Econ 1

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Resources

Anything used to produce a good or service, or achieve a goal

Leftward shift of demand curve:

Decrease in demand

PXX + PYY = M is called a. An indifference curve b. An opportunity set c. A budget set D. A budget line

Which of the following is NOT a supply shifter?

Average income level

Which firm would you expect to make the lowest profits, other things equal? Betrand Sweezy Cournot Stackelberg

Betrand Oligopolist

Which of the following is most likely NOT an example of a normal good? A. Sports cars B. Bus travel C. Jacuzzis D. Lobster

Bus travel

Two sides to Every Transaction

Buyer & Seller

In asset markets, an assetʹs price is A) set equal to the highest price a seller will accept. B) set equal to the highest price a buyer is willing to pay. C) set equal to the lowest price a seller is willing to accept. D) set by the buyer willing to pay the highest price.

In the one-period valuation model, an increase in the required return A) increases the expected sales price of a stock. B) increases the current price of a stock. C) reduces the expected sales price of a stock. D) reduces the current price of a stock.

Suppose the production function is given by Q = K^1/2L^1/2, and both K and L double. Then output Q will? A. More than double B. Increase by half C. Less than double D. Double

Double

Given that income is $300, the price of good Y is $15, and the price of good X is $20. What is the vertical intercept of the budget line? a. 4,500 b. 300 c. 20 d. 15

For given input prices, isocosts closer to the origin are associated with: A. Higher costs B. Lower costs C. The same costs D. Initially lower, then higher costs

Lower costs

An increase in the price of steak will probably lead to:

an increase in demand for chicken.

Advertising & Consumer Taste

increase in advertising shifts the demand curve to the right and can impact consumer tastes

If A and B are complements, an increase in the price of good A would:

lead to a decrease in demand for B.

If a shortage exists in a market, the natural tendency is for:

price to increase.

What is the marginal revenue of producing the third unit? Units produced 0 1 2 3 4 5 total revenue 0 100180 250 290 310 total costs 0 50 110 180 270 380 A. 250 B.70 C. 0 D. 90

Ad Valorem Tax

A percentage tax; best known is the sales tax

Which of the following is probably not a normal good? A. Designer jeans.B. Diamond rings.C.Intercity passenger bus travel.D. New automobiles.

Intercity passenger bus travel

If a consumer's income decreases, what will happen to the budget line?

It will shift inward

Which of the following is true under monopoly? P=MR Profits are always positive P>MC All of the choices are true

P>MC

Market Equilibrium

Price of a good is determined by the interactions of the market demand and market supply for the good

Suppose you produce wooden desks, and government legislation protecting the spotted owl has made it more expensive for you to purchase wood. What do you expect to happen to the equilibrium price and quantity of wooden desks? A. Price will increase but quantity will decrease B. Price will decrease but quantity will increase C. Price and quantity will increase D. Price and quantity will decrease

Price will increase but quantity will decrease

Price will increase but quantity will decrease.

Supply Shifters

Prices of Inputs, Technology, Number of Firms in the Market, Taxes (Government) , natural disasters, substitutes in production, and Producer Expectations

The creation of a new product is referred to as:

Product innovation.

By instituting performance-based rewards to CEOs the profits of firms will: A. Remain constant B. Rise C. Fall D. None of the statements are correct

Rise

Running a supermarket involves a. A lower level of risk than running a gourmet shop b. A higher level of risk than running a gourmet shop c. The same level of risk as running a gourmet shop d. All of the statements associated with this question are correct

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output? A. The MRTS is equal to the ratio of input prices, and the marginal product per dollar spent on all inputs is equal. B. The marginal products of all inputs are equal C. The marginal product per dollar spent on all inputs is equal D. The MRTS is equal to the ratio of input prices

The MRTS is equal to the ratio of input prices, and the marginal product per dollar spent on all inputs is equal

Price Ceiling

The Maximum legal price that can be charged in a market, QD exceeds QS and creates a shortage

Changes in the prices of other goods lead to:

a change in demand.

Economics: A.exists because of scarcity.B. is not related to decision making.C. is the science of the rich.D. has nothing to do with the allocation of resources.

exists because of scarcity

In the Wealth of Nations, Adam Smith argues that: A.self-interest leads to the efficient allocation of resources.B. benevolence leads to the efficient allocation of resources.C. profits are maximized where marginal revenue equals net marginal benefits.D. None of the statements associated with this question are correct.

self-interest leads to the efficient allocation of resources

If consumers expect future prices to be higher A. they substitute current purchases for future purchases of perishable products.B.stockpiling will happen when products are durable in nature.C. the position of the demand will not change.D. the demand for automobiles today will not change.

stockpiling will happen when products are durable in nature

An isoquant defines the combination of inputs

that yield the producer the same level of output.

Suppose the cost function is C(Q) = 50 + Q - 10Q2 + 2Q3. What is the total cost of producing 10 units?

$1,060

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day. What is the minimum the worker can earn in a day?

$100.

