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David should make decisions based on benefit-cost analysis.

Ann is a manager at a private construction company. David works a manger in the city planning department of the government. Based on this information, which of the following is most likely to be true?

which of the following is most likely to be true?, David will make decisions based on benefit-cost analysis.

Ann is a manager at a private construction company. David works in the city planning department of the government. Based on this information

David will make decisions based on benefit-cost analysis

Ann is a manager at a private construction company. David works in the city planning department of the government. Based on this information, which of the following is most likely to be true?

David will make decisions based on benefit-cost analysis.

Ann is a manager at a private construction company. David works in the city planning department of the government. Based on this information, which of the following is most likely to be true?

The franchisee's revenue-maximizing output will be greater than its profit-maximizing output

Assume that Burger King, a fast food chain, enters into a franchise agreement. The royalty paid to Burger King by the franchisee is calculated as a percentage of the franchisee's revenue. Given that the franchisee faces a downward-sloping demand curve, which of the following is likely to be true? a) The franchisee's revenue-maximizing output will be greater than its profit-maximizing output. b) To maximize revenue, Burger King will want the franchisee to produce at the level where total revenue is positive but falling. c) The franchisee will produce at the level where the slope of the total revenue curve is zero in order to maximize profits. d) The profit-maximizing level of output for the franchisee will be at the level where marginal revenue is less than marginal cost. e) To maximize revenue, Burger King will want the franchisee to produce at the level where marginal revenue equals marginal cost.

Neither marginal revenue or marginal cost will change

Assume that a firm is producing at its profit maximising level of output. A decrease in fixed cost implies that

neither marginal revenue nor marginal cost will change

Assume that a firm is producing at its profit-maximizing level of output. A decrease in fixed cost implies that

Marginal revenue will not change but marginal cost will decrease.

Assume that a firm is producing at its profit-maximizing level of output. A decrease in fixed cost implies that...

neither marginal revenue nor marginal cost will change.

Assume that a firm is producing at its profit-maximizing level of output. A decrease in fixed cost implies that:

Assume that a firm is producing at its profit-maximizing level of output. A decrease in fixed cost implies that: a) marginal revenue will increase but marginal cost will decrease. b) marginal revenue will not change but marginal cost will decrease. c) neither average total cost nor marginal cost will change. d) neither marginal revenue nor marginal cost will change. e) both marginal revenue and marginal cost will decrease.

observations in different regions or markets during the same time period

Cross-sectional data

Refer to Figure 22.2 for a perfectly competitive firm. The profit-maximizing quantity of output is

D ; that's the answer not the answer choice.

An increase in the demand for motorcycles has led to an increase in the demand for helmets. Based on the information, which of the following is likely to be true. A. With an increase in the demand for motorcycles the demand curve will shift toward the origin. B. Helmets are inferior goods. C. The increase in the demand for helmets will be represented as a movement along the demand curve for helmets. D. In the demand equation for helmets the coefficient associated with the price of motorcycles will be negative.

D, because the relationship of complementary goods is negative and supplementary goods is positive. Meaning that if the price of motorcycles increase the demand for helmets will decrease.

Marginal revenue will increase but marginal cost will not change

Due to an increase in the price of a competitor's product, the demand for a firm's product increases sharply. How is this most likely to affect the firm's marginal revenue and marginal cost?

Marginal revenue will increase but marginal cost will not change.

Due to an increase in the price of a competitor's product, the demand for a firm's product increases sharply. How is this most likely to affect the firm's marginal revenue and marginal cost?

Due to an increase in the price of a competitor's product, the demand for a firm's product increases sharply. How is this most likely to affect the firm's marginal revenue and marginal cost? a) Marginal revenue will increase but marginal cost will decrease. b) Both marginal revenue and marginal cost will not be affected. c) Both marginal revenue and marginal cost will increase. d) Marginal revenue will not change but marginal cost will increase. e) Marginal revenue will increase but marginal cost will not change.

Variables used to represent a specific state

Dummy Variables

500

During our spring 2016 Economics 4357 class, the total number of possible points to earn is __________.

500

During our spring 2019 Economics 4357 class, the total number of possible points a student may earn is __________.

Inelastic (insensitive)

E < 1

Unit Elastic

E = 1

Elastic (sensitive)

E > 1

Trade-offs and decision making within the firm

Econ 4357 generally addresses topics that typically labeled "microeconomic". This means that topics focus on _____________.

Trade-offs and decision-making within the firm

Econ 4357 generally addresses topics that typically labeled "microeconomic". This means that topics focus on _____________.

wrong answer

Econ 4357 generally addresses topics that typically labeled "microeconomic". This means that topics focus on _____________.

initial change in price causes a larger percentage change in quantity: highly responsive

Elastic

% change in Quantity/% change in Price or 1/slope * Price/Quantity or (dQ/dP) * (Price/Quantity)

Elasticity of Demand Equation

Horizontal Line

Elasticity on a graph

5 units take derivative 360-72q set equal to 0=360-72q solve for q

If a firm's profit is given by pie=-150+360q-36q^2 then the optimal output is

MR=a-2bQ

If a firms demand function is of the form P=a-bq, what is its marginal revenue equation.

MR=a-2bQ R=(q-bQ)(Q)

If a firms demand function is the form of P=a-bQ what is the marginal revenue equation

cross-sectional data

If a study examines several different markets at the same time, and compares outcomes with conditions in each market, it is specifically using:

wrong answer

If a study examines several different markets at the same time, and compares outcomes with conditions in each market, it is specifically using:

If all of the price-quantity demanded observations lie exactly on a predicted equation line, the value of the sum of squared errors (SSE) will be:

Yes

If someone buys a product but never actually uses it, is value being created?

Yes

If the coefficient for a variable is -6.78 and the standard error is 2.20, is the coefficient statistically significant?

lead to an increase in quantity demanded and an increase in the firm's revenue.

If the demand for a good is price-elastic, a cut in price will:

Negotiating a consensus to implement the decision

Which of the following is not one of the steps in managerial decision making?

In order to sell more units, the firm needs to lower its price

Which of the following is true of a firm facing a downward sloping demand curve?

In order to sell more units, the firm needs to lower its price.

Which of the following is true of a firm facing a downward sloping demand curve?

Which of the following is true of a firm facing a downward sloping demand curve? a) In order to sell more units, the firm needs to lower its price. b) A price cut will reduce total revenue. c) The firm's total revenue and price are directly correlated. d) The marginal revenue from each unit sold is constant. e) The firm faces a constant marginal cost curve.

Models are simplified descriptions of processes, relationships, or other phenomena Which of the following correctly describes a deterministic economic model?, A deterministic model is a model for which the outcome is predicted with certainty

Which of the following is true of economic models?

Models are simplified descriptions of processes, relationships, or other phenomena.

Which of the following is true of economic models?

Models are simplified descriptions of processes, relationships, or other phenomena.

Which of the following is true of economic models? Models are too theoretical to be applicable in real world decisions. Models are not useful because uncertainty prevents accurate forecasts. Models are simplified descriptions of processes, relationships, or other phenomena. Models describe real world situations in complete detail. Models are not useful because they do not take into account complicating and less important features of a problem.

It measures the proportion of the variation of the dependent variable explained by the multiple-regression equation.

Which of the following is true of the R-squared statistic?

When the marginal product of a variable input is zero, it implies that the firm is at the point where the total product is:

at its maximum

A monopolist maximizes profit by producing:

at the output level where marginal revenue equals marginal cost

When average total cost is at its minimum point:

average total cost is equal to marginal cost

A monopolist produces and sells 400 units at a price of $40 per unit. The monopolist's marginal cost is equal to $15 and average cost is equal to $23. The monopolists profit is: a. none of these are correct b. $6,800 c. $10,000 d. $16,000 e. $8,000

b. $6,800

marginal cost is the additional cost of producing an extra unit of output.

which of the following correctly defines marginal cost

When the demand for a product is said to be perfectly inelastic, it implies that

with a change in price, change in quality demanded is zero

When the demand for a product is said to be perfectly inelastic, it implies that:

with a change in price, change in quantity demanded is zero.

Satisfying

striving for satisfactory level of performance rather than attempting to maximize its objective

Why does management use Marginal Analysis?

to determine optimal decision

The demand for a product is given by Q=600-30P. At P=$15, the firm sells

150 units

The demand for a product is given by Q=600-30p. At P=$15.00 the firm sells...

150 units...Just plug in p

Calculate the sum of squared errors of the observations from Table 4-1

A product's point price elasticity has been estimated at -1.5. At the initial price of $20, the quantity demanded was 10 units. If the firm cuts the price to $17.50, quantity demanded and sold is expected to increase by _____.

18.75%

The firm's average total cost is $12.

2. A firm produces 100 units of output at an average variable cost of $5 and incurs a total fixed cost of $700. Which of the following is true? The firm's average total cost is $12. The firm's total variable cost is $1,200. The firm's marginal cost is constant and equal to $5. The firm's average fixed cost is $5. The firm's total cost is $500.

marginal revenue product of labor is equal to the marginal cost of labor.

2. A profit-maximizing firm will hire the variable input, labor, until the point where: marginal product of labor is equal to the marginal revenue product of capital. marginal revenue from each unit of output is equal to the wage rate. marginal revenue product of labor is equal to the marginal cost of labor. marginal revenue product of labor is equal to zero. marginal product of labor equals the marginal revenue from each unit of output.

economic cost includes all relevant opportunity costs.

2. Accounting profit differs from economic profit because: accounting cost does not include sunk cost. economic cost includes all relevant opportunity costs. accounting cost includes the implicit costs of production. accounting cost does not include fixed cost. economic cost does not include the explicit costs of production.

The rate of interest that could have been earned on an a comparably risky $500,000 investment

2. Amanda invests $500,000 in a new business venture. Which of the following correctly identifies the relevant opportunity cost that she faces? The potential profits from the business The discounted present value of future profits from the business The rate of interest that could have been earned on an a comparably risky $500,000 investment The probability of losing the initial investment of $500,000 The rate of return on $500,000 invested in the business

marginal cost must be greater than short-run average cost.

2. If short-run average cost is increasing then: average fixed cost must be increasing. marginal cost must be decreasing. marginal cost must be greater than short-run average cost. the production function displays decreasing returns to scale. average variable cost must be decreasing.

2. The following figure shows the long-run average cost curve of a firm. Figure 6-1 Refer to Figure 6-1. What is the quantity that the firm will produce if it is operating at minimum efficient scale? E A C D B

3 workers

2. The following table shows the total output produced in a factory at various levels of employment of labor. The firm sells each unit of output at $2 and each worker is paid a wage of $32. Table 5-1 number of workers/ total output 1/ 8 2/ 18 3/ 30 4/ 41 5/ 50 6/ 56 7/ 60 8/ 61 9/ 62 Refer to Table 5-1. Diminishing returns to labor occurs beyond: 4 workers. 3 workers. 5 workers. 9 workers. 8 workers.

$20

2. The following table shows the total output produced in a factory at various levels of employment of labor. The firm sells each unit of output at $2 and each worker is paid a wage of $32. Table 5-1 number of workers/ total output 1/ 8 2/ 18 3/ 30 4/ 41 5/ 50 6/ 56 7/ 60 8/ 61 9/ 62 Refer to Table 5-1. What is the marginal revenue product of the 2nd worker? $36 $24 $22 $20 0

Marginal revenue is the additional revenue from a unit increase in output and sales.

3. Which of the following correctly defines marginal revenue? Marginal revenue is the price at which the firm sells the last unit of the good. Marginal revenue is the change in revenue from a unit increase in the price of the good. Marginal revenue is the additional revenue from a unit increase in output and sales. Marginal revenue is the additional revenue earned from an increase in demand for the good. Marginal revenue is the difference between price and marginal cost for the last unit sold.

Price will increase and output will decrease.

3. A firm negotiates a new labor contract with a higher average hourly wage. What is the most likely effect of the higher wage on the firm's price and output? Neither price nor output will be affected. Price will increase but output will not change. Both price and output will increase. Price will not change but output will decrease. Price will increase and output will decrease.

a fall in the price of the good and an increase in the quantity produced.

3. Assume that a firm is producing at its profit-maximizing level of output. A decrease in the price of raw materials used in production is most likely to lead to: an increase in quantity produced at an unchanged price. a fall in the price of the good and an increase in the quantity produced. a fall in both the price of the good and the quantity produced. an increase in both the price of the good and the quantity produced. a fall in the quantity produced of the good at an unchanged price.

Coal miners received large wage increases.

3. Coal is an input in the production of oil. Suppose that over the last 3 months, the price of oil has increased and the quantity sold of oil has fallen. Other things remaining the same, which of the following is most likely to be true? There was a decrease in the demand for oil. Coal miners received large wage increases. Coal producers installed more efficient coal mining equipment. New mine operators entered the coal industry. New firms entered the market for oil.

Marginal revenue will increase but marginal cost will not change.

