Economics: Chapters 5 & 6 Quiz

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

$250

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, pays $1,300 for fuel and maintenance, and hires one worker for $30,000. Sam's total revenue from pilot training classes this year equaled $90,400. Sam's implicit costs for this year are equal to:

$39,000

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

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

1,000 units per week

In Exhibit 6-5, the marginal product of the second worker is

12

If the price of Pepsi-Cola 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 Pepsi-Cola is

3

A farm can produce 10,000 bushels of wheat per year with 4 workers and 13,000 bushels of wheat per year with 6 workers. The marginal product of the sixth worker for this farm is:

3,000 bushels

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 value of the price elasticity of demand is 0.2, this means that

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

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

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

Edward

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

Elastic

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

Elastic

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 B

In Exhibit 6-13, ATC is shown by the graph labeled

I

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

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

Infinity

Normal profit is defined as a(n)

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

Other things constant, the price elasticity of demand for a product will be smaller (more inelastic) if

People spend an insignificant share of their income on the product

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

Elasticity measure how "sensitive" consumers are by measuring their change in ___ as the price of the product changes.

Quantity demanded

Another word for elasticity is

Responsiveness

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

Rising

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 accounting services provided free of charge to the firm by Paul's wife, who is an accountant.

The law of diminishing returns applies to which of the following segments of the marginal product of labor

The downward-sloping segment only

Total fixed costs are costs that are fixed with respect to

The rate of output

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

Total cost

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

Unelastic

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

Implicit costs are best thought of as

opportunity costs

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