Econ Exam 3

If quantity demanded rises by 60% and price falls by 20%, the price elasticity of demand is:

3

Which elasticity would be the most responsive to a change in price if good A has an elasticity of 0.05, good B has an elasticity of 0.8, good C has an elasticity of 1.8, and good D has an elasticity of 47?

D, 47

Which event is a long-run adjustment for a university? A) A new science building is being constructed. B) More staff is hired. C) More laptops are purchased for faculty use. D) Two hundred new books are purchased by the library.

a) a new science building is being constructed

Which of the following represents a market period? A) a spring peach harvest in central Texas B) three years in the oil industry C) two years in the honey industry D) one year in the laptop computer industry

a) a spring harvest in central Texas

Which statement is NOT a characteristic of a corporation? A) Its investors face unlimited liability. B) It produces more value of goods and services than any other type of business structure. C) It has the ability to issue stock to raise capital. D) It usually consists of many owners (in some cases, tens of thousands of owners or more)

a) its investors face unlimited liability

At an all-you-can eat buffet, a person will stop eating when: A) marginal utility is equal to zero. B) total utility is equal to zero. C) total utility increases at a diminishing rate. D) marginal utility increases at a diminishing rate.

a) marginal utility is equal to zero

Which production input can be altered in the short run? A) The number of hours that existing employees work. B) The amount of heavy machinery used in the plant. C) The capacity of the plant. D) The total number of plants in operation.

a) the number of hours that existing employees work.

Which statement is true regarding the total product and marginal product curves? A) The total product curve reaches its peak when marginal product is zero. B) The total product curve begins to fall when marginal product begins to fall. C) The marginal product curve is upward sloping whenever total product is rising. D) The total product and marginal product curves both reach their maximum point at the same level of labor.

a) the total product curve reaches its peak when marginal product is zero.

If the total variable cost of producing three wickets is $30, while the average fixed cost of producing three wickets is $25, then the total cost of producing three wickets is: A) $55 B) $105 C) $115 D) $165

b) $105

AJ plans to attend a retreat on mindfulness. He paid a $500 nonrefundable registration fee, made a reservation at a hotel that costs $200, and budgeted $150 for gas and food. Two days before the retreat, he becomes ill. Assuming he is able to cancel the hotel without penalty, AJ's sunk cost equals: A) $150 B) $500 C) $650 D) $850

b) $500

Which of the following indicates a possible income elasticity measure for a normal good? a) -0.8 b) 0.8 c) 1.8 d) -0.3

b) 0.8

David earns three hits in the first baseball game, one hit in the second game, and five hits in the third. What was his average number of hits based on these three games? A) 2 B) 3 C) 4 D) 5

b) 3

Enrique teaches in the math department at a local university, and he volunteers as a math tutor at the local high school. Enrique's behavior can be explained by: A) the sunk cost fallacy. B) altruism. C) overconfidence. D) framing bias.

b) alturism

If supply is perfectly inelastic and demand is relatively elastic, the burden of an excise tax: A) falls primarily on consumers. B) falls entirely on producers. C) is shared evenly by consumers and producers. D) falls entirely on consumers.

b) falls entirely on producers

If hot dogs and relish are complements, their cross elasticity of demand is: a) greater than zero b) less than zero c) greater than zero, but less than one d) zero

b) less than zero

If an increase in income of 10% causes an increase in quantity demanded of 20% for a good, the good is a(n): a) normal good b) luxury good c) inferior good d) abnormal good

b) luxury good

Many workers know they should save for retirement, but they put off doing so. They reason that there is plenty of time to do so in the future when their bills are not as high as they are now. What psychological factor associated with behavioral economics explains this behavior? A) a sunk cost fallacy B) overvaluing the present relative to the future C) overconfidence D) a framing bias

b) overvaluing the present relative to the future

If a consumer's budget increases, the budget line shifts to the _____ and a consumer can reach a _____ level of consumption. A) right; lower B) right; higher C) left; lower D) left; higher

b) right; higher

As a person consumes more of a good or service, the person's _____ will increase. At the same time, this person's _____ will decrease with each additional unit. A) marginal utility; total utility B) total utility; marginal utility C) marginal utility; cost D) cost; total utility

b) total utility; marginal utility

When the price of a good decreases from $10 to $8, the quantity supplied of the good decreases from 80 units to 65 units. The price elasticity of supply is: a) 0.75 b) 0.80 c) 0.93 d) 0.60

c) 0.93

A wedding planner determines that one waiter can serve 30 guests, two waiters can serve 70 guests, three waiters can serve 120 guests, four waiters can serve 160 guests, and five waiters can serve 180 guests. The marginal product of the third waiter is _____ guests. A) 36 B) 40 C) 50 D) 120

c) 50

Sharkey's Surfboards are all priced one cent lower than the next round dollar, for example, $89.99, $129.99, and $114.99. Sharkey believes that his customers are affected by: A) sunk costs. B) a sunk cost fallacy. C) a framing bias. D) overconfidence.