3. Due to an increase in the price of a competitor's product, the demand for a firm's product increases sharply. How is this most likely to affect the firm's marginal revenue and marginal cost? Marginal revenue will increase but marginal cost will decrease. Both marginal revenue and marginal cost will not be affected. Both marginal revenue and marginal cost will increase. Marginal revenue will not change but marginal cost will increase. Marginal revenue will increase but marginal cost will not change.

a rightward shift of the demand curve.

3. Everything else remaining unchanged, an increase in demand will lead to: a leftward shift of the supply curve and a consequent fall in price. an upward movement along the demand curve. a rightward shift of the demand curve. an increase in output and a fall in price. a downward movement along the demand curve.

is horizontal at the equilibrium price.

3. In a perfectly competitive market, an individual firm faces a demand curve that: is downward sloping. lies above the marginal revenue curve. is horizontal at the equilibrium price. is perfectly inelastic. is upward sloping.

earn zero economic profits and produce at minimum cost.

3. In the long run, firms in a perfectly competitive industry are most likely to: earn negative economic profits and exit the market. have a positively sloped average revenue curve. suppress innovative products to earn a positive economic profit. continue to earn positive economic profit because of barriers to entry. earn zero economic profits and produce at minimum cost.

the price of chicken feed falls.

3. Other factors being unchanged, the supply curve for eggs will shift downward and to the right if: a virus spreads through poultry farms through the country and kills millions of chickens. new research establishes that cholesterol, found in egg yolks, is found to cause heart disease. the price of chicken feed falls. the government introduces a new tax on poultry suppliers. the average income level in the country falls due to a recession.

The output of oranges will fall and the price will increase.

3. Suppose a severe freeze damages the Florida orange crop. Everything else remaining unchanged, which of the following is most likely to be true? Because of the shortage of oranges, consumers will reduce their demand in order to economize. The supply curve for oranges will shift to the right. Both the output and the price of oranges will decrease. Both the supply curve and the demand curve for oranges will shift to the left. The output of oranges will fall and the price will increase.

increase output because MR is greater than MC.

3. Suppose, at its current output level, a firm's marginal profit is positive. Therefore, to maximize profit, it should: decrease output until marginal profit is zero. increase output because MR is less than MC. increase both its output and its price. increase output because MR is greater than MC. increase output until it is producing at full capacity.

takes the market price as given.

3. The demand curve faced by an individual firm in a competitive market, implies that the firm: can influence the market price. takes the market price as given. can raise the market price of the good by lowering its sales. can increase its profits by raising the price of the good it sells. should reduce its price in order to increase sales.

The cost of fishing increased.

3. The price of fresh fish rose and the quantity sold fell. Other things remaining the same, which of the following is consistent with this observation? The number of consumers that have a preference for fish increased. The price of meat, which is a substitute for fish, rose. The fishermen learned to fish more efficiently. The cost of fishing increased. The supply of fresh fish increased.

the portion of the marginal cost curve above the average variable cost curve.

3. The supply curve of a perfectly competitive firm is: the portion of the marginal cost curve above the marginal revenue curve. the portion of the marginal cost curve above the average cost curve. the portion of the marginal cost curve above the average variable cost curve. the portion of the average cost curve above the average variable cost curve. the same as the average variable cost curve.

marginal revenue is equal to marginal cost.

3. To maximize profit, the firm should set output at the level where: the average cost per unit is minimized. average revenue just equals average cost. marginal cost equals zero. marginal revenue is equal to marginal cost. marginal revenue equals zero.

Maximize profit

According to the model of the firm, the management's main goal is to

maximize profit

According to the model of the firm, the management's main goal is to

maximize profit.

According to the model of the firm, the management's main goal is to:

Refer to Table 5-1. What is the marginal product of the 5th worker?

9 units

Total Revenue - Total Cost

Profit

principal objective of the firm

Profit

Revenue - Cost

Profit equation

define the problem

Step 1

determine the objective

Step 2

explore the alternatives

Step 3

A monopolist produces and sells 400 units at a price of $40 per unit. The monopolist's marginal cost is equal to $15 and average cost is equal to $23. The monopolist's profit is:

$6,800

Demand for a good is given by: Qd(subscript)=100-P and supply by Qs(subscript)=.5P-20 where P is the market price of the good. In equilibrium, price and output under perfect competition will be:

$80 and 20 units respectively

A firm's demand curve is estimated to be Q=400-5P, where Q is quantity and P is the price of the good. At P= $20, the point elasticity of demand is

-0.33

predict the consequences

Step 4

A firm's demand curve is estimated to be Q=400-5p, where Q is quanitiy and P is the price of the good. At P=$20, the point elasticty of demand is

.33 Use point elasticity equation (dq/Dp)(p/q) 5(20/400-5(20))

make a choice

Step 5

perform sensitivity analysis

Step 6

Firm X sells output at a price of $8 per unit and pays labor a wage of $20 per hour. The marginal product of labor is given by: MP(L)= 12-.1L. To maximize profit, the firm should utilize_________ hours of labor

11. Suppose a firm's profit is given by the equation = -200 + 80Q - .2Q2. Which of the following is true? a) The firm's marginal profit is given by the equation: M = 80 - .2Q. b) The firm's profit-maximizing output is Q = 400. c) The firm's profit-maximizing output is Q = 200. d) The firm's marginal profit is given by the equation: M = 80 - 2Q. e) The firm's profit-maximizing output is Q = 800.

When one input is increased, with all other inputs unchanged, the marginal product of the input will eventually decline.

2. What does the law of diminishing marginal returns state? When all inputs to production are increased in equal proportions, output will eventually decrease. When one input is increased, with all other inputs unchanged, the marginal product of the input will eventually decline. When one input is held constant, and all other inputs are increased, output will eventually decrease. When one input is increased, and all other inputs are held constant, output will increase at an increasing rate. When all inputs to production are increased in equal proportions, the addition to output will increase at an increasing rate.

Economies of scope refers to the cost advantages from the joint production of multiple goods.

2. What is meant by economies of scope? Economies of scope refers to the cost advantages from the joint production of multiple goods. Economies of scope refers to the profits that firms earn when they practice price discrimination across market segments. Economies of scope refers to efficiency that firms gain when they specialize in the production of one good. Economies of scope refers to the efficiency gains from specialization and division of labor. Economies of scope refers to the reduction in cost that accrues to a firm due to cumulative production experience and learning.

The lowest output at which minimum average cost can be achieved

2. Which of the following correctly defines the minimum efficient scale for a firm? The output level at which the firm earns an abnormal profit The minimum point of the firm's learning or experience curve The lowest output at which minimum average cost can be achieved The output level where average fixed cost is at its minimum point The level of output produced when the firm is operating at full production capacity

Marginal product of labor/price of labor = marginal product of capital/price of capital

2. Which of the following identifies the optimal usage of inputs by a profit-maximizing firm? Marginal product of labor = marginal product of capital = 0 Marginal product of labor/price of labor = marginal product of capital/price of capital Marginal revenue product of labor = marginal revenue product of capital Marginal cost of labor = marginal cost of capital Marginal product of labor/marginal product of capital = price of capital/price of labor

A firm can vary all the inputs used in production.

2. Which of the following is true in the long-run? A firm can vary all the inputs used in production. A firm can vary only one of the inputs used in production. All inputs used in production are fixed in the long-run. The level of output produced can be varied only over a limited range. The marginal cost is at a minimum.

A given increase in the quantity of all inputs will increase output by a greater proportion.

2. Which of the following is true of a firm that faces increasing returns to scale? An increase in the quantity of one input will increase output by a greater proportion. As the quantity of all inputs are increased, the average cost of production will increase. A given increase in the quantity of all inputs will increase output by a greater proportion. As the quantity of one input is increased, its marginal product will increase at an increasing rate. As the quantity of one input is increased, the marginal cost of production will decline.

The initial price for an item is $5.00, and the quantity demanded is 400 units. When the price is raised to $5.25 , the quantity demanded falls to 350 units. The absolute value of the point elasticity of demand is

2.5

The initial price for an item is $5.00, and the quantity demanded is 400 units. When the price is raised to $5.25, the quantity demanded falls to 350 units. The absolute value of the point elasticity of demand is _____.

2.5

Refer to Table 5-1. Diminishing returns to labor occurs beyond:

3 workers

Given the inverse demand function P =50-0.5Q and the cost function C=600+40Q what is the profit maximizing price?

Given the inverse demand function P=50-.5Q and the cost function C=600+40q what is the profit max price

45 First set MC=MR MR=(P*Q) 40=(50-.5q)(q) 40=50-1q -10=-1q q=10 Plug in to the P function and you get 45

If a firm's profit is given by p = -150 + 360Q - 36Q2, then its optimal output is:

5 units

If a firm's profit is given by п = -150 + 360Q -36Q^2, then its optimal output is

5 units

Given the inverse demand function P=50-0.5Q and the cost function C=600+40Q, what is the firm's fixed cost?

600

Given that a firm's inverse demand function is P=100-5Q and total cost is given by C=550+10Q, what is the firm's profit-maximizing level of output?

9 units

Given that a firm's inverse demand unction is P=100-5Q and the total cost is given by C=550+10Q, what is the firm's profit-maximizing level of output?

9 units

Firm X sells output at a price of $8 per unit and pays labor a wage of $20 per hour. The marginal product of labor is given by: MP(of labor)=12-.1L. To maximize profit, the firm should utilize _______ hours of labor

deterministic

A beverage company wants to launch a new diet soda aimed at diabetics and health-conscious customers. It will use a _____ economic model to identify its target customers.

deterministic

A beverages company wants to launch a new diet soda aimed at diabetics and health-conscious customers. It will use a _____ economic model to identify its target customers

Sample bias

A campus survey asks senior students if they would support a 3-year plan to upgrade the cafeterias at a given cost. What pitfall does this survey exhibit?

Revenue maximization.

A coffee shop decides that it will increase its market share to 55% by the end of the year by lowering the price of a cup of coffee. The price cut will certainly result in an increase in the firm's share but will lower its profits. Which of the following best explains the firm's decision?

however, feels that the profit projections would vary based on other factors such as the price of the competitor's products, the actual level of sales, and the possibility of cost reductions. In other words, the senior management is undertaking _____., a sensitivity analysis

a sensitive analysis

A cosmetics company is conducting a second-year review of one of its newest products. The marketing department expects that the firm will continue to earn profits from the sale of the product in the third year as it did in the past two years. Senior management, however, feels that the profit projections would vary based on other factors such as the price of the competitor's products, the actual level of sales, and the possibility of cost reductions. In other words, the senior management is undertaking _____.

a sensitivity analysis

sensitivity analysis

a sensitivity analysis

Price will increase and output will decrease

A firm negotiates a new labor contract with a higher average hourly wage. What is the most likely effect of the higher wage on the firm's price and output?

Price will increase and output will decrease.

A firm negotiates a new labor contract with a higher average hourly wage. What is the most likely effect of the higher wage on the firm's price and output?

A firm negotiates a new labor contract with a higher average hourly wage. What is the most likely effect of the higher wage on the firm's price and output? a) Neither price nor output will be affected. b) Price will increase but output will not change. c) Both price and output will increase. d) Price will not change but output will decrease. e) Price will increase and output will decrease.

Which of the following firms faces a pure selling problem in pricing?

A firm that incurs a small or negligible variable cost of production

the marginal cost is negligible or zero.

A firm will maximize profits and revenues at the same price when:

the marginal cost is zero.

A firm will maximize profits and revenues at the same price when:

-0.067 (Q = 400 - 5(20) Q = 300 20/300 = -0.067)

A firm's demand curve is estimated to be Q = 400 - 5P, where Q is quantity and P is the price of the good. At P = $20, the point elasticity of demand is..

P = 400 - .5Q

A firm's demand curve is given by Q = 800 - 2P, where P = price and Q = quantity. Therefore, its inverse demand equation is

(Add 2P to both sides, subtract Q, then divide by 2) P = 400 - .5Q

A firm's demand curve is given by Q = 800 - 2P, where P = price and Q = quantity. Therefore, its inverse demand equation is..

P = 400 - .5Q

A firm's demand curve is given by Q = 800 - 2P, where P = price and Q = quantity. Therefore, its inverse demand equation is:

P = 400 - .5Q

A firm's demand curve is given by Q = 800 - 2P, where P = price and Q = quantity. Therefore, its inverse demand equation is____________.

increase by 100 units

A firm's demand equation is given by: Q = 60 - 60P + 2Y, where Q is quantity, P is price, and Y is income. If price increases by $1 and income increases by $80, then quantity demanded will:

increase by 40 units

A firm's demand equation is given by: Q = 60 - 60P + 2Y, where Q is quantity, P is price, and Y is income. If price increases by $2 and income increases by $80, then quantity demanded will:

A firm's profit equation is given by profit = -100 +160 Q - 20 Q^2. Find the profit maximizing output (Q).

The firm's fixed cost is 100 The firm's profit maximizing output is Q=4 Marginal profit = 160-40Q

A firm's profit equation is given by: Total profit = -100+160Q=20Q^2. Therefore,

The firm's Marginal Revenue is $60

A firm's total revenue function is given by R = 100 + 100Q - 2Q2. At Q = 10, which of the following is true?