Suppose that production for good X is characterized by the following production function, Q = K^.5L^.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $25, and the per-unit wage, w, is $15, then the average variable cost of using 81 units of capital and 9 units of labor is: A. $2,025 B. $2,160 C. $135 D. There is insufficient information to determine the variable costs

$135

You are the manager in a perfectly competitive market. The price is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q^2. What price should you charge in the short run? A. $12 B. $16 C. $14 D. $18

$14

Suppose a monopolist knows the own price elasticity of demand for its product is -3 and that its marginal cost of production is constant MC(Q) = 10. To maximize its profit, the monopoly price is: A. $10 per unit B. $15 per unit C. $6.67 per unit D. $1.50 per unit

$15 per unit

Suppose a firm manager has a base salary of $75,000 and earns 1.5% of all profits. Determine the manager's income, if revenues are $10,000,000 and profits are $5,000,000. A. $75,000 B. $150,000 C. $300,000 D. $225,000

$150,000

In a perfectly competitive market, each firm has the following cost function: C = 49 + 5Q + Q^2. The market price is $35 and the market demand is Qd = 185 - P, where P is the market price. The short run profit level is: A. $176 B. $100 C. $0 D. None of the above

$176

Suppose market demand and supply are given by Qd = 100 - 2P and Qs = 5 + 3P. the equilibrium price is: A. $20 B. $19 C. $15 D. $17

$19

Suppose market demand and supply are given by Q d = 100 - 2P and Q S = 5 + 3P. The equilibrium price is:

$19.

If the interest rate is 10% and cash flows are $1,000 at the end of year one and $2,000 at the end of year two, then the present value of these cash flows is: A. $439 B. $3,000 C. $2,562 D. $3,200

$2,562

A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $20. What will the new price be should the three firms coexist after entry?

$20

A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $20. What will the new price be should three firms coexist after the entry? A. $15 B. $25 C. $20 D. None of the answers are correct

$20

A monopoly produces widgets at a marginal cost of $8 per unit and zero fixed costs. It faces an inverse demand function given by P=38-Q. What are the profits of the monopoly at equilibrium?

$225

A monopoly produces widgets at a marginal cost of $8 per unit and zero fixed costs. It faces an inverse demand function given by P=38-Q. The monopoly price is:

$23

Suppose market demand and supply are given by Qd = 100 − 2P and Qs = 5 + 3P. If a price ceiling of $15 is imposed, what will be the resulting full economic price?

$25

You are the manager of a mom and pop store that can buy milk from a supplier at $2.00 per gallon. If you believe the elasticity of demand for milk by customers at your store is -3, then your profit-maximizing price is:

$3.00

You are the manager of a mom and pop store that can buy milk from a supplier at $3.00 per gallon. If you believe the elasticity of demand for milk by customers at your store is -4, then your profit maximizing price is:

$4.00

You are the manager in a perfectly competitive market. The price is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q^2. What level of profits will you make in the short run? A. $40 B. $60 C. $20 D. $80

$40

Suppose the cost function is C(Q) = 50 + Q - 10Q2 + 2Q3. What are the fixed costs?

$50

You are the manager a firm that sells its product in a competitive market with market (inverse) demand given by P = 50 - 0.5Q. The market equilibrium price is $50. Your firm's cost function is C = 40 + 5Q^2. Your firm's marginal revenue is: A. MR(Q) = 50 - Q B. $50 C. MR(Q) = 10Q D. There is insufficient information to determine the firm's marginal revenue.

$50

Suppose compensation is given by W = 512,000 + 217pi + 10.08S, where W = total compensation of the CEO, pi = company profits (in millions) = $200, and S = sales (in millions) = $400. How much will this CEO be compensated? A. $512,000 B. $43,400 C. $559,432 D. $812,431

$559,432

Consider a cournot oligopoly consisting of five identical firms producing good X. If the firms produce good X at a marginal cost of $7 per unit and the market elasticity of demand is -3, determine the profit-maximizing price.

$7.50 per unit

Effective managers must:

- Identify goals and constraints. - Recognize the nature and importance of profits. - Understand incentives. - Understand markets. - Recognize the time value of money. - Use marginal analysis.

Suppose you compete in a Cornet oligopoly market consisting of six firms. The equilibrium market price and quantity are $5 and 10 units, respectively. The marginal cost for each firm is $3. Based on this information, we know the price elasticity of the market demand is:

-.417

Suppose the equilibrium price in the market is $200 and the marginal revenue associated with the linear (inverse) demand function is -$200. Then we know that the own price elasticity of demand is: A. 2 B. -1 C. -0.5 D. It cannot be determined from the information contained in the question.

-0.5

The demand for good X has been estimated by Qxd = 12 - 3Px + 4Py. Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price elasticity. A. -0.3 B. -0.2 C. -0.5 D. -0.6

-0.6

In a monopoly where the marginal revenue and price are, respectively, given by $10 and $20, the price elasticity of demand is: A. -1 B. -0.5 C. -2 D. Cannot be determined based on the information in the question

-2

Suppose a consumer with an income of $100 is faced with Px = 1 and Py = 1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)? A. 0.50 B. -2 C. -4 D. -1

-2

What is the marginal net benefit of producing the fourth unit? units produces 0 1 2 3 4 5 total revenue 0 100 180 250 290 310 total costs 0 50 110 180 270 380 A.-50B. 0C. 60D. 40

-50

Which of the following cost functions exhibits cost complementarity?

-5Q1Q2 + 7Q1.

