, then a 1% increase in price will yield a __________ in quantity demanded.

2.7% decrease

Which of the following economists closely analyzed how consumers behave and why ?

All the above

In the Indifference Diagram above, Point J has higher satisfaction than position I but is not attainable with the given budget.

T

Average Total Cost (ATC) = Average ___________ Cost (AVC) + Average Fixed Cost(AFC)

Variable

The Economic costs of taking this course would include:

all the above

Elasticity of supply measures the amount of change in quantity brought to the market by a ______________.

change in price

If the price and total revenue change in the same direction, then demand is ____________.

inelastic

In the 1800's Jeremy Bentham concluded that consumers seek maximum pleasure (called _________ in economics) with minimum cost expenditure.

utility

Use the following table of total cost (TC) related to output (quantity produced) to answer this question: For an out put of 3 units, what is the Total Fixed Cost ?

$110

These utility concepts can be applied to a decision of what to purchase given utility patterns for two goods as listed in the figure below. If you assume that good R and good S both cost $2 each, how many of each would you purchase if you have an income of $8?

1 R and 3 S

Assume you invested $100,000 into your lawn mowing business, but you could have invested in a similar operation with the same risk and received a 20 percent return. You should expect a "normal profit " of $ _____________ .

20,000

Assume you are going to lunch and have a choice of two meals. The first meal would give an increase in marginal utility of 100 with a $25 price. The second meal would give you an increase of only 10 with a $2 price. The third meal will give you an increase of 50 with a $5 price. Which meal should you logically choose ?

3rd

There are three possible time frames for a supplier, including the "long run" where _________ factor(s) of production are changeable.

4 (all)

If the coefficient of elasticity of demand is 2, then a 3 percent increase in price would cause a _________ in quantity demanded.

6% decrease

Economies of scale cause ___________ costs to decline with increases in capacity due to efficiency of production.

All the above

Economic Costs include __________

Both a. and b.

Assume you own a widget manufacturing plant. In the short run you could build a larger plant or purchase an existing operation to combine with your own firm.

F

In the field of Marketing the concepts of marginal values and marginal utility per dollar are not used for brand comparisons because measuring "pleasure" is difficult.

F

Savings (non-consumption) can not have a utility function.

F

The utility obtained per unit of consumption will not vary based upon "need at the moment" such as with police or doctor services.

F

The ______________ is the basic principle that as more is produced, eventually less additional output will result with each additional input.

Law of Diminishing Returns

The relationship between the number of inputs and the additional output that is added is called ________________ .

Marginal Product

With unitary demand producers may charge either a higher or lower price, and the total revenue will ______________.

Remain the same

In addition to price, "time" relative to utility is another consideration in consumer behavior.

T

In figure 6.4, Plant 2 has lower costs with increasing output compared to Plant 1 due to economies of scale.

T

Some individuals receive a high value of utility from not spending all of their income and therefore choose to save a reasonable amount of money.

T

Which of the following names would be most closely associated with the idea that pleasure attained by individuals is difficult to measure since it is often subjective and social in nature ?

Thorstein Veblen

Average Variable Cost (AVC) = Total ___________ Cost (TVC) / Quantity (Q)

Variable

An example of Consumer Behavior is illustrated along the demand line in Figure 6.1. The amount of money that some consumers would be willing to pay above the equilibrium is called _________________ .

consumer surplus

The diminishing marginal utility effect states that as more of an item is consumed and the amount of additional satisfaction decreases, the seller must ________ price to induce the consumer to buy more.

decrease

If MC is increasing, marginal product (MP) is ___________.

decreasing

The amount of pleasure derived from a product per dollar spent is the marginal utility __________ by the price of the item.

divided by

The utility functions of individuals __________ according to personal values and tastes.

do not vary much

All consumers and suppliers are __________ to large price changes, but for analysis economists assume a moderate amount of price change.

elastic

Industries with extensive economies of scale (such as autos, computer chips and steel) will often have high _________ costs and, therefore, increasing output will allow absorption of those costs over greater output.

fixed

Production analysis is essential in order for a firm to make __________ among the various possible allocations of resources.

good choices

The higher the value of the elasticity coefficient (Ed) above 1.0, the ________ is the price sensitivity (elasticity).

greater

__________________ is the sensitivity of quantity demanded of an item to a change in income.

income elasticity

Price increases with inelastic demand will result in __________ in total revenue.

increases

When a small percentage of the household budget is spent on an item, it's demand tends to be ____________ .

inelastic

In the ____________ the Elasticity of Supply is perfectly inelastic (supply line is vertical) because no adjustments can be made immediately in the amount produced.

market period

The degree of elasticity is calculated using the __________ formula to find the coefficient of elasticity.

mid point

A coupon purchaser is _______ sensitive, but time insensitive.

price

There are two ways of measuring price elasticity - the total __________ test and the coefficient of elasticity (uses the midpoint formula).

revenue