The firm's marginal revenue is $60

A firm's total revenue function is given by R = 100 + 100Q - 2Q2. At Q = 10, which of the following is true?

The firm's marginal revenue is $60.

A firm's total revenue function is given by R = 100 + 100Q - 2Q2. At Q = 10, which of the following is true?

Wrong answer

A firm's total revenue function is given by R = 100 + 100Q - 2Q2. At Q = 10, which of the following is true?

(MR - 100 - 4Q) The firm's marginal revenue is $60.

A firm's total revenue function is given by R = 100 + 100Q - 2Q^2. At Q = 10, which of the following is true?

Which of the following is true of a firm that faces increasing returns to scale?

A given increase in the quantity of all inputs will increase output by a greater proportion

have a large number of substitute

A good that has highly elastic demand is most likely to:

have a large number of substitutes

A good that has highly elastic demand is most likely to:

have a large number of substitutes.

A good that has highly elastic demand is most likely to:

have a high number of substitutes

A good that is highly elastic is likely to

18.75%

wrong answer

A regression analysis is said to suffer from multicollinearity when:

the change in the dependent variable due to a unit change in a particular independent variable.

A regression coefficient measures:

the government because the total benefits exceed total costs.

A research study estimates that the direct cost of constructing a bridge connecting two boroughs in a city is $10 million. The revenue from the tolls on the bridge is estimated to be $8 million. The dollar value of pollution from the construction is estimated to be $5 million but the dollar value of the benefit to the city's residents is calculated to be $20 million. The construction of the bridge is most likely to be undertaken by

responses do not reflect the true preferences and attitudes of respondents.

A response bias occurs when

responses do not reflect the true preferences and attitudes of respondents.

A response bias occurs when:

Price discrimination occurs when

A seller charges different prices for the same good or service.

patterns of changes in a single variable over time

A time-series model attempts to identify:

patterns of changes in a single variable over time.

A time-series model attempts to identify:

Refer to Figure 6-1. The production function of the firm displays increasing returns to scale at all levels of output between ______.

A to C ; that's the answer not the answer choice.

Competing firms will reduce prices

According to the law of demand, if a firm reduces the price of its good

consumers in the market will demand more units of the good

According to the law of demand, if a firm reduces the price of its good

Consumers in the Market will demand more units of the good.

According to the law of demand, if a firm reduces the price of its good:

consumers in the market will demand more units of the good.

According to the law of demand, if a firm reduces the price of its good:

consumers in the market will want more units of the good at the lower price.

According to the law of demand, if a firm reduces the price of its good:

the quantity of goods produced and sold by the firm will decline.

According to the law of demand, if a firm reduces the price of its good:

According to the law of demand, if a firm reduces the price of its good: a) consumers in the market will demand more units of the good. b) some consumers will exit the market. c) consumers will demand fewer units than before the price cut. d) the quantity of goods produced and sold by the firm will decline. e) competing firms will reduce prices.

According to the model of the firm, the management's main goal is to: a) increase revenue from sales. b) maximize profit. c) maximize its market share. d) minimize its variable cost per unit. e) maintain a steady and predictable growth in earnings.

the goal of a firm is to, achieve a satisfactory level of performance against a benchmark.

According to the satisficing model of management behavior

the management's ultimate objective is to, maximize the value of the firm.

According to the theory of the firm

maximize the value of the firm.

According to the theory of the firm, the management's ultimate objective is to:

maximize the value of the firm.

According to the theory of the firm, the management's ultimate objective is to: maximize short-term profit, even if this sacrifices long-term profit. maximize the value of the firm. increase production to the highest possible level. increase the market share of the firm. diversify into as many product lines as the firm can.

In the demand equation for helmets, the coefficient associated with the price of motorcycles will be negative.

An increase in the demand for motorcycles has led to an increase in the demand for motorcycle helmets. Based on this information, which of the following is likely to be true?

The increase in demand for helmets will be represented as a movement along the demand curve for motor cycle helmets.

An increase in the demand for motorcycles has led to an increase in the demand for motorcycle helmets. Based on this information, which of the following is likely to be true?

Which of the following is an example of a good with positive network externalities?

An online dating service that only allows registered users to use the service

a fall in the price of the good and an increase in the quantity produced

Assume that a firm is producing at its profit-maximizing level of output. A decrease in the price of raw materials used in production is most likely to lead to

a fall in the price of the good and an increase in the quantity produced.

Assume that a firm is producing at its profit-maximizing level of output. A decrease in the price of raw materials used in production is most likely to lead to __________.

a fall in the price of the good and an increase in the quantity produced.

Assume that a firm is producing at its profit-maximizing level of output. A decrease in the price of raw materials used in production is most likely to lead to:

Assume that a firm is producing at its profit-maximizing level of output. A decrease in the price of raw materials used in production is most likely to lead to: a) an increase in quantity produced at an unchanged price. b) a fall in the price of the good and an increase in the quantity produced. c) a fall in both the price of the good and the quantity produced. d) an increase in both the price of the good and the quantity produced. e) a fall in the quantity produced of the good at an unchanged price.

will be higher in the segment with more inelastic demand.

Assume that a profit-maximizing firm practices price discrimination in two different market segments. If the marginal cost of producing the good is the same, the price: will be lower in the segment with lower cross price elasticity of demand. will be higher in the segment with higher income elasticity of demand. will be lower in the segment with lower fixed costs. will be higher in the segment with more inelastic demand. will be higher in the segment with higher marginal revenue.

increase by 6%

increase by 4.8%

Assume that demand for a service depends upon price and income, where the price elasticity of demand is EP = -0.6 and income elasticity is EY = 1.2. If price falls by 4% and income rises by 2%, the quantity demanded of the service will _____. not be affected as the change in price will cancel the change in income increase by 6% increase by 4.8% decrease by 9.6% decrease by 2.4%

increase by 24.56%

Assume that the price and income elasticities of demand for luxury cars are EP = -0.52 and EY = 3.2 respectively. In the coming year, car prices are expected to rise by 2 percent and income by 8 percent. Based on this information, sales of cars are expected to _____.

Reduce output because MR<MC

At its current output level, a firm's marginal profit is negative. Therefore, it should:

A firm's total revenue function is given by R=100=100Q-2Q^2. At Q=10 which of the following is true. A. The MR is constant B. The MR=60 C. The MR=80 D. The TR=500

B Take MR and plug in 10

Refer to Figure 6-1. What is the quantity that the firm will produce if it is operating at minimum efficient scale?

C ; that's the answer not the answer choice.

begins with the systematic enumeration of all the potential benefits and costs of a particular public decision

Benefit-cost analysis

There is an upward movement along the demand curve.

Ceteris Paribus, if the price of a good or service increases, what happens to the firm's demand curve?

According to the law of Demand, if a firm reduces the price of its good

Consumers in the market will demand more units of the good

where an increase in demand for one causes an increase in the demand for another (increase in cars means increase for tires)

Complementary good

A type of interval estimate that may contain the true value of the unknown parameter

Confidence Interval

According to the law of demand, if a firm reduces the price of its good

Consumers in the market will demand more units of the good.

Megan used to work at the local pizzeria for $15,000 per year but quit in order to start her own deli. To buy the necessary equipment, she withdrew $20,000 from her inheritance (which paid 8 percent interest). Last year she paid $25,000 for ingredients and $500 per month rent but had revenue of $50,000. She asked her dad the accountant and her mom the economist to calculate her costs for her.

Dad says her profit is $19,000 and Mom says her profit is $2,400

David should make decisions based on benefit-cost analysis.

David should make decisions based on the benefit-cost analysis

Which of the following best describes the meaning of "inelastic demand"?

Demand is relatively unresponsive to price

at any given price, the quantity sold can be predicted with certainty

Deterministic

one which the outcome is certain (a soft-drink manufacturer may wish to predict the numbers of individuals in the 10-25 age group over the next 5 years)

Deterministic model

has twice the slope as the demand curve

For a downward-sloping demand curve, the associated marginal revenue curve

considerations of benefits v. costs, short-term v. long-term results of decisions, risk v. returns of decisions

Elements of economic trade-offs include

Consideration of benefits v. costs. Short-term v. long-term results of decisions. Risk v. returns of decisions.

Elements of economic trade-offs include ______________.

Consideration of benefits v. costs. Short-term v. long-term results of decisions. Risk v. returns of decisions.

Elements of economic trade-offs include ______________.

testing a number of alternatives and selecting the one that best meets the objective (a car company drew up a list of 2 dozen different pricing and production plans, computed the profits of each, and selected the best of the lot)

Enumeration

Using a large sample of past observations for the regression.

Errors in forecasting are caused by all of the following EXCEPT:

has twice the slope as the demand curve.

For a downward-sloping demand curve, the associated marginal revenue curve:

Which of the following is true of a firm's fixed costs?

Fixed costs are incurred regardless of the firm's level of output.

For a downward-sloping demand curve, the associated marginal revenue curve: a) coincides with the demand curve. b) lies below and is parallel to the demand curve. c) has twice the slope as the demand curve. d) is positive for all levels of sales. e) is parallel to the quantity axis.

$150

For a good that has a price elasticity of demand of -1.5 and a marginal cost of $50 per unit, the profit-maximizing price should be approximately _____. $200 $168 $150 $50 $134

the marginal revenues from the segments are equal.

9 units

Given that a firm's inverse demand function is P = 100 - 5Q and total cost is given by C = 550 + 10Q, what is the firm's profit-maximizing level of output?

9 units Find the marginal cost first the MR which is P*Q Then set equal to eachother

Given that a firms inverse demand function is P=100-5q and total cost is given by c=550+10q, what is the firm's profit maximizing level of output.

an increase in the demand for downloaded songs.

Given that digital music players are used to play music downloaded from the Internet, a fall in the price of digital music players will lead to: an increase in the price of a song download. an increase in the demand for downloaded songs. an increase in the price of broadband plans. a fall in the demand for digital music players. an increase in the price of personal laptops.

An increase in the demand for downloaded songs.

Given that digital music players are used to play music downloaded from the internet, a fall in the price of digital music players will lead to:

a firm will use a _____ economic model to estimate the market share for one of its products, probabilistic

Given that the market share of a firm depends on many unpredictable factors

probabilistic

Given that the market share of a firm depends on many unpredictable factors, a firm will use a _____ economic model to estimate the market share for one of its products.

P = 40 - 2 Q.

Given the following demand curve: Q = 20 - 0.5 P, please match the inverse demand curve below.

P = 1250 - 25Q

Given the following demand curve: Q = 5 - .04P, please match the inverse demand below

P = 1250 - 25 Q.

Given the following demand curve: Q = 5.0 - 0.04 P, please match the inverse demand curve below.

P = 12,5 - 2.5 Q

Given the following demand curve: Q = 5.0 - 0.4P, please match the inverse demand curve below.

600

Given the inverse demand function P = 50 - 0.5Q and the cost function C = 600 + 40Q, what is the firm's fixed cost?

Given the inverse demand function P = 50 - 0.5Q and the cost function C = 600 + 40Q, what is the profit maximizing price?

600-based of the cost function, the 40q is a variable cost and the 600 is not.

Given the inverse demand function p=50-0.5q and the cost function c=600+40q what is the firms fixed cost

taking the first derivative of the cost function with respect to quantity

Given the total cost equation for a firm, the marginal cost equation can be derived by

Taking the direst derivative of the cost function with respect to quantity.

Given the total cost equation for a firm, the marginal cost equation can be derived by...

taking the first derivative of the cost function with respect to quantity.

Given the total cost equation for a firm, the marginal cost equation can be derived by:

Given the total cost equation for a firm, the marginal cost equation can be derived by: a) dividing total cost by total output. b) taking the first derivative of the cost function with respect to quantity. c) dividing total variable cost by total output. d) subtracting variable cost from the fixed cost at all levels of output. e) multiplying the total cost equation by price.

Information goods and services are characterized by:

Higher value added and very inelastic demand. High fixed cost and negligible marginal cost.

Profit is maximized at the quantity where:

I & II only I) The slope of the profit curve is equal to zero II) The 1st derivative of the profit unction is equal to zero and the 2nd derivative is negative

Profit is maximized at the quantity where

I, II, and III I) MR=MC II) The slope of the Revenue Curve is equal to the slope of the Cost Curve III) The 1st derivative of the Revenue Function is equal to the 1st derivative of the Cost Function

Yes

If Q=400-2P, is revenue maximized at P=100?

Yes

If TC = 75+15Q and Ep=-2 is P=$30 the optimal price?

MR = a - 2bQ

If a firm's demand function is of the form P = a - bQ, what is its marginal revenue equation?

MR = a - 2bQ

If a firm's demand function is of the form P = a-bQ, what is its marginal revenue equation?

5 units

If a firm's profit is given by p = -150 + 360Q - 36Q2, then its optimal output is

5 units.

If a firm's profit is given by p = -150 + 360Q - 36Q2, then its optimal output is:

5 units (-72Q)

If a firm's profit is given by pi = -150 + 360Q - 36Q^2, then its optimal output is...

lead to an increase in quantity demanded and an increase in the firm's revenue.