. If a worker receives a fixed payment of $100 plus $10 for every hour she works, what is the maximum total earnings the worker can receive if they are restricted to a maximum of 12 hours of work per day? a. $220 b. $120 c. $340 d. $125

. If you are in the business of selling chicken and the price of selling chicken and the price of beef both were to drop dramatically, what should you do with your inventory level of chicken? a. Keep it the same b. Decrease the inventory c. Increase the inventory d. Get into the beef business

. Suppose a consumer with an income of $100 who is faced with PX = 1 and PY = 1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)? a. 0.50 b. -1.0 c. -2.0 d. -4.0

. The difference between a price decrease and an increase in income is that a. A price decrease does not affect the consumption of other goods while an increase in income does b. An increase in income does not affect the slope of the budget line while a decrease in price does change the slope c. A price decrease decreases real income while an increase in income increases real income d. A price decrease leaves real income unchanged while an increase in income increases real income

What is the marginal net benefit associated with producing five units of the control variable, Q (identify point F in the table)?A. -100B. -75C.0D. 100

The demand for good X is estimated to be Q xd = 10,000 - 4PX + 5PY + 2M + AX, where PXis the price of X, PY is the price of good Y, M is income and AX is the amount of advertising on X. Suppose the present price of good X is $50, PY = $100, M = $25,000, and AX = 1,000 units. Based on this information, the cross price elasticity between goods X and Y is

0.008.

The production function for a competitive firm is Q = K^.5L^.5. The firm sells its output at a price of $10, and can hire labor at a wage of $5. Capital is fixed at one unit. The profit-maximizing quantity of labor is: A. 10 B. 2/5 C. 1 D. None of the answers are correct

You are the manager of a firm that produces output in two plants. The demand for your firm's product is P=78-15Q, where Q=Q1+Q2. The marginal costs associated with producing in the two plants are MC1=3Q1 and MC2=2Q2. How much output should be produced in plant 1 in order to maximize profits?

Given the linear production function Q = 10K + 5L, if Q = 10,000 and K = 500, how much labor is utilized? A. 800 units B. 600 units C. 500 units D. 1,000 units

1,000 units

If the annual interest rate is 0 percent, the present value of receiving $1.10 in the next year is: A. $1.00.B. $1.01.C. $1.11.D.$1.10.

1.10

if the production function is Q = K^.5L^.5 and capital is fixed at 1 unit, then the average product of labor when L = 25 is: A. 10 B. 2/5 C. 1/5 D. None of the answers are correct

1/5

You are the manager in a perfectly competitive market. The price is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q^2. What level of output should you produce in the short run? A. 15 B. 8 C. 10 D. 5

You are the manager of a firm that sells its product in a competitive market at a price of $60. Your firm's cost function is C=50+3Q^2. The profit-maximizing output for your firm is:

Suppose the growth rate of the firm's profit is 5 percent, the interest rate is 6 percent, and the current profits of the firm are $100 million. What is the value of the firm? A. $111.5 millionB. $1,766.6 millionC.$10,600 millionD. None of the statements associated with this question are correct.

10,600

Suppose total benefits and total costs are given by B(Y) = 100Y - 8Y2 and C(Y) = 10Y2. Then marginal benefits are: A.100 - 16Y.B. 100Y - 8Y2.C. 50 - 4Y.D. 200Y - 10Y.

100-16Y

What is the marginal cost of producing the fifth unit? A. 50 B. 270 C. 0 D. 110

110

Suppose compensation is given by W = 500,000 + 200pi + 17S, where W = total compensation of the CEO, pi = company profits (in millions) = $400, and S = sales (in millions) = $700. What percentage of the CEO's total earnings are tied to profits of the firm? A. 31.4% B. 19.6% C. 13.5% D. 2.0%

13.5%

You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit-maximizing price is: A. 110 B. 90 C. 150 D. 130

130

According to the table below, what is the average variable cost of producing 50 units of output? A. 34 B. 14 C. 20 D. 21

Two identical firms compete as a Cournot duopoly. The demand they face is P = 100 - 2Q. The cost function for each firm is C(Q) = 4Q. The equilibrium output of each firm is: A. 16 B. 36 C. 32 D. 8

Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. If the government sets a price floor of $30 and agrees to purchase all surplus at $30 per unit, the total cost to the government will be: A.$1,650.B. $1,375.C. $900.D. $1,125.

1650

Suppose the demand for good X is given by Qdx = 20 - 4Px + 2Py + M. The price of good X is $5, the price of good Y is $15, and income is $150. Given these prices and income, how much of good X will be purchased? A. 160.B.180.C. 220.D. None of the statements associated with this question are correct.

180

Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. The equilibrium price is: A. $15.B.$19.C. $17.D. $20.

Given the following table, how many workers should be hired to maximize profits? A. 1 B. 2 C. 3 D. 4

According to the table below, what is the total cost of producing 125 units of output? A. 2,400 B. 1,000 C. 2,050 D. 1,400

2,400

If the interest rate is 10 percent and cash flows are $1,000 at the end of year one and $2,000 at the end of year two, then the present value of these cash flows is: A.$2,562.B. $3,200.C. $439.D. $3,000.