c) a framing bias

The _____ graphically illustrates the possible combinations of two goods a consumer can purchase with a given income, given the prices of both products. A) production possibilities frontier B) supply curve C) budget line D) demand curve

c) budget line

Justin owns a home entertainment installation company. One employee can complete two installations per month; two employees can complete 5 installations, three employees can complete 9 installations, four employees can complete 12 installations, and five employees can complete 11 installations. Diminishing marginal returns begin with the _____ worker. A) second B) third C) fourth D) fifth

c) fourth

Andrea is routinely late for class because she always underestimates how long it will take her to drive to class. When it comes to arriving on time for class, Andrea is subject to: A) altruism. B) a framing bias. C) overconfidence. D) a sunk cost fallacy.

c) overconfidence

When a consumer chooses among a set of goods or services, utility is maximized when marginal utility: A) equals total utility. B) is minimized. C) per dollar spent is equal for all goods. D) is greater than total utility.

c) per dollar spent is equal for all goods.

If the cross elasticity of demand between chicken and fish is 0.8, then chicken and fish are: a) complements b) not related c) substitutes d) normal goods

c) substitutes

If the total cost of 3 units is $40 and the total cost of 4 units is $50, the marginal cost of the fourth unit is: A) $90 B) $50 C) $40 D) $10

d) $10

Dan's Car Wash produces $150,000 in revenues and incurs $120,000 in labor wages, materials, rent, and other explicit costs. Moreover, Dan gave up a $40,000-a-year job as a hotel valet to start his car wash business. Dan's economic profit is _____, and he _____ earning a normal profit. A) $30,000; is B) $30,000; is not C) -$10,000; is D) -$10,000; is not

d) -$10,000; is not

If the price of a product or service increases by 5%, the total revenue spent on which of these would probably decrease? a) gasoline b) salt c) prescription medication for diabetes d) air travel to Barcelona

d) air travel to Barcelona

Marginal utility: A) is the total satisfaction derived from the consumption of a given quantity of a good. B) is the change in total satisfaction derived from consuming one more unit of a good. C) is the change in marginal satisfaction derived from consuming one more unit of a good. D) increases with the consumption of each additional good.

d) increases with the consumption of each additional good

Amy decides to open a bakery that will specialize in delicious gourmet brownies. Her explicit costs would include all of these EXCEPT the: A) business taxes paid on her earnings. B) monthly lease payment on the building. C) health insurance premiums that she pays for her employees. D) interest earnings Amy forgoes from selling her savings bonds to finance her store.

d) interest earnings Amy forgoes from selling her savings bonds to finance her store.

Walmart is able to order huge quantities of shovels and rakes at very low prices from many different factories in China as it opens more stores. This best represents: A) short-run economies of scale. B) long-run diseconomies of scale. C) economies of scope. D) long-run economies of scale.

d) long-run economies of scale

Ramiro has been an accounting major for three years, but he is not doing very well in his courses. He has, however, done very well in his law courses, but he doesn't want to change his major to law because he has already spent three years as an accounting major. He does not want to feel like he wasted those three years. Ramiro is subject to: A) altruism. B) a framing bias. C) overconfidence. D) a sunk cost fallacy.

d) sunk cost fallacy

Which statement describes a situation in which negative returns to labor occur? A) The marginal product of labor begins to fall. B) The total product of labor peaks. C) The average product of labor begins to fall. D) The marginal product of labor falls below zero.

d) the marginal product of labor falls below zero

Which of these is the most likely to have the highest elasticity of demand? a) salt b) pepper c) dog food d) theme park tickets

d) theme park tickets

The price elasticity of demand measures

how responsive quantity demanded is to a change in price.

When consumers are loyal to a particular product and the product's price increases, the producer's total revenue:

increases

If a firm sells a product that has a perfectly inelastic demand curve, then, if price doubles, it can be expected that:

total revenue will decrease.

A gas station owner in a large city learned in his microeconomics class that buyers are relatively unresponsive to changes in the price of gasoline. If, based on that assumption, he increases the price of gas at his station:

total revenue will increase