If the demand for a good is price-elastic, a cut in price will: lead to an increase in quantity demanded and an increase in the firm's revenue. not affect the total revenue of the firm. lead to a fall in the firm's revenue but an increase in quantity demanded. lead to a decrease in quantity demanded. decrease the firm's revenue by the same percentage as the cut in price.

If the firm reduced the price greater to $50,000 it would increase sales to 6 lots

If the firm cut its price to $100,000, its sales would increase to 3.5 lots

sales of the good are highly sensitive to changes in consumers' income.

If the income elasticity of demand for a good is greater than one, it implies that:

There is a downward movement along the demand curve

If the price of a good or service decreases, what happens to the firm's demand curve?

There is an upward movement along the demand curve.

If the price of a good or service increases, what happens to the firm's demand curve?

there is an upward movement along the demand curve

If the price of a good or service increases, what happens to the firm's demand curve?

There is an upward movement along the demand curve.

If the price of a good or service increases, what happens to the firm's demand curve? The demand curve shifts inward toward the origin. The demand curve shifts outward away from the origin. There is an upward movement along the demand curve. There is a downward movement along the demand curve. The slope of the demand curve changes.

80 percent of the variation in the dependent variable is explained by the regression.

If the sample coefficient of determination (R2) is 0.80, this means that

wrong answer

If the sample variance of a set of observations is 225, its sample standard deviation is equal to _____.

MR = 170 - 40 Q

If we start with the equation, P = 170 - 20 Q, then select the marginal revenue function below.

R = 125Q - 25Q2

If we use the equation, P = 125 - 25 Q, then to generate revenue function we have __________.

R = 125Q - 25Q^2

If we use the equation, P = 125 - 25 Q, then to generate total revenue function we have __________.

R = 125Q - 25Q2

If we use the equation, P = 125 - 25Q, then to generate a revenue function we have

R = 170 Q - 20 Q2

If we use the equation, P = 170 - 20 Q, then to generate a revenue function we have ___________.

R = 170Q - 20Q2

If we use the equation, P = 170-20Q, then to generate a revenue function we have

several independent variables rather than one

In contrast to simple regression, multiple regression considers:

several independent variables rather than one.

In contrast to simple regression, multiple regression considers:

benefit-cost analysis, states that a program should be undertaken only if total benefits exceed total costs.

In evaluating public programs

States that a program should be undertaken only if total benefits exceed total costs.

In evaluating public programs, benefit-cost analysis...

states that a program should be undertaken only if total benefits exceed total cost.

In evaluating public programs, benefit-cost analysis:

wrong answer

In evaluating public programs, benefit-cost analysis:

Which of the following is true of a firm facing a downward sloping demand curve?

In order to sell more units, the firm needs to lower its price.

Refer to Figure 22.3 for a perfectly competitive firm. If the market price is $15,

In the Long Run Firms will neither enter or exit the market

An increase in the demand for motorcycles has led to an increase in the demand for motorcycle helmets. Based on this information, which of the following is likely to be true?

In the demand equation for helmets, the coefficient associated with the price of motorcycles will be negative

An increase in the demand for motorcycles has led to an increase in the demand for motorcycle helmets. Based on this information, which of the following is likely to be true?

In the demand equation for helmets, the coefficient associated with the price of motorcycles will be negative.

An increase in the demand of motorcycles has led to an increase in the demand for motorcycle helmets. Based on this information, which of the following is likely to be true?

In the demand equation for helmets, the coefficient associated with the price of motorcycles will be negative.

Refer to Figure 22.3 for a perfectly competitive firm. If the market price is $23,

In the short run the firm will produce 39 units and have an economic profit. In the long run firms will enter the market and the market supply curve will shift right

Vertical line

In-elasticity on a graph

demand is relatively unresponsive to price: less than (in absolute value) than the percentage change in price

Inelastic

where an increase in income reduces spending (hamburger to steak)

Inferior good

Yes

Is "ladies night" at a bar (where ladies pay no over) a form of price discrimination?

Which of the following correctly defines the marginal product of labor?

It is the additional output produced by an additional unit of labor, all other factors held constant.

Equivalent statement for Mπ = MR - MC

MR - MC = 0

profit maximizing level of output happens when additional revenue from selling and extra unit just equals the extra cost of producing it

MR = MC

If a firm's demand function is of the form P = a - bQ, what is its marginal revenue equation?

MR = a - 2bQ

If a firm's demand function is of the form P = a - bQ, what is its marginal revenue equation?

MR=a-2bQ

The analysis of major management using the tools of economics

Managerial Economics

the analysis of major management decisions using economic tools

Managerial Economics is: macroeconomics and microeconomics for managers. study of economic incentives on consumer behavior and demand. analysis of the labor market through the behavior of workers and managers. analysis of major management decisions using economic tools. study of the strategic interaction between firms in a market.

looks at the change in profit that results from making a small change in a decision variable

Managerial analysis

Analysis of major management decisions using economic tools

Managerial economics can be best defined as the

analysis of major management decisions using economic tools

Managerial economics can best be defined as the

analysis of major management decisions using economic tools.

Managerial economics can best be defined as the

analysis of major management decisions using economic tools.

Managerial economics can best be defined as the ____________.

analysis of major management decisions using economics tools

Managerial economics can best be defined as the:

Change in Profit/Change in Quantity or Marginal Revenue - Marginal Cost

Marginal Profit

Change in Total Revenue/Change in Quantity

Marginal Revenue

Marginal Profit is maximized when....

Marginal Revenue equals Marginal Cost

the additional cost of producing an extra unit of output

Marginal cost

Which of the following correctly defines marginal cost?

Marginal cost is the additional cost of producing an extra unit of output.

Analysis of the labor market through the behavior of workers and managers

Marginal economics can best be defined as the...

Which of the following identifies the optimal usage of inputs by a profit-maximizing firm?

Marginal product of labor/price of labor = marginal product of capital/price of capital

the change in profit resulting from a small increase in any managerial decision variable

Marginal profit

all profit-augmenting opportunities been exhausted

Marginal profit = 0

the amount of additional revenue that comes with a unit increase in output and sales

Marginal revenue

Which of the following correctly defines marginal revenue?

Marginal revenue is the additional revenue from a unit increase in output and sales

marginal revenue

Marginal revenue is the additional revenue from a unit increase in output and sales

Which of the following correctly defines marginal revenue.

Marginal revenue is the additional revenue from a unit increase in output and sales.

Due to an increase in the price of a competitor's product, the demand for a firm's product increases sharply. How is this most likely to affect the firm's marginal revenue and marginal cost?

Marginal revenue will increase but marginal cost will not change.

Optimal Price = (E/E + 1) * MC

Markup Rule

According to the model of the firm, the managements main goal is to.

Maximize profit

Becomes increasingly costly as the number of choices increase.

Maximizing profit by enumerating the profit outcomes of different courses of action

posits that the typical firm strives for a satisfactory level of performance rather than attempting to maximize its objective

Model of Satisficing Behavior

Typically, what main economic factor(s) affect demand?

Multiple factors including price and income.

not only price, but competitors data and regional income

Multiple regression equation includes

where an increase in income raises its sales (air travel)

Normal good

the general income level of consumers

Other factors constant, a change in _____ will cause a shift in a firm's demand curve.

the general income level of consumers

Other factors constant, a change in _____ will cause a shift in a firm's demand curve. the price of the good or service the quantity of the good offered for sale the wages paid to labor employed the general income level of consumers the technology used in the production of the good or service

Refer to Table 4-2. Liza is a manager of a leading soft drink manufacturing firm. Liza uses 10 months data and estimates the following dmand equation: Q=10-.5P+1.8Y+.25Pr(subscript r) where P is price of the soft drink manufactured by Liza's firm, Y refers to household per capita income, and Pr(subscript r) is the price of a rival soft drink manufacturing firm. Based on the regression results from Table 4-2, which explanatory variable(s) is/are likely useful to explain Demand for Liza's soft drink (in other words are statistically significant)?

P, Y

The demand for a product is given by P=1750-25Q. If the firm wishes to sell 50 units, each unit should be priced at.

P=1750-25(50) =500 Q is representing quantities.

A firm's demand curve is given by Q=800-2P where P = price and Q = quantity. Therefore its inverse demand equation is

P=400-.5Q

A firm negotiates a new labor contract with a higher average hourly wage. What is the most likely effect of the higher wage on the firm's price and output?

Price will increase and output will decrease

accounts for a range of possible future outcomes, each with a probability attached

Probabilistic model

-MR = MC -The slope of the Revenue Curve is equal to the slope of the Cost Curve -The 1st derivative of the Revenue function is equal to the 1st derivative of the Cost Function.

Profit is maximized at the quantity where:

-The slope of the profit curve is equal to zero -the 1st derivative of the profit function is equal to zero and the 2nd derivative is negative

Profit is maximized at the quantity where:

MR=MC The slope of the Revenue curve is equal to the cost curve. The 1st derivative of the Revenue Function is equal to the 1st derivative of the Cost Function

Profit is maximized where

of the presence of risk and uncertainty

Profit maximization is an ambiguous guide to decision making in the private sector because

Which of the following production functions displays decreasing returns to scale?

Q=c(L^.2)(K^5)

Derek is a co-owner of a small gift shop. He decides to hold a sale and reduce most prices by 20%. His parents owned a convenience store, and they said that they could always count on increased traffic when they cut prices. Unfortunately, as a result of the sale, Derek's Total Revenue declined. What must be true, ceteris paribus

Quantity Increased and Demand was Inelastic

If the price of a good is in the inelastic range and the firm raises price,

Quantity will fall, but revenue will increase.

Measures the goodness-of-fit for the linear regression model

R-Squares

measures the proportion of the variation in the dependent variable

R-squared statistic

Suppose a firm's inverse demand function is P = 40 - 8Q. What is the firm's revenue function?

R=40Q-8Q^2

Inverse Demand function is P=40-8q. What is the firm's revenue function.

R=40q-8q^2

Refer to Table 2-1. What is the marginal revenue for the firm from the sale of the 6th unit of the good?

set of statistical techniques using past observations to find the equation that best summarizes the relationships among key economic variables

Regression analysis

potential customers often do not know how they will react to a price increase or to new advertising

Response accuracy

respondents might report what they believe the questioner wants to hear

Response bias

Price * Quantity

Revenue profit

When Rita was a student, she consumed beer with her dinner. Over the years, as her income increased, she substituted beer for a glass of wine. From this information, one can imply that:

Rita considers beer an inferior good

When Rita was a student, she consumed beer with her dinner. Over the years, as her income increased, she substituted beer for a glass of wine. From this information, one can imply that:

Rita considers beer an inferior good.

A Presidential Poll is conducted to determine which candidate is most likely to win an upcoming United States election. If only young people are surveyed, the results may be unreliable due to:

Sample Bias

researchers ask the right questions, but of the wrong people

Sample bias

considers how an optimal decisions is affected if key economic facts or conditions vary

Sensitivity analysis

Examine how an optimal decision is affected if key economic facts vary

Sensitivity analysis is used by a firm to

examine how an optimal decision is affected if key economic facts vary.

Sensitivity analysis is used by a firm to

In the case of an airline pricing business seats and pleasure seats, what rule should the profit-maximizing airline follow?

Set prices so that marginal revenue from the last business seat equals marginal revenue from the last pleasure seat

1. Define the problem 2. Determine objective 3. Explore the alternatives 4. Predict the consequence 5. Make a choice 6. Perform analysis

Six steps to decision making

Change in Price/Change in Quantity

Slope

The standard deviation of a regression coefficient

Standard Error

$220

Start with the demand function P = 340 - 0.8 Q and the total cost function is C = 120 + 100 Q. Solve for the firm's optimal (profit-maximizing) price

150

Start with the demand function P = 340 - 0.8 Q and the total cost function is C = 120 + 100 Q. Solve for the firm's optimal (profit-maximizing) output (Q = )

R = 170 Q - 20 Q^2

Start with the equation, P = 170 - 20 Q. Then, to generate a total revenue function, we have ___________.

In evaluating public programs, benefit cost analysis...

States that a program should be undertaken only if total benefits exceed total costs

A measure to show that the relationship between two variables is more than chance

Statistical Significance

competes with and can substitute for the good in question (one airline for another going the same route)

Substitute good

Sum of the differences between the predicted value and the actual value for each observation

Sum of Squared Errors

increase output because MR is greater than MC

Suppoose, at its current output level, a firm's marginal profit is positive. Therefore, to maximize profit, it should

R = 40Q - 8Q2

Suppose a firm's inverse demand function is P = 40 - 8Q. What is the firm's revenue function?

R = 40Q - 8Q^2

Suppose a firm's inverse demand function is P = 40 - 8Q. What is the firm's revenue function?

The firm's profit-maximizing output is Q = 200

Suppose a firm's profit is given by the equation p = -200 + 80Q - .2Q2. Which of the following is true?

The firm's profit maximizing output is Q = 200

Suppose a firm's profit is given by the equation pi = -200 + 80Q - .2Q^2. Which of the following is true?

o The firm's fixed cost = 200

Suppose a firm's profit is given by the equation π = -200 +80Q -.2Q^2 | Which of the following is true?