2,562

SeaSide Industries currently spends 5 percent of its sales on advertising. Suppose that the elasticity of advertising for Seaside is 0.2. Determine the optimal profit margin over price (P-MC)/P. A. 10 percent B. 4 percent C. 25 percent D. None of the answers is correct

25 percent

At what level of output does marginal cost equal marginal revenue? units produces 0 1 2 3 4 5 total revenue 0 100 180 250 290 310 total costs 0 50 110 180 270 380 A. 1 B. 2 C.3 D. 4

A local video store estimates its average customer's demand per year is Q=20-4P, and it knows the marginal cost of each rental is $1.00. How much should the store charge for an annual membership in order to extract the entire consumer surplus via an optimal to part pricing strategy? 20 32 64 40

You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C=40+5Q^2. The profit-maximizing output for your firm is:

You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit-maximizing output for your firm is: A. 5 B. 4 C. 6 D. 7

You are the manager of a monopoly that faces a demand curve described by P=230-20Q. Your costs are C=5+30Q. The profit maximizing output of your firm is:

For the cost function C(Q) = 100 + 2Q + 3Q^2, the average fixed cost of producing 2 units of output is: A. 3 B. 2 C. 100 D. 50

For the cost function C(Q) = 100 + 2Q + 3Q2, the average fixed cost of producing 2 units of output is

50.

If the interest rate is 7 percent, $500 received at the end of nine years is worth how much today? A. 500/(0.07)^9B.500/(1 + .07)^9C. 500/(1 + 7)^9D. 500

500/(1 + .07)^9

Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. If a price floor of $30 is set, what will be size of the resulting surplus? A. 0.B. 45.C. 30.D.55.

Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. The equilibrium quantity is: A. 92.B. 81.C. 45.D.62.

Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed? A. 45 B. 7 C. 3 D. 4

If the interest rate is 5 percent and cash flows are $3,000 at the end of year one and $5,000 at the end of year two, then the present value of these cash flows is: A.$7,392.29.B. $8,400.34.C. $4,222.50.D. $400.74.

7,392.29

Suppose compensation is given by W = 512,000 + 217pi + 10.08S, where W = total compensation of the CEO, pi = company profits (in millions) = $200, and S = sales (in millions) = $400. What percentage of the CEO's total earnings are tied to profits of the firm? A. 7.8% B. 10.9% C. 5.1% D. 8.2%

7.8%

Suppose the production function is Q = min{K, 2L}. How much output is produced when 4 units of labor and 9 units of capital are employed? A. 9 B. 2 C. 8 D. 4

If the interest rate is 5 percent, what is the present value of $10 received one year from now? A. $9.50B. $10.05C.$9.52D. $9.77

9.52

In the generalized dividend model, if the expected sales price is in the distant future A) it does not affect the stock price. B) it is more important than dividends in determining a stockʹs price. C) it is equally important with dividends in determining the stockʹs price. D) it is less important than dividends but still affects a stockʹs price.

In the one-period valuation model, the current stock price increases if A) the expected sales price increases. B) the expected sales price falls. C) the required return increases. D) dividends are cut.

In the one-period valuation model, the value of a share of stock depends upon A) the present value of both dividends and the expected sales price. B) only the present value of the future dividends. C) the actual value of the dividends and expected sales price received in one year. D) the future value of dividends and the actual sales price.

New information about an asset can result in a decrease in the assetʹs price due to A) an expected decrease in the level of future dividends. B) a decrease in the required rate of return. C) an expected increase in the dividend growth rate. D) an expected increase in the future sales price.

The difference between a price increase and a decrease in income is that

A decrease in income does not affect the slope of the budget line while an increase in price does change the slope.

An increase in the price of good X will have what effect on the budget line on a normal X-Y graph? A. An increase in the vertical intercept B. A decrease in the horizontal intercept C. A parallel inward shift of the line D. A parallel outward shift of the line

A decrease in the horizontal intercept

A decrease in the price of good Y will have what effect on the budget line on a normal X-Y graph? a. Increase the vertical intercept b. Decrease the horizontal intercept c. Parallel outward shift of the line d. Parallel inward shift of the line

A firm manager with vertical indifference curves (output on the horizontal axis, profit on the vertical axis) views a. Only profits to be "goods." b. Only output to be "goods." c. Both profits and outputs to be "goods." d. None of the statements associated with this question are correct

Indifference curves further from the origin imply: A. The same level of satisfaction as any other curve B. A higher level of satisfaction C. A lower level of satisfaction D. None of the statements are correct

A higher level of satisfaction

Suppose perfectly competitive market conditions are characterized by the following inverse demand and inverse supply functions : P = 100 - 5Q and P = 10 + 5Q. The demand curve facing an individual firm operating in this market is: A. P/N = (100 - 5Q)/N, where N is the total number of firms in the competitive market B. P = 100 - 5Q C. a horizontal line at $9 D. a horizontal line at $55

A horizontal line at $55

A change in income will not lead to: A. A movement along the demand curve B. A rightward shift of the demand curve C. A leftward shift of the demand curve D. All of the statements associated with the question are correct

A movement along the demand curve

Suppose the demand for X is given by Qxd = 100 - 2Px + 4Py + 10M + 2A, where Px represents the price of good X, Py is the price of good Y, M is income and A is the amount of advertising on good X. Good X is: A. A Giffen good B. A complement C. A normal good D. An inferior good