Marginal revenue will decrease, marginal cost will not change

Suppose that demand decreases. What is the most likely effect on the marginal revenue and marginal cost curves?

Very close to +1

Suppose that the "goodness of fit" of an equation is nearly perfect. What is the value of the R2 statistic in this case?

Price will decrease, quantity will increase.

Suppose that the firm's marginal cost decreases. What is the effect on the firm's optimal price and quantity?

Increase output because MR is greater than MC

Suppose, at its current output level, a firm's marginal profit is positive. Therefore, to maximize profit it should

increase output because MR is greater than MC

Suppose, at its current output level, a firm's marginal profit is positive. Therefore, to maximize profit, it should

increase output because MR is greater than MC.

Suppose, at its current output level, a firm's marginal profit is positive. Therefore, to maximize profit, it should:

Suppose, at its current output level, a firm's marginal profit is positive. Therefore, to maximize profit, it should: a) decrease output until marginal profit is zero. b) increase output because MR is less than MC. c) increase both its output and its price. d) increase output because MR is greater than MC. e) increase output until it is producing at full capacity.

Coefficient divided by the standard error; used to evaluate statistical significance of a coefficient

T-Statistic

increase by 16%

The cross-price elasticity between two products is estimated to be +2. If the price of the first product is increased by 8%, demand for the second product will _____.

increase by 16%

The cross-price elasticity between two products is estimated to be 2. If the price of the first product is increased by 8%, demand for the second product will _____.

increase by 16%

The cross-price elasticity between two products is estimated to be 2. If the price of the first product is increased by 8%, demand for the second product will _____. increase by 8% decrease by 4% increase by 4% increase by 16% decrease by 8%

Inverse demand curve

The demand curve that views Q as a function of Price can also be presented as Price as a function of Quantity. We call this later presentation the ________.

inverse demand curve

The demand curve that views Q as a function of Price can also be presented as Price as a function of Quantity. We call this later presentation the ________.

$500

The demand for a product is given by P = 1,750 - 25Q. If the firm wishes to sell 50 units, each unit should be priced at

$500

The demand for a product is given by P = 1,750 - 25Q. If the firm wishes to sell 50 units, each unit should be priced at:

$500.

The demand for a product is given by P = 1,750 - 25Q. If the firm wishes to sell 50 units, each unit should be priced at:

300 units.

The demand for a product is given by Q = 600 - 30P. At P = $10, the firm sells:

150 units

The demand for a product is given by Q = 600 - 30P. At P = $15, the firm sells

150 units

The demand for a product is given by Q = 600 - 30P. At P = $15, the firm sells..

150 units

The demand for a product is given by Q = 600 - 30P. At P = $15, the firm sells:

150 units.

The demand for a product is given by Q = 600 - 30P. At P = $15, the firm sells:

A firm produces 100 units of output at an average variable cost of $5 and incurs a total fixed cost of $700. Which of the following is true?

The firm's average total cost is $12

A firm's total revenue functin is given by R=100-2Q^2. At Q=10 which of the following is true?

The firm's marginal revenue is $60

Suppose a firm's profit is given by the equation п = -200+80Q-.2Q^2. Which of the following is true?

The firm's profit-maximizing output is Q = 200.

Suppose a firm's profit is given by the equation pie=-200+80q-.2q^2 which of the following is true A.The firms profit max output is q=800 B. The firms profit max out put is q=200 C. The firms marginal profit is given by the equation mp=80-2q D.the firms profit max output is q=400

The firms profit max out put is q=200 You are already given the profit function, derive to get marginal profit (80q-.2q^2) set equal to zero....0=80-.4q

The following table shows the total revenue and total cost (in dollars) from different sales volumes of the good. Table 2-1 Refer to Table 2-1. What is the marginal profit of the firm from the sale of the 3rd unit of the good?

In which case is demand likely to be more elastic, the long run or the short run?

The goods are strong complements

the total benefits from the hospital exceed total costs.

The government is deciding whether it should build a veteran's hospital in an urban area. It will choose to build the hospital only if

the total benefits from the hospital exceed total costs.

The government is deciding whether it should build a veteran's hospital in an urban area. It will choose to build the hospital only if:

2.5

The initial price for an item is $5.00, and the quantity demanded is 400 units. When the price is raised to $5.25, the quantity demanded falls to 350 units. The absolute value of the point elasticity of demand is _____.

2.5

The initial price for an item is $5.00, and the quantity demanded is 400 units. When the price is raised to $5.25, the quantity demanded falls to 350 units. The absolute value of the point elasticity of demand is _____. 2.25 2.5 3.5 2.0 1.5

(.125/.05) 2.5

The initial price for an item is $5.00, and the quantity demanded is 400 units. When the price is raised to $5.25, the quantity demanded falls to 350 units. The absolute value of the point elasticity of demand is..

in the case of elastic demand

The markup rule is only applicable

For a profit-maximizing markup

The more elastic is demand, the lower the price

Inelastic

The price elasticity of demand for electricity is

Percentage change in quantity demanded to the percentage change in price.

The price elasticity of demand is defined as the ratio of the ___ other factors held constant.

percentage change in quantity demanded to the percentage change in price

The price elasticity of demand is defined as the ratio of the _____ other factors held constant.

percentage change in quantity demanded to the percentage change in price.

The price elasticity of demand is defined as the ratio of the ______ other factors held constant

an increase in the price of a complementary good reduces demand for the good in question

The price of a complementary good enters negatively into the demand function

Which of the following correctly defines first-degree price discrimination?

The seller offers each individual customer a different price

the price elasticity of demand for a good or service

The size of a firm's markup depends inversely on

Profit is maximized at the quantity where

The slope of the profit curve is equal to zero The first derivative of the profit function is equal to zero

are prone to biases, mistakes, and pitfalls.

The study of behavioral economics shows that decision makers

If the price of a good or service increases, what happens to the firm's demand curve?

There is an upward movement along the demand curve

Ceteris Paribus, if the price of a good or service increases, what happens to the firm's demand curve?

There is an upward movement along the demand curve.

If the price of a good or service increases, what happens to the firm's demand curve?

There is an upward movement along the demand curve.

Ceterius Paribus, if the price of a good or service increases, what happens to the firms demand curve.

There is upward movement along the demand curve.

single geographic area and varies its key decision variables over time

Time-series data

Marginal revenue is equal to marginal cost

To maximize profit , the firm should set output at the level where

Marginal revenue is equal to marginal cost

To maximize profit, the firm should set output at the level where

marginal revenue is equal to marginal cost

To maximize profit, the firm should set output at the level where

marginal revenue equals marginal cost

To maximize profit, the firm should set output at the level where ________.

marginal revenue is equal to marginal cost.

To maximize profit, the firm should set output at the level where ________.

marginal revenue is equal to marginal cost.

To maximize profit, the firm should set output at the level where:

To maximize profit, the firm should set output at the level where: a) the average cost per unit is minimized. b) average revenue just equals average cost. c) marginal cost equals zero. d) marginal revenue is equal to marginal cost. e) marginal revenue equals zero.

marginal revenue is equal to marginal cost

To maximize profit, the firm will set output at the level where ________.

Price x Quanitity

Total Revenue

Sum of the difference between the actual value and the average for each observation

Total of Squares

False

True or False: a variable representing the age of a person in years is a dummy variable.

the percentage change in price is exactly matched by the resulting percentage change in quantity, but in opposite direction

Unitary elastic

how managerial decisions should be made

Value maximization is a compelling prescription concerning

In a pure selling problem,

Variable costs are zero or so low they can be ignored

Suppose that the "goodness of fit" of an equation is nearly perfect. What is the value of the R^2 statistic in this case?

Very close to +1

Q = 8.5 - 0.05 P

We are given a revenue function, R = 170 Q - 20 Q^2 . Which of the following demand curves is consistent with this revenue function?

dummy variables

What can be used to correct for seasonality in time-series modeling?

it measures the proportion of the variation of the dependent variable explained by the multiple-regression equation

What is a statistic of R-squared

$27

What is the firm's profit from selling 3 units of the good?

What is the marginal profit of the firm from the sale of the 3rd unit of the good?

What is the marginal revenue associated with the sale of the 5th unit of the good?

5 units

What is the profit-maximizing level of output for the firm?

Amy considers beer an inferior good.

When Amy was a student, she consumed beer with her dinner. Over the years, as her income increased, she substituted beer for a glass of wine. From this information, one can imply that:

Rita considers beer an inferior good

When Rita was a student, she consumed beer with her dinner. Over the years, as her income increased, she substituted beer for a glass of wine. From this information one can imply that:

Rita considered beer an inferior good.

When Rita was a student, she consumed beer with her dinner. Over the years, as her income increased, she substituted beer for a glass of wine. From this information, one can imply that.

Rita considers beer an inferior good.

When Rita was a student, she consumed beer with her dinner. Over the years, as her income increased, she substituted beer for a glass of wine. From this information, one can imply that:

Rita considers beer an inferior good.

When Rita was a student, she consumed beer with her dinner. Over the years, as her income increased, she substituted beer for a glass of wine. From this information, one can imply that: the law of demand does not hold for beer. wine and beer are complementary goods. Rita considers beer an inferior good. the price elasticity of demand for beer is high. Rita gets more utility from beer than from wine.

Positive

When output increases and total profit increases, marginal profit must be..

With a change in price, change in quantity demanded is zero.

When the demand for a product is said to be perfect inelastic it implies that a. the demand curve for the product is flat b. the profit per unit increases with and increase in price. c. as price increases, the quantity demanded increases d. with a change in price, change in quantity demanded is zero. e. the sales of the product are very sensitive to changes in price

The profit per-unit increases with an increase in price (straight up and down).

When the demand for a product is said to be perfectly inelastic, it implied that:

with a change in price, change in quantity demanded is zero

When the demand for a product is said to be perfectly inelastic, it implies that:

with a change in price, change in quantity demanded is zero.

When the demand for a product is said to be perfectly inelastic, it implies that:

Increase

When the price of smart phones decreases, the demand for data plans will:

dummy variables

Which of the following can be used to correct for seasonality in time-series modeling?

Marginal cost is the additional cost of producing an extra unit of output

Which of the following correctly defines marginal cost?

Marginal cost is the additional cost of producing an extra unit of output.

Which of the following correctly defines marginal cost?

Which of the following correctly defines marginal cost? a) Marginal cost is the addition made to fixed cost when an extra unit is produced. b) Marginal cost is the additional cost of producing an extra unit of output. c) Marginal cost is the additional cost of increasing the scale of production in the long run. d) Marginal cost is the difference between price and marginal revenue for the last unit sold. e) Marginal cost is the same as the firm's variable cost at all levels of output.

(R = P x Q) Marginal revenue is the additional revenue from a unit increase in output and sales.

Which of the following correctly defines marginal revenue?

Marginal revenue is the additional revenue from a unit increase in output and sales

Which of the following correctly defines marginal revenue?

Marginal revenue is the additional revenue from a unit increase in output and sales.

Which of the following correctly defines marginal revenue?

Which of the following correctly defines marginal revenue? a) Marginal revenue is the price at which the firm sells the last unit of the good. b) Marginal revenue is the change in revenue from a unit increase in the price of the good. c) Marginal revenue is the additional revenue from a unit increase in output and sales. d) Marginal revenue is the additional revenue earned from an increase in demand for the good. e) Marginal revenue is the difference between price and marginal cost for the last unit sold.

A deterministic model is a model for which the outcome is predicted with certainty.

Which of the following correctly describes a deterministic economic model?

A probabilistic model shows the possibility of a range of outcomes.

Which of the following correctly explains a probabilistic model?

A probabilistic model shows the possibility of a range of outcomes.

Which of the following correctly explains a probabilistic model? A probabilistic model gives a description of real world economic phenomena. A probabilistic model shows the possibility of a range of outcomes. A probabilistic model examines the changes in economic variables over a period of time. A probabilistic model is based on value judgments. A probabilistic model is used to explain long-run economic phenomena.

A firm that incurs a small or negligible variable cost of production

Which of the following firms faces a pure selling problem in pricing?

Negotiating a consensus

Which of the following is NOT one of the steps in managerial decision making a. Defining the problem and the objectives of the decision b. Negotiating a consensus to implement the decision c. Exploring the alternatives to the decision d. performing sensitivity analysis e. Predicting the consequences of a decision

Negotiating a consensus to implement the decision.

Which of the following is NOT one of the steps in managerial decision making?

An online dating service that only allows registered users to use the service

Which of the following is an example of a good with positive network externalities?

Marginal Profit Equation

[Change in Profit] / [Change in Output] = Δπ / ΔQ = [π_1 - π_0] / [Q_1 - Q_0]

Marginal Revenue Equation

[Change in Revenue] / [Change in Output] = ΔR / ΔQ = [R_1 - R_0] / [Q_1 - Q_0]

Assume that a firm is producing at its profit-maximizing level of output. A decrease in the price of raw materials used in production is most likely to lead to:

a fall in the price of the good and an increase in the quantity produced

Assume that a firm is producing at its profit-maximizing level of output. A decrease in the price of raw materials used in production is most likely to lead to:

a fall in the price of the good and an increase in the quantity produced.