A normal good

Manager

A person who directs resources to achieve a stated goal. -Directs the efforts of others - Purchases inputs used in the production of the firms output - Directs the product price or quality decisions

A price decrease causes a consumer's "real" income to: a. Increase b. Decrease c. Remain unchanged d. Decrease or increase depending on the size of the price change

A price increase causes a consumer's "real" income to: a. Decrease b. Increase c. Remain unchanged d. Vary along the budget line

A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of: a. More is be better b. Completeness c. Substitutability d. Complementarity

Excise Tax

A tax on each unit of output sold, where the tax revenue is collected from the supplier

A worker's total earnings for one day is $100. He received a $20 fixed payment and consumes 14 hours of leisure. What is the hourly wage rate? a. $10 b. $6 c. $4 d. $8

Incentives

Affect how resources are used and how hard workers work

After a price decrease for good X, the new consumer equilibrium level of good X will be: a. Higher than before the price change b. Lower than before the price change c. Indeterminate without more information d. The same as before the price change

Suppose the production function is given by Q = 2K+ L. If w = $4 and r = $4, how many units of K and L will be utilized in the production process? A. All K and no L B. A combination of K and L not represented above. C. Equal amounts of K and L D. All L and no K

All K and no L

The market demand in a Bertrand duopoly is P=10-3Q, and the marginal costs are $1. Fixed costs are zero for both firms. Which of the following statements is are true? A) Producers surplus for firm1=producers for firm 2 B) Profits of firm=profits of firm 2 C) P=$1 D) All of the above

All of the above

To engage in first-degree price discrimination, a firm must: A) prevent low-value consumers from reselling to high-value consumers. B) be able to set P>MC C) Know each consumers maximum willingness to pay. D) all of the answers are correct

All of the answers are correct

In a competitive industry with identical firms, long run equilibrium is characterized by: P=MC MR=MC P=AC All of the statements are correct

All of the statements are correct.

In a competitive industry with identical firms, long-run equilibrium is characterized by: A. P = MC B. P = AC C. MR = MC D. All of the statements associated with this question are correct

All of the statements associated with this question are correct

In the long run, monopolistically competitive firms produce a level of output such that: A. P = ATC B. P > MC C. ATC > minimum of average costs D. All of the statements associated with this question are correct

All of the statements associated with this question are correct

The market demand in a Bertrand duopoly is P = 10 - 3Q, and the marginal costs are $1. Fixed costs are zero for both firms. Which of the following statement(s) is/are true? A. P = $1 B. Producer's surplus of firm 1 = producer's surplus of firm 2 C. Profits of firm 1 = profits of firm 2 D. All of the statements associated with this question are correct

All of the statements associated with this question are correct

Which of the following is (are) true? A. Accounting costs generally understate economic costs. B. In the absence of any opportunity costs, accounting profits equal economic profits. C. Accounting profits generally overstate economic profits. D. All of the statements associated with this question are correct.

All of the statements associated with this question are correct

Which of the following is(are) true? A. Accounting costs generally understate economic costs.B. Accounting profits generally overstate economic profits.C. In the absence of any opportunity costs, accounting profits equal economic profits.D.All of the statements associated with this question are correct.

All of the statements associated with this question are correct.

Along the same indifference curve, MRS is a. Constant as more of one good is obtained b. Increasing as more of one good is obtained c. Decreasing as more of one good is obtained d. Varying irregularly as more of one good is obtained

An in-kind gift causes the budget line to a. Shift to the right in a parallel fashion b. Shift to the left in a parallel fashion c. Rotate counter-clockwise d. None of the statements associated with this question are correct

An increase in the price of steak will probably lead to: A. An increase in demand for chicken B. An increase in the supply for chicken C. No change in the demand for steak or chicken D. An increase in demand for steak

An increase in demand for chicken

The difference between a price decrease and an increase in income is that: A. An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope. B. A price decrease leaves real income unchanged, while an increase in income increases real income. C. A price decrease does not affect the consumption of other goods, while an increase in income does. D. A price decrease decreases real income, while an increase in income increases real income.

An increase in income does not not affect the slope of the budget line, while a decrease in price does change the slope.

Suppose a new contracting environment that requires greater specialized investments is considered. This new contract will result in: A. An increase in the marginal benefit and a longer optimal contract B. An increase in the marginal benefit and a shorter optimal contract C. A decrease in the marginal benefit and a shorter optimal contract D. A decrease in the marginal benefit and a longer optimal contract

An increase in the marginal benefit and a longer optimal contract

Which of the following can explain an increase in the demand for housing in retirement communities?

An increase in the population of the elderly.

An increase in the price of good X will have what effect on the budget line on a normal X-Y graph? a. Parallel outward shift of the line b. Increase the vertical intercept c. Decrease the horizontal intercept d. Parallel inward shift of the line

If an increase in income causes a decrease in the consumption of good Y, we know that good Y is: A. A complement B. An inferior good C. A Giffen good D. A normal good

An inferior good

Decisions

Are important because scarcity implies trade-offs

Number of Firms in Market

As more firms enter, more and more output is available and is reflected by a rightward shift

Law of Supply

As the price of a good rises (falls), the quantity supplied of the good rises (falls), holding other factors affecting supply constant

Input Prices

As these prices rise, producers are willing to produce less output at each given price

At any point on an indifference curve, the slope indicates a. The market rate of substitution between the two goods b. The way the consumer's budget is allocated between the two goods c. How the total satisfaction of the consumer changes with different market baskets d. None of the statements associated with this question are correct

At the equilibrium consumption bundle, which of the following holds? a. MRSX,Y = PX /PY b. MRSX,Y = -PX /PY c. MRSX,Y = -PY /PX d. MRSX,Y =PY /PX

At the point of consumer equilibrium the slope of the budget line is equal to the: a. Market rate of substitution b. Indifference curve c. Marginal rate of substitution d. Consumer preference

Which of the following are least likely to be substitutes? A. Chicken and beef.B. Cars and trucks.C. Automobile and housing.D.Automobile and gasoline.

Automobile and gasoline

Which curve(s) does the marginal cost curve intersect at the (their) minimum point? A. Average variable cost curve B. Average total cost curve C. Average fixed cost curve D. Average total cost curve and average variable cost curve

Average total cost curve and average variable cost curve

A≻B means a. Bundle A is not preferred to bundle B b. Bundle A is preferred to bundle B c. Bundle A is equally preferred to bundle B d. Bundle A is greater than bundle B

A stockholderʹs ownership of a companyʹs stock gives her the right to A) vote and be the primary claimant of all cash flows. B) vote and be the residual claimant of all cash flows. C) manage and assume responsibility for all liabilities. D) vote and assume responsibility for all liabilities.

A stockʹs price will fall if there is A) a decrease in perceived risk. B) an increase in the required rate of return. C) an increase in the future sales price. D) current dividends are high.

In the generalized dividend model, a future sales price far in the future does not affect the current stock price because A) the present value cannot be computed. B) the present value is almost zero. C) the sales price does not affect the current price. D) the stock may never be sold.

In the generalized dividend model, the current stock price is the sum of A) the actual value of the future dividend stream. B) the present value of the future dividend stream. C) the present value of the future dividend stream plus the actual future sales price. D) the present value of the future sales price.

Information plays an important role in asset pricing because it allows the buyer to more accurately judge ________. A) liquidity B) risk C) capital D) policy

Periodic payments of net earnings to shareholders are known as A) capital gains. B) dividends. C) profits. D) interest.

Using the Gordon growth formula, if D1 is $1.00, ke is 10% or 0.10, and g is 5% or 0.05, then the current stock price is A) $10. B) $20. C) $30. D) $40.

Oligopoly differs from monopoly as follows: A) Oligopoly involves a few firms; monopoly involves a single firm and oligopoly involves free entry; monopoly involves no free entry B) Oligopoly involves a few firms; monopoly involves a single firm C) Oligopoly involves free entry; monopoly involves free entry D) Oligopoly does use advertisement; monopoly does not use advertisement

B) Oligopoly involves a few firms; monopoly involves a single firm

From a consumer's point of view, which type of oligopoly is most desirable? A. Cournot B. Bertrand C. Stackelberg D. Sweezy

Bertrand

Tom and Jack are the only two local gas stations. Although they have different constant marginal costs, they both survive continued competition. Tom and Jack do NOT constitute a: A. Cournot oligopoly B. Sweezy oligopoly C. Bertrand oligopoly D. Stackelberg oligopoly

Bertrand oligopoly

By the completeness property, if neither A>B nor B>A hold, then a. The consumer is indifferent between A and B b. The consumer prefers bundle A c. The consumer prefers bundle B d. None of the statements associated with this question are correct

By the property of "more is better" and transitivity, indifference curves a. Can intersect one another only once b. Can intersect one another only twice c. Do not intersect one another d. May overlap one another

By the property of "more is better," the consumer views the products under consideration as a. Goods b. Bads c. Inferior goods d. Normal

By the transitivity property if and then a. A<C b. A>C c. A~C d. B~C

A change in perceived risk of a stock changes A) the expected dividend growth rate. B) the expected sales price. C) the required rate of return. D) the current dividend.

In the Gordon Growth Model, the growth rate is assumed to be ________ the required return on equity. A) greater than B) equal to C) less than D) proportional to

One of the assumptions of the Gordon Growth Model is that dividends will continue growing at ________ rate. A) an increasing B) a fast C) a constant D) an escalating

Using the Gordon growth formula, if D1 is $2.00, ke is 12% or 0.12, and g is 10% or 0.10, then the current stock price is A) $20. B) $50. C) $100. D) $150.

Using the one-period valuation model, assuming a year-end dividend of $0.11, an expected sales price of $110, and a required rate of return of 10%, the current price of the stock would be A) $110.11. B) $121.12. C) $100.10. D) $100.11

Which of the following cost functions exhibits economies of scope when three (3) units of good one and two (2) units of good two are produced?

C = 50 - 5Q1Q2 + .5Q12 + Q22

Firms have market power in: A) perfectly competitive markets B) monopolistic markets C) monopolistically competitive and monopolistic markets D) monopolistically competitive markets

C) monopolistically competitive and monopolistic markets

If the price of good X is $10 and the price of good Y is $5, how much of good X will the consumer purchase if her income is $15? A. 2 B. 0 C. 3 D. Cannot tell based on the above information

Cannot tell based on the above information

Change in QD

Changes in the price of a good lead to a change in the quantity demanded of that good. This corresponds to a movement along a given demand curve

Change in Supply

Changes in variables other than the price of a good that shift the entire supply curve to the right (increase) or left (decrease)

Change in Demand

Changes in variables other than the price of a good, such as income or the price of another good . This corresponds to a shift of the entire demand curve.

Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat and $50 for pants. Consumers of type B will pay $75 for a coat and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. The optimal commodity bundling strategy is: Charge $100 for a suit Charge $125 for a suit Charge $75 for a suit Charge $150 for a suit

Charge $150 for a suit

A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of: A. Complementarity B. Substitutability C. Completeness D. More is better

Completeness

Industry Rivalry

Concentration, Price, Quantity, Quality or Service Competition, Degree of Difference, Switching Costs, Timing of Decisions, Information, Government Restraints

Consider a two good world, with commodities X and Y. If X is an inferior good, then an increase in consumer income cannot a. Decrease the demand for Y b. Increase the demand for Y c. Decrease the demand for X d. Make the consumer better off

Consider a two good world, with commodities X and Y. If Y is an inferior good, then an increase in consumer income cannot a. Decrease the demand for Y b. Decrease the demand for X c. Increase the demand for X d. Make the consumer better off

Consider a two good world, with commodities X and Y. Which of the following statements is correct? a. Both X and Y must be normal goods b. If good X is a normal good, good Y must be an inferior good c. If good X is an inferior good, good Y must be a normal good d. Both good X and good Y can be inferior goods

Consumer-Producer Rivalry

Consumer attempt to negotiate low prices while producers negotiate high prices - provide a natural check and balance on the market process

The possible goods and services a consumer can afford to consume represents the: A. Consumer opportunities B. Consumer behavior C. Consumer status D. Consumer preferences

Consumer opportunities

Consumers adjust their purchasing behavior so that: a. They purchase as many scarce resources as possible b. Marginal rate of substitution is maximized c. Marginal rate of substitution is minimized d. The ratio of prices they pay equals their marginal rate of substitution

Stockholders are residual claimants, meaning that they A) have the first priority claim on all of a companyʹs assets. B) are liable for all of a companyʹs debts. C) will never share in a companyʹs profits. D) receive the remaining cash flow after all other claims are paid.

The value of any investment is found by computing the A) present value of all future sales. B) present value of all future liabilities. C) future value of all future expenses. D) present value of all future cash flows.

Using the one-period valuation model, assuming a year-end dividend of $1.00, an expected sales price of $100, and a required rate of return of 5%, the current price of the stock would be A) $110.00. B) $101.00. C) $100.00. D) $96.19.

Assume that the price elasticity of demand of -2 for a certain firm's product. If the firm raises price, the firm's managers can expect total revenue to: A. Increase B. Decrease C. Remain constant D. Either increase or remain constant, depending upon the size of the price increase

Decrease

Suppose the own price elasticity of demand for good X is -0.5, and the price of good X increases by 10 percent. We would expect the quantity demanded of good X to: A. Decrease by 5 percent B. Decrease by 20 percent C. Increase by 20 percent D. Increase by 5 percent

Decrease by 5 percent

If the price of a good falls, then the equilibrium consumption of that good: A. Decreases if it is an inferior good B. Decreases if it is a normal good C. Decreases if it is a Giffen good D. None of the statements are correct

Decreases if it is a Giffen good

When a demand curve is linear, A. Demand is elastic at high prices B. Demand is unitary elastic at low prices C. The elasticity is the same as the slope of the demand curve D. The elasticity is constant at all prices

Demand is elastic at high prices

Diminishing marginal rate of substitution implies that a. Indifference curves are convex from the origin b. Indifference curves are concave from the origin c. Indifference curves are either convex or concave from the origin d. Indifference curves are straight line

Which of the following would not shift the demand for good A? A. Drop in price of good A B. Consumer income C. Change in the level of advertising of good A D. Drop in price of good B

Drop in price of good A

Which of the following would not shift the demand for good A?

Drop in price of good A.

If the cross-price elasticity between ketchup and hamburgers is -1.2, a 4 percent increase in the price of ketchup will lead to a 4.8 percent: A. Increase in quantity demanded of ketchup B. Drop in quantity demanded of ketchup C. Drop in quantity demanded of hamburgers D. Increase in quantity demanded of hamburgers

Drop in quantity demanded of hamburgers

What is implied when the total cost of producing Q1 and Q2 together is less than the total cost of producing Q1 and Q2 separately?

Economies of scope

What contributes to the existence of multi product firms? Economies of scope and cost complementarity Cost complementarity Economies of Scope Economies of Scale

Economies of scope and cost complementarity

Point B in the figure below is: A. inefficient since it produces 20 units of output at a cost greater than the minimum cost B. efficient since it produces 10 units of output at the lowest possible cost C. efficient since it produces 20 units of output at the lowest possible cost. D. inefficient since it produces 10 units of output at a cost greater than the minimum cost

Efficient since it produces 10 units of output at the lowest possible cost

Suppose the demand for a product is lnQxd = 12 - 3lnPx. Then product x is: A. Unitary elastic B. Elastic C. Inelastic D. It cannot be determined without more information

Elastic

S^ only

Equilibrium Price: Decrease Equilibrium Quantity: Increase

Two firms compete in a Stackelberg fashion. If firm 2 is the leader, then: firm 2 views the output of firm 1 as given. Firm 1 views the output of firm 2 as given. Both of the above are correct. None of the answers are correct.