Which of the following firms faces a pure selling problem in pricing?

a firm that incurs a small or negligible variable cost of production

Compared to a perfectly competitive industry, a monopolist will generally produce:

a smaller level of output at a higher price

The money that a firm has already spent on research and development for a project should be categorized as ________ when the firm is deciding whether to make an additional investment in the project.

a sunk cost

A firms demand curve is estimated to be Q=400-5P, where Q is quantity and P is the price of the good. At P=$20, the point elasticity of demand is a. -0.33 b. -0.67 c. -0.25 d. -1.33 e. -0.067

a. -0.33

The demand for a product given by Q= 600-30P. At P= $15, the firm sells a. 150 units b. 450 units c. 600 units d. 300 units e. 100 units

a. 150 units

An increase in the demand for motorcycles has led to an increase in the demand for motorcycle helmets. Based on this information, which of the following is likely to be true? a. In the demand equation for helmets, the coefficient associated with the price of motorcycles will be negative b. The increase in demand for helmets will be represented as a movement along the demand curve for motorcycle helmets c. Helmets are considered to be inferior goods d. Motorcycles and motorcycle helmets are considered to be substitute goods e. with an increase in the demand for motorcycles, the demand curve will shift inward toward the origin

a. In the demand equation for helmets, the coefficient associated with the price of motorcycles will be negative

Which of the following correctly defines the marginal product of labor? a. It is the additional output produced by an additional unit of labor, all other factors held constant b. It is the addition to total cost from employing an additional unit of labor c. It is the additional labor required to produce one additional unit of output, other inputs held constant d. It is calculated as the total output divided by the total units of labor employed in production e. It is the additional output produced by a proportionate increase in capital and labor, the demand for the product held constant

a. It is the additional output produced by an additional unit of labor, all other factors held constant

Which of the following correctly defines marginal cost? a. Marginal cost is the additional cost of producing an extra unit of output b. Marginal cost is the additional cost of increasing the scale of production in the long run c. Marginal cost is the addition made to fixed cost when an extra unit is produced d. Marginal cost is the difference between price and marginal revenue for the last unit sold e. Marginal cost is the same as the firms variable cost at all levels of output

a. Marginal cost is the additional cost of producing an extra unit of output

Which of the following identifies the optimal usage of inputs by a profit-maximizing firm? a. Marginal product of labor/price of labor=marginal product of capital/price of capital b. Marginal cost of labor=marginal cost of capital c. Marginal product of labor/marginal product of capital=price of capital/price of labor d. Marginal revenue product of labor=marginal revenue product of capital e. Marginal product of labor= marginal product of capital=0

a. Marginal product of labor/price of labor=marginal product of capital/price of capital

Which of the following production functions displays decreasing returns to scale? a. Q=cL^.2K^.5 b. Q=aL+bK² c. Q= bLK d. Q= aL+bK e. Q= cL²K⁵

a. Q=cL^.2K^.5

Suppose a firms inverse demand function is P=40-8Q. What is the firms revenue function? a. R=40Q-8Q^2 b. R= -8Q c. R= 40/Q-8 d. R= 40-16Q e. R= 40Q-4Q^2

a. R=40Q-8Q^2

A Presidential Poll is conducted to determine which candidate is most likely to win an upcoming United States election. If only young people are surveyed, the results may be unreliable due to: a. Sample bias b. Response accuracy c. Uncontrolled Market Study Bias d. Response bias e. Controlled market study bias

a. Sample bias

A firm produces 100 units of output at an average variable cost of $5 and incurs a total fixed cost of $700. Which of the following is true? a. The firms average total cost is $12 b. The firms total variable cost is $1200 c. The firms marginal cost is constant and equal to $5 d. The firms total cost is $500 e. The firms average fixed cost is $5

a. The firms average total cost is $12

A firms total revenue function is given by R=100+100Q-2Q². At Q=10, which of the following is true? a. The firms marginal revenue is $60 b. The firms average revenue is $50 c. The firms total revenue is $500 d. The firms marginal revenue is $80 e. The firms marginal revenue is constant

a. The firms marginal revenue is $60

Suppose a firm's profit is given by the equation π=-200+80Q-.2Q². Which of the following is true? a. The firms profit-maximizing output is Q=200 b. The firms profit-maximizing output is Q=800 c. The firms marginal profit is given by the equation: Mπ=80-2Q d.The firms marginal profit is given by the equation: Mπ=-.2Q e. The firms profit-maximizing output is Q=400

a. The firms profit-maximizing output is Q=200

When average total cost is at its minimum point: a. average total cost is equal to marginal cost b. marginal cost is also at its minimum point c. the firm is maximizing profit d. marginal cost is constant e. marginal cost is equal to zero

a. average total cost is equal to marginal cost

Assume that demand for a service depends upon price and income, where the price elasticity of demand is E(P)= -0.6 and income elasticity is E(Y)=1.2. If price falls by 4% and income rises by 2%, the quantity demanded of the service will _____. a. increase by 4.8% b. increase by 6% c. decrease by 2.4% d. decrease by 9.6% e. not be affected as the change in price will cancel the change in income

a. increase by 4.8%

Suppose, at its current output level, a firms marginal profit is positive. Therefore, to maximize profit, it should a. increase output because MR is greater than MC b. increase output because MR is less than MC c. increase output until it is producing at full capacity d. increase both its output and its price e. decrease output until marginal profit is zero

a. increase output because MR is greater than MC

If the demand for a good is price-elastic, a cut in price will: a. lead to an increase in quantity demanded and an increase in the firms revenue b. lead to a fall in the firms revenue but an increase in quantity demanded c. decrease the firms revenue by the same percentage as the cut in price d. lead to a decrease in quantity demanded e. not affect the total revenue of the firm

a. lead to an increase in quantity demanded and an increase in the firms revenue

If short-run average total cost is increasing then: a. marginal cost must be greater than short-run average cost b. average variable cost must be decreasing c. the production function displays decreasing returns to scale d. marginal cost must be decreasing e. average fixed cost must be increasing

a. marginal cost must be greater than short-run average cost

In the short run, if the marginal product of labor is decreasing, then: a. marginal cost must be increasing b. average total cost must be increasing c. average variable cost must be decreasing d. the marginal revenue of the firm must be decreasing e. average total cost must be decreasing, the marginal revenue product of labor must be increasing

a. marginal cost must be increasing

A profit-maximizing firm will hire the variable input, labor, until the point where: a. marginal revenue product of labor is equal to the marginal cost of labor b. marginal product of labor is equal to the marginal revenue product of capital c. marginal product of labor equals the marginal revenue from each unit of output d. marginal revenue from each unit of output is equal to the wage rate e. marginal revenue product of labor is equal to zero

a. marginal revenue product of labor is equal to the marginal cost of labor

Which of the following is NOT one of the steps in managerial decision making? a. negotiating a consensus to implement the decision b. defining the problem and the objectives of the decision c. performing sensitivity analysis d. predicting the consequences of a decision e. exploring the alternatives to the decision

a. negotiating a consensus to implement the decision

The demand curve faced by an individual firm in a perfectly competitive market, implies that the firm: a. takes the market price as given b. can increase its profits by raising the price of the good it sells c. can influence the market price d. can raise the market price of the good by lowering its sales e. should reduce its price in order to increase sales

a. takes the market price as given

A regression coefficient measures: a. the change in the dependent variable due to a unit change in a particular independent variable b. the intercept of the regression line c. the value of the predicted variable when the explanatory variables remain unchanged d. the correlation between the explanatory variables e. the correlation between the dependent and all independent variables

a. the change in the dependent variable due to a unit change in a particular independent variable

Ceteris Paribus, if the price of a good or service increases, what happens to the firms demand curve? a. there is an upward movement along the demand curve b. there is a downward movement along the demand curve c. the slope of the demand curve changes d. the demand curve shifts outward away from the origin e. the demand curve shifts inward toward the origin

a. there is an upward movement along the demand curve

Probabilistic Model

accounts for a range of possible future outcomes, each with a probability model attached

Which of the following is the best description of a normal good?

an increase in income increase its unit sales

example of a good with positive network externailites

an online dating service that allows registered users to use the service

Managerial economics can best be defined as the

analysis of major management decisions using economic tools

Deterministic

at any given price, the quantity sold can be predicted with certainty

Demand for a good is given by: Q(D)=100-P and supply by Q(S)=.5P-20, where P is the market price of the good. In equilibrium, price and output under perfect competition will be: a. $100 and 30 units respectively b. $80 and 20 units respectively c. $120 and 35 units respectively d. $70 and 30 units respectively e. $60 and 10 units respectively

b. $80 and 20 units respectively

A products point price elasticity has been estimated at -1.5. At the initial price of $20, the quantity demanded was 10 units. If the firm cuts the price to $17.50, quantity demanded is expected to increase by _______. a. 10.33% b. 18.75% c. 12.5% d. 6.67% e. 8.75%

b. 18.75%

Given that a firms inverse demand function is P=100-5Q and total cost is given by C=550+10Q, what is the firms profit-maximizing level of output? a. 5 units b. 9 units c. 15 units d. 8 units e. 10 units

b. 9 units

Firms X sells output at a price of $8 per unit and pays labor wage of $20 per hour. The marginal product of labor is given by: MP(L)=12-.1L. To maximize profit, the firm should utilize_____ hours of labor. a. 90 b. 95 c. 80 d. 85 e. 75

b. 95

Which of the following firms faces a pure selling problem in pricing? a. A firm that faces a highly elastic demand curve b. A firm that incurs a small or negligible marginal cost of production c. A firm that is undercut by competitors and priced out of the market d. A firm that faces a very high fixed cost of production e. A firm that has a negligible share in the market

b. A firm that incurs a small or negligible marginal cost of production

Profit is maximized at the quantity where: I. The slope of the profit curve is equal to zero II. The 1st derivative of the profit function is equal to zero and the 2nd derivative is negative III. The 1st derivative of the profit function is equal to zero and the 2nd derivative is positive -- a. I only b. I & II only c. II only d. I & III only e. III only

b. I & II only

Suppose a firm's profit is given by the equation π= -200+80Q-.2Q². Which of the following is true? a. The firms marginal profit is given by the equation: MP=80-.2Q b. The firms profit-maximizing output is Q=200 c. The firms marginal profit is given by the equation: MP=80-2Q d. The firms profit-maximizing output is Q= 800 e. The firms profit-maximizing output is Q= 400

b. The firms profit-maximizing output is Q=200

Which of the following correctly defines first-degree price discrimination? a. The seller offers different prices and customers choose the one that best suits them b. The seller offers each individual customer a different price c. The seller sets the price of the good equal to the marginal cost of production d. The seller sells differentiated goods at different prices e. The seller sets different prices for different market segments

b. The seller offers each individual customer a different price

Compared to perfectly competitive industry, a monopolist will generally produce: a. a greater level of output at a higher price b. a smaller level of output at a higher price c. a greater level of output at a lower price d. roughly the same level of output but at a higher price e. a smaller level of output at a lower price

b. a smaller level of output at a higher price

When the marginal product of a variable input is zero, it implies that the firm is at the point where the total product is: a. increasing at an increasing rate b. at its maximum c. decreasing at an increasing rate d. also equal to zero e. increasing at a decreasing rate

b. at its maximum

A monopolist maximizes profit by producing: a. on the inelastic portion of the demand curve b. at the output level where marginal revenue equals marginal cost c. at the level where the deadweight loss is minimized d. at the point where the cost of producing the last unit of output equals price e. at the level where average cost is minimized

b. at the output level where marginal revenue equals marginal cost

A good that has highly elastic demand is most likely to: a. be produced by a single firm b. have a large number of substitutes c. be sold at a high price level d. be purchased by low-income consumers e. be a necessary good

b. have a large number of substitutes

If the sum of the exponents of a Cobb-Douglas production function is equal to 1.2, the production function exhibits: a. declining productivity b. increasing returns to scale c. diminishing marginal returns d. constant returns to scale e. increasing average costs

b. increasing returns to scale

A firm will continue to operate in the long run only if: a. average cost exceeds price b. it earns a nonnegative economic profit c. it earns a positive rate of return d. the average variable cost exceeds price e. it makes a positive accounting profit

b. it earns a nonnegative economic profit

A very friendly and attractive person wearing a brightly colored Pepsi shirt is collecting consumer data on soft drinks by standing at the entrance to a store and asking the following question to customers as they enter: "Do you prefer Pepsi or Coke?". The results of this survey will likely be unreliable due to: a. controlled market study bias b. response bias c. uncontrolled market study bias d. sample bias e. response accuracy

b. response bias

Given the total cost equation for a firm, the marginal cost equation can be derived by a. dividing total variable cost by total output b. taking the first derivative of the cost function with respect to quantity c. dividing total cost by total output d. multiplying the total cost equation by price e. subtracting variable cost from the fixed cost at all levels of output

b. taking the first derivative of the cost function with respect to quantity

In order to maximize profits, a perfectly competitive firm will continue producing until: a. its total sales revenue is maximized b. the marginal cost equals the market price c. it utilizes its full production capacity d. the average cost is minimized e. the profit per-unit is at its highest possible point

b. the marginal cost equals the market price

A firms production function shows: a. the least-cost combination of inputs that can be used to produce a given level of output b. the maximum level of output the firm can produce for any combination of inputs c. the marginal cost of producing an extra unit of output by employing an extra unit of an input d. the profit-maximizing level of output that can be produced with a given level of inputs e. the average cost associated with the production of various levels of output

b. the maximum level of output the firm can produce for any combination of inputs

Benefit-cost analysis

begins with the systematic enumeration of all of the potential benefits and costs of a particular public decision. It goes on to measure or estimate the dollar magnitude of these benefits and costs.