Firm 1 views the output of firm 2 as given.

Given that income is $200 and the price of good Y is $40. What is the vertical intercept of the budget line? a. 8,000 b. 20 c. 1/5 d. 5

Given that income is $500 and PX = $20 and PY = $5, what is the market rate of substitution between goods X and Y? a. 100 b. -4 c. -20 d. 25

Given that income is $750 and PX = $32 and PY = $8, what is the market rate of substitution between goods X and Y? a. -0.75 b. -3 c. -4 d. -25

Complements

Goods for which an increase (decrease) in the price of one good leads to a decrease (increase) in the demand for the other good (beer & pretzels)

How does a decrease in the price of good X affect the market rate of substitution between goods X and Y? a. It increases b. It decreases c. Remains unchanged d. Indeterminable without more information

Which of the following mergers is an example of vertical integration? A. IBM purchases a California computer chip company B. AT&T purchases MCI. C. GM purchases Ford. D. Bethlehem Steel purchases U.S. Steel.

IBM purchases a California computer chip company

If a consumer is given a $10 gift certificate, good only for items in store X and all items in store X are normal goods, then the consumer desires to consume a. More goods in store X b. Less goods in store X c. The same amount of goods in store X d. None of the statements associated with this question are correct

If a consumer's income decreases, what will happen to the budget line? a. It will shift outward b. It will become steeper c. It will become flatter d. It will shift inward

If a firm offers to pay a worker $10 for each hour of leisure the worker gives up the $10 implies the a. Marginal rate of substitution between leisure and income b. Market rate of substitution between leisure and income c. Market rate of transformation between leisure and income d. Marginal rate of transformation between leisure and income

If a firm offers to pay a worker $10 for each hour of leisure the worker gives up then the opportunities confronting the worker will be given by the a. Convex curve from the origin b. Concave curve from the origin c. Straight line with a negative slope d. Straight line with a positive slope

If an increase in income causes a decrease in the consumption of good Y we know that good Y is: a. A normal good b. A substitute c. A complement d. An inferior good

If an increase in the price of good X leads to a decrease in the consumption of good Y, then goods X and Y are called a. Substitutes b. Complements c. Normal goods d. Inferior goods

Consider a two-good world, with commodities X and Y. Which of the following statements is correct? A. If good X is a normal good, good Y must be an inferior good. B. Both good X and good Y can be inferior goods. C. If good X is an inferior good, good Y must be a normal good. D. Both X and Y must be normal goods

If good X is an inferior good, good Y must be a normal good

If sugar and Nutrasweet are substitutes, then we can be certain that a decrease in the price of sugar will lead to an increase in the consumption of a. Nutrasweet b. Sugar c. Sugar and Nutrasweet d. None of the statements associated with this question are correct

Short-term and long-term profits principle

If the growth rate in profits is less than the interest rate and both are constant, maximizing current (short-term) profits is the same as maximizing long-term profits

If the price of a good purchased by a utility maximizing consumer goes down, all other things remain the same, and the consumer's income is adjusted so that he can just barely attain his previous level of satisfaction, and if the consumer had indifference curves of the usual shape it will be found that a. More of the good will be purchased than before b. Less of the good will be purchased than before c. The same amount of the good will be purchased as before d. The consumer will stop purchasing the good at all

If the price of a good rises, then the equilibrium consumption of that good a. Increases if it is an inferior good b. Decreases if it is a normal good c. Remains the same d. None of the statements associated with this question are correct

If the price of computers decreases, then the a. Sales of a substitute, such as a telephone, decreases b. Sales of a substitute, such as a telephone, increases c. Inventory of computers increases d. Inventory of computer software increases

If the price of good X decreases, what will happen to the budget line? a. It will have a parallel shift inward b. It will have a parallel shift outward c. It will become steeper d. It will become flatter

If the price of good X increases, what will happen to the budget line? a. It will shift outward b. It will become steeper c. It will become flatter d. It will shift inward

If the price of good X is $10 and the price of good Y is $5, how much of good X would the consumer purchase if her income is $15? a. 0 b. 2 c. 3 d. Cannot tell based on the above information

If the slope of the indifference curve is steeper than the slope of the budget line, and X is on the horizontal axis a. The consumer is willing to give up more of good Y to get an additional unit of good X than is necessary under the current market prices b. MRS < PX /PY c. MRS < - PX /PY d. The consumer is willing to give up more of good X to get an additional unit of good Y than is necessary under the current market prices

If widgets and gidgets are complements and both are normal goods, then a decrease in the demand for widgets will result from a. An increase in the price of widgets b. A decrease in income c. A decrease in the price of gidgets d. An increase in the price of widgets and a decrease in income

If widgets and gidgets are complements and both are normal goods, then an increase in the demand for widgets will result from a. An increase in the price of widgets b. A decrease in income c. A decrease in the price of gidgets d. An increase in the price of widgets and a decrease in income

If you include in your offerings some inferior goods, the demand for these products will increase a. During bad economic times b. During economic booms c. When incomes are high d. All of the statements associated with this question are correct

If you sell an inferior good, offering to sell gift certificates to those