If fixed costs increase, what will happen to marginal revenue and marginal cost?

both will be unchanged

Suppose that the demand for a product increases. What is the most likely effect on the firm's price and quantity?

both will increase

Dana, who is a trained yoga instructor, spends 4 hours on Monday baking and packing 10 boxes of cookies. She sells the cookies for $10 a box. Given that she can also teach yoga for $80 an hour, what is her implicit cost of baking cookies? a. $100 b. $220 c. $320 d. $420 e. $800

c. $320

Given the inverse demand function P=50-.5Q and the cost function C=600+40Q, what is the profit maximizing price? a. 600 b. 20 c. 45 d. 40 e. 15

c. 45

c. 95

Megan used to work at the local pizzeria for $15,000 per year but quit to start her own deli. To buy the necessary equipment, she withdrew $20,000 from her inheritance (which paid 8% interest). Last year she paid $25,000 for ingredients and $500 per month rent but had revenue of $50,000. She asked her dad the accountant and her mom the economist to calculate her annual profit for her. a. Dad says her profit is $9000 and mom says she lost $6000 b. Dad says her profit is $31,000 and mom says her profit is $16,600 c. Dad says her profit is $19000 and mom says her profit is 2400 d. Dad says she lost $11000 and mom says she lost $26000 e. none of the above

c. Dad says her profit is $19000 and mom says her profit is 2400

Which of the following is true of a firm's fixed costs? a. Fixed costs are reduced to zero if the firm produces no output b. Fixed costs are the same as a firm's total costs c. Fixed costs are incurred regardless of the firms level of output d. Accounting profit equals economic profit when fixed costs fall to zero e. A firm should shut down if it cannot cover its fixed costs

c. Fixed costs are incurred regardless of the firms level of output

Profit is maximized at the quantity where: I. MR=MC II. The slope of the Revenue Curve is equal to the slope of the Cost curve III. The 1st derivative of the revenue function is equal to the 1st derivative of the cost function -- a. I only b. I & III only c. I & II, and III d. I & II only e. III only

c. I & II, and III

Which of the following correctly defines marginal revenue? a. Marginal revenue is the price at which the firm sells the last unit of the good b. Marginal revenue is the difference between price and marginal cost for the last unit sold c. Marginal revenue is the additional revenue from a unit increase in output and sales d. Marginal revenue is the change in revenue from a unit increase in the price of the good e. Marginal revenue is the additional revenue earned from an increase in demand for the good

c. Marginal revenue is the additional revenue from a unit increase in output and sales

A firms demand curve is given by Q=800-2P, where P= price and Q= quantity. Therefore, its inverse demand equation is a. 800= Q +2P b. P= 800-.5Q c. P= 400-.5Q d. P= 800- 2Q e. MR= 800-4P

c. P= 400-.5Q

Derek is the co-owner of a small gift shop. He decides to hold a sale and reduce most prices by 20%. His parents owned a convenience store, and they said that they could always count on increased traffic when they cut prices. Unfortunately, as a result of the sale, Derek's Total Revenue declined. What must be true, ceteris paribus? a. Quantity decreased and demand was unitary elastic b. Quantity decreased and demand was elastic c. Quantity increased and demand was inelastic d. Quantity decreased and demand was inelastic e. Quantity increased and demand was elastic

c. Quantity increased and demand was inelastic

Suppose that the "goodness of fit" of an equation is nearly perfect. What is the value of the R² statistic in this case? a. Very close to positive infinity b. Very close to -1 c. Very close to +1 d. very close to 0 e. Very close to .5

c. Very close to +1

In the long run, firms in a perfectly competitive industry are most likely to: a. continue to earn positive economic profit because of barriers to entry b. have a positively sloped average revenue curve c. earn zero economic profits and produce a minimum cost d. suppress innovative products to earn a positive economic profit e. earn negative economic profits and exit the market

c. earn zero economic profits and produce a minimum cost

A firms demand equation is given by: Q=60-60P+2Y, where Q is quantity, P is price, and Y is income. If price increases by $2 and income increases by $80, then quantity demanded will: a. decrease by 60 units b. decrease by 120 units c. increase by 40 units d. increase by 80 units e. increase by 160 units

c. increase by 40 units

To maximize profit, the firm should set output at the level where a. marginal revenue equals zero b. average revenue just equals average cost c. marginal revenue is equal to marginal cost d. marginal cost equals zero e. the average cost per unit is minimized

c. marginal revenue is equal to marginal cost

The price elasticity of demand is defined as the ratio of the ______ other factors held constant. a. percentage change in the price of an input to the percentage change in the price of the good b. percentage change in quantity demanded to the percentage change in the price of a competitors good c. percentage change in quantity demanded to the percentage change in price d. percentage change in price of the good to the percentage change in the consumers income e. change in the price of a good to the change in the total revenue

c. percentage change in quantity demanded to the percentage change in price

Other factors constant, a change in ____ will cause a shift in a firms demand curve a. the technology used in the production of the good or service b. the wages paid to labor employed c. the general income level of consumers d. the price of the good or service e. the quantity of the good offered for sale

c. the general income level of consumers

A firm produces a good at a positive marginal cost. The firm's optimal price

is on the elastic portion of its demand curve

Deterministic Model

is one in which the outcome is certain

For a parking garage of fixed capacity, the owner sets different parking rates for cars that are parked for less than 24 hours (short-term) and for those that are parked for more than 24 hours (long-term). Assume MC is negligible. To maximize revenue, the operator should set prices and target the number of places for each segment such that: a. the price paid by both short-term and long-term consumers is equal b. the average revenues from the segments are equal c. the marginal revenues from the segments are equal d. the total revenues from each of the segments are equal e. the long-term consumers pay a higher hourly price

c. the marginal revenues from the segments are equal

Inferior goods

category of goods (ex. certain food staples) an increase in income cases a reduction in spending

Substitute good

competes with and can substitute for the good in question

Sensitivity Analysis

considers how an optimal decision is affected if key economic facts or conditions vary

according to the law of demand, if a firm reduces the price of its good:

consumers in the market will demand more units of the good

shows how total cost depends on quantity

cost function

For a good that has a price elasticity of demand of -1.5 and a marginal cost of $50 per unit, the profit-maximizing price should be approximately _____. a. $168 b. $50 c. $134 d. $150 e. $200

d. $150

The initial price for an item is $5.00, and the quantity demanded is 400 units. When the price is raised to $5.25, the quantity demanded falls to 350 units. The absolute value of the point elasticity of demand is a. 3.5 b. 1.5 c. 2.0 d. 2.5 e. 2.25

d. 2.5

If a firms profit is given by π=-150+360Q-36Q², then its optimal output is a. 36 units b. 2 units c. 20 units d. 5 units e. 12 units

d. 5 units

Given that a firms inverse demand function is P=100-5Q and total cost is given by C=550+10Q, what is the firms profit-maximizing level of output? a. 8 units b. 5 units c. 15 units d. 9 units e. 10 units

d. 9 units

Which of the following is true in the long-run? a. The marginal cost is at a minimum b. The level of output produced can be varied only over a limited range c. A firm can vary only one of the inputs used in production d. A firm can vary all the inputs used in production e. All inputs used in production are fixed in the long-run

d. A firm can vary all the inputs used in production

Which of the following is true of a firm that faces increasing returns to scale? a. As the quantity of one input is increased, the marginal cost of production will decline b. As the quantity of one input is increased, its marginal product will increase at an increasing rate c. As the quantity of all inputs are increased, the average cost of production will increase d. A given increase in the quantity of all inputs will increase output by a greater proportion e. An increase in the quantity of one input will increase output by a greater proportion

d. A given increase in the quantity of all inputs will increase output by a greater proportion

If a firms demand function is of the form P=-a-bQ, what is its marginal revenue equation? a. MR= a-2Q b. MR= a-2b c. MR= a+2bQ d. MR= a- 2bQ e. MR= a-Q

d. MR= a- 2bQ

Which of the following is true of economic models? A. Models are not useful because they do not take into account complicating and less important features of a problem B. Models describe real world situations in complete detail. C. Models are too theoretical to be applicable in real world situations. D. Models are simplified descriptions of processes, relationships, or other phenomena.

d. Models are simplified descriptions of processes, relationships, or other phenomena.

The cross-price elasticity between two products is estimated to be 2. If the price of the first product is increased by 8%, demand for the second product will ____. a. decrease by 4% b. increase by 8% c. decrease by 8% d. increase by 16% e. increase by 4%

d. increase by 16%

If the price of a product consistently exceeds its average cost, one can definitely conclude that the firm: a. is maximizing its long-run profit b. is earning a normal rate of return c. is producing at the minimum efficient scale d. is earning a positive economic profit e. is producing at its most efficient level of output

d. is earning a positive economic profit

In a perfectly competitive market, an individual firm faces a demand curve that: a. is downward sloping b. lies above the marginal revenue curve c. is upward sloping d. is horizontal at the equilibrium price e. is perfectly inelastic

d. is horizontal at the equilibrium price

According to the model of the firm, the managements main goal is to a. increase revenue from sales b. maximize its market share c. minimize its variable cost per unit d. maximize profit e. maintain a steady and predictable growth in earnings

d. maximize profit

Theory of the firm

is that management strives to maximize the firm's profits

Managerial Economics

is the analysis of major management decisions using the tool of economics

Which of the following is true of economic models? a. Models are not useful because they do not take into account complicating and less important features of a problem b. models describe real world situations in complete detail c. models are too theoretical to be applicable in real world decisions d. models are simplified descriptions of processes, relationships, or other phenomena e. Models are not useful because uncertainty prevents accurate forecasts

d. models are simplified descriptions of processes, relationships, or other phenomena

Assume that a firm is producing at its profit-maximizing level of output. A decrease in fixed cost implies that a. neither average total cost nor marginal cost will change b. marginal revenue will not change but marginal cost will decrease c. both marginal revenue and marginal cost will decrease d. neither marginal revenue nor marginal cost will change e. marginal revenue will increase but marginal cost will decrease

d. neither marginal revenue nor marginal cost will change

In evaluating public programs, benefit-cost analysis a. states that a program should be undertaken only if there are no indirect costs b. states that a program should be undertaken only if it generates revenue c. takes into account only the direct costs of the program d. states that a program should be undertaken only if total benefits exceed total costs e. takes into account only the benefits that society gains from public programs

d. states that a program should be undertaken only if total benefits exceed total costs

A firm will maximize profits and revenues at the same price when: a. marginal revenue is zero b. the fixed costs are zero c. the demand for the good is unit elastic d. the marginal cost is negligible or zero e. the demand for the good is highly elastic

d. the marginal cost is negligible or zero

When the demand for a product is said to be perfectly inelastic, it implies that: a. the profit per-unit increases with an increase in price b. the sales of the product are very sensitive to changes in price c. as price increases, the quantity demanded increases d. with a change in price, change in quantity demanded is zero e. the demand curve for the product is relatively flat

d. with a change in price, change in quantity demanded is zero

Six Steps to Decision Making

define the problem, determine the objective, predict the consequences, make a choice, perform sensitivity analysis

downward slope

demand curve

outcome is certain (or close enough)

deterministic model

The demand for a product is given by P=1750-25Q. If the firm wishes to sell 50 units, each unit should be priced at a. $300 b. $100 c. $400 d. $200 e. $500

e. $500

Given the inverse demand function P=50-0.5Q and the cost function C=600+40Q, what is the firms fixed cost? a. 40Q b. 40 c. 50 d. .5 e. 600

e. 600

When Rita was a student, she consumed beer with her dinner. Over the years, as her income increased, she substituted beer for a glass of wine. From this information, one can imply that: a. wine and beer are complementary goods b. the price elasticity of demand for beer is high c. the law of demand does not hold for beer d. Rita gets more utility from beer than from wine e. Rita considers beer an inferior good

e. Rita considers beer an inferior good

The money that a firm has already spent on research and development for a project should be categorized as _____ when the firm is deciding whether to make an additional investment in the project a. a variable cost b. an overhead cost c. an implicit cost d. a marginal cost e. a sunk cost

e. a sunk cost

Given that digital music players are used to play music downloaded from the Internet, a fall in the price of digital music players will lead to: a. an increase in the price of a song download b. a fall in the demand for digital music players c. an increase in the price of broadband plans d. an increase in the price of personal laptops e. an increase in the demand for downloaded songs

e. an increase in the demand for downloaded songs

Managerial economics can best be defined as the a. study of economic incentives on consumer behavior and demand b. study of the strategic interaction between firms in a market c. analysis of the labor market through the behavior of workers and managers d. macroeconomics and microeconomics for managers e. analysis of major management decisions using economic tools

e. analysis of major management decisions using economic tools

According to the law of demand, if a firm reduces the price of its good a. Consumers will demand fewer units than before the price cut b. the quantity of goods produced and sold by the firm will decline c. some consumers will exit the market d. competing firms will reduce prices e. consumers in the market will demand more units of the good

e. consumers in the market will demand more units of the good

Sensitivity analysis is used by a firm to a. examine the opportunity costs of an economic decision b. examine the static effects of an economic decision on the firms profitability c. analyze the impact of a change in the price of the good on the demand for the good d. analyze the social costs and benefits of an economic decision e. examine how an optimal decision is affected if key economic facts vary

e. examine how an optimal decision is affected if key economic facts vary

The short-run is best defined as the time period in which: a. the amount of output cannot be varied b. the marginal cost of production is low c. all inputs to production can be varied d. all inputs to production remain fixed e. one or more inputs to production are fixed

e. one or more inputs to production are fixed

In contrast to simple regression, multiple regression considers: a. both time-series data and cross-section data b. multiple equation specifications in order to find the best statistical fit c. several dependent variables rather than one d. more than one dependent and independent variable e. several independent variables rather than one

e. several independent variables rather than one

In the long run, firms in a perfectly competitive industry are most likely to:

earn zero economic profits and produce at minimum cost

A firm will continue to operate in the long run only if:

it earns a nonnegative economic profit

Sensitivity analysis is used by a firm to

examine how an optimal decision is affected if key economic factors vary

What is the associated Marginal REVENUE curve to a downward sloping demand curve?

has the same price intercept but a steeper slope

for a downward sloping demand curve the associated marginal revenue curve

has the same price intercept but a steeper slope than the demand curve

For a downward-sloping demand curve, the associated marginal revenue curve:

has twice the slope as the demand curve

A good that has highly elastic demand is most likely to:

have a large number of substitutes

a good that has highly elastic demand is most likely to

have a large number of substitutes

A good that has highly elastic demand is most likely to:

have a large number of substitutes.

Objective of value maximization

implies that management's primary responsibility is to the firm's shareholders

Which of the following is true of a firm facing a downward sloping demand curve?

in order to sell more units, the firm needs to lower its price

If the price of a substitute good increases significantly, demand for the competing good will

increase

When the price of smart phones decreases, the demand for data plans will

increase

The cross-price elasticity between two products is estimated to be 2. If the price of the first product is increased by 8%, demand for the second product will _____.

increase by 16%

The cross-price elasticity between two products is estimated to be 2. If the price of the first product is increased by 8%, demand for the second product will ________.

increase by 16%

increase by 24.56%

Assume that demand for a service depends upon price and income, where the price elasticity of demand is Ep(subscript)= -0.6 and income elasticity is Ey(subscript)= 1.2. If price falls by 4% and income rises by 2%, the quantity demanded of the service will _____.

increase by 4.8%

A firm's demand equation is given by: Q=60-60P+2Y, where Q is quantity, P is price, and Y is income. If price increases by $2 and income increases by $80, then quantity demanded will:

increase by 40 units

Complementary

increase in demand for one good causes an increase in demand for the other

Normal good

increase in income raises its sales

Suppose, at its current output level, a firm's marginal profit is positive. Therefore, to maximize profit, it should

increase output because MR is greater than MC

Suppose, at its current output level, a firm's marginal profit is positive. Therefore, to maximize profit, it should:

increase output because MR is greater than MC

Suppose, at its current output level, a firm's marginal profit is positive. Therefore, to maximize profit, it should:

increase output because MR is greater than MC. Correct

If the sum of the exponents of a Cobb-Douglas production function is equal to 1.2, the production function exhibits:

increasing returns to scale

deterministic economic model

is a model for which the outcome is predicted with certainty

Model

is a simplified description of a process, relationship, or other phenomenon

In a perfectly competitive market, an individual firm faces a demand curve that:

is horizontal at the equilibrium price

If the demand for a good is price-elastic, a cut in price will:

lead to an increase in quantity demanded and an increase in the firm's revenue

If the demand for a good is price-elastic, a cut in price will:

lead to an increase in quantity demanded and an increase in the firm's revenue.

law of the demand for a good is price-elastic, a cut in price will

lead to an increase in quantity demanded and an increase in the firm's revenue.

make a profit

main goal of management

change in profit that results from a small change in a decision variable

marginal analysis

additional cost of producing an extra unit of output

marginal cost

marginal cost is the additional cost of producing an extra unit of output

If short-run average total cost is increasing then:

marginal cost must be greater than short-run average cost

change in profit from a small increase in any managerial decision variable

marginal profit

change in profit / change in output

marginal profit equation

Maximun Profit is attained at the output level at which:

marginal profit is zero

in order to maximize profit management should set output such that

marginal profit is zero and marginal revenue equals marginal cost

amount of additional revenue that comes with a unit increase in output and sales

marginal revenue

a firm can sell as much output as it wishes at the fix price, P= $10 per unit. Then,

marginal revenue is constant and equals $10

To maximize profit, the firm should set output at the level where...

marginal revenue is equal to marginal cost

To maximize profit, the firm should set output at the level where:

marginal revenue is equal to marginal cost

A profit-maximizing firm will hire the variable input, labor, until the point where:

marginal revenue product of labor is equal to the marginal cost of labor.

Suppose that demand decreases. What is the most likely effect on the marginal revenue and marginal cost curves?

marginal revenue will decrease, marginal cost will not change

Due to an increase in the price of a competitor's product, the demand for a firm's product increases sharply. How is this most likely to affect the firm's marginal revenue and marginal cost?

marginal revenue will increase but marginal cost will not change

Suppose a firm sells a good in three different markets. In market A, management thinks that demand elasticity is -1.1. In market B, management thinks elasticity is -3.5. In market C, management thinks elasticity is -8. In which market will a profit-maximizing firm set the highest price?

market A

according to the model of the firm, the management's main goal is to

maximize profit

-120 + 240 Q - 0.8 Q^2

start with the demand function P = 340 - 0.8 Q and the total cost function is C = 120 + 100 Q. Find the profit function.

Assume that a firm is producing at its profit-maximizing level of output. A decrease in fixed cost implies that:

neither marginal revenue nor marginal cost will change

A firm produces an information good at a marginal cost of $0. The firm's optimal price

occurs where EP = -1. occurs where MR = 0.

A firms demand curve is given by Q=800-2p, where P=price and Q=quantity. Therefore, its inverse demand equation is....

p=400-.5q

The price elasticity of demand is defined as the ratio of the _____ other factors held constant

percentage change in quantity demanded to the percentage change in price

The price elasticity of demand is defined as the ratio of the _____ other factors held constant.

percentage change in quantity demanded to the percentage change in price

The price elasticity of demand is defined as the ratio of the _____ other factors held constant.

percentage change in quantity demanded to the percentage change in price Correct

Suppose that the firm's marginal cost decreases. What is the effect on the firm's optimal price and quantity?

price will decrease, quantity will increase

a firm negotiates a new labor contract with a higher average hourly wage. What is the most likely effect to the higher wage on the firm's price and output

price will increase and output will decrease

accounts for a range of possible future outcomes

probabilistic model

When Rita was a student, she consumed beer with her dinner. Over the years, as her income increased, she substituted beer for a glass of wine. From this information, one can imply that:

rita considers beer an inferior good

If the income elasticity of demand for a good is greater than one, it implies that:

sales of the good are highly sensitive to changes in consumer's income

If the income elasticity of demand for a good is greater than one, it implies that:

sales of the good are highly sensitive to changes in consumers' income

If the income elasticity of demand for a good is greater than one, it implies that:

sales of the good are highly sensitive to changes in consumers' income.

In contrast to simple regression, multiple regression considers:

several independent variables rather than one

probabilistic model

shows the possibility of a range of outcomes

answer

table

answer

table 2

answer

table 3

wrong answer

table 4

The demand curve faced by an individual firm in a perfectly competitive market, implies that the firm:

takes the market price as given

Given the total cost equation for a firm, the marginal cost equation can be derived by

taking the first derivative of the cost function with respect to quantity

Given the total cost equation for a firm, the marginal cost equation can be derived by:

taking the first deviate of the cost function with respect to quantity

Enumeration

testing a number of alternatives and selecting the one that best meets the objective

Marginal Cost

the additional cost pf producing an extra unit of output

Marginal Revenue

the amount of additional revenue that comes with a unit increase in output and sales

Optimal decision

the best decision

Marginal Profit

the change in profit resulting from a small increase in any managerial decision variable

Inverse demand curve

the demand curve that views Q as a function of Price can also be presented as Price as a function of Quantity. We call this later presentation the ________.

Insanity Other factors constant, a change in _____ will cause a shift in a firm's demand curve.

the general income level of consumers

Other factors constant, a change in _____ will cause a shift in a firm's demand curve.

the general income level of consumers

Other factors constant, a change in ______ will cause a shift in a firm's demand curve.

the general income level of consumers

other factors constant, a change in _____ will cause a shift in a firm's demand curve

the general income level of consumers.

A firm will maximize profits and revenues at the same price when:

the marginal cost is negligible or zero

A firm will maximize profits and revenues at the same price when:

the marginal cost is negligible or zero.

the marginal revenues from the segments are equal

the marginal revenues from the segments are equal.

A firm's production function show:

the maximum level of output the firm can produce for any combination of inputs.

Profit

the principle objective of the firm and the usual barometer of its performance

Marginal Analysis

the process of considering small changes in a decision and determining whether a given change will improve the ultimate objective

Profit Equation

π = R - C

o Price will increase and output will decrease

• A firm negotiates a new labor contract with a higher average hourly wage. What is the most likely effect of the higher wage on the firm's price and output?

o The marginal cost is negligible or zero

• A firm will maximize profits and revenues at the same price when:

o 100 o Math: 20 + 4(20)

• A firm's cost equation is given by C = 400 + 20Q + 2Q^2. At Q = 20, marginal cost is

o P = 800 - 2Q

• A firm's demand curve is given by Q = 400 - .5P, where P = price and Q = quantity. Therefore, its inverse demand function equation is:

o Have no or few substitutes

• A good that has highly inelastic demand is most likely to:

o -1.5 Math: (1/-.02) * (10-.02(200)/200)

• A good's demand is given as: P= 10 - 0.02Q. At Q=200, the point-price elasticity is?

o There is a collective benefit from cooperation but the self-interest of individuals leads to an inferior outcome.

• A prisoner's dilemma is a strategic situation in which:

o Economic cost includes all relevant opportunity costs.

• Account profit differs from economic profit because:

o The rate of interest that could have been earned on an a comparably risky $500,000 investment.

• Amanda invests $500,000 in a new business venture. Which of the following correctly identifies the relevant opportunity cost that she faces?

o Test the overall statistical significance of the regression equation

• Computing the F-Statistic allows one to:

o 2,568

• Five oligopoly firms have market shares of 40%, 20%, 18%, 12%, and 10%. Compute the Herfindahl-Hirschman index for the industry:

o Has twice the slope as the demand curve

• For a downward-sloping demand curve, the associated marginal revenue curve:

o Has twice the slope as the demand curve.

• For a downward-sloping demand curve, the associated marginal revenue curve:

o -.32

• For the log-linear demand estimation, Ln(Q) = 2.4 - .32Ln(Px) + 1.2Ln(y), where Px is the price of good X and Y is consumer income, the price elasticity for demand is:

o Economic Profits; Economic Losses

• Generally, ______ motivate firms to enter an industry while _____ motivate firms to exit an industry

o K and L are perfect substitutes for each other so production is possible with just K or L.

• Given the production function Q = 5K + 10L, which of the following is true?

o The goods are complements

• If the cross price elasticity between two goods is -0.7, how are the two goods related?

o Lead to a fall in the firm's revenue but an increase in quantity demanded

• If the demand for a good is price-inelastic, a cut in price will:

o Is at the level where its marginal revenue and marginal cost are equal

• Price leadership assumes that the quantity that is set by the dominant firm (price leader) in an oligopolistic industry:

o 1 - -2(3/20) = .7 >>> .7*400 = 280

• Suppose that the current price for a good is $20, and quantity sold is 400 units. If the price elasticity is -2, and price is raised to $23, what is the new quantity sold?

o Is decreasing over all levels of output.

• The average fixed cost for a firm

o Is at its maximum

• When the marginal product of a variable input is zero, it implies that the firm is at the point where the total product is:

o Q = 11 * Px^-.32 * Y^1.2

• Which of the following is the correct exponential form for the following Log-linear demand estimation: Ln(Q) = 2.4 - .32Ln(Px) + 1.2Ln(Y), where Px is the price of the good X and I is consumer's income?

o A firm will always produce at price equals MC, and where price equals ATC in the long-run.

• Which of the following is true in a perfectly competitive market?

o Q = bL^.2K^.8 The exponents added up = 1

• Which of the following production functions displays constant returns to scale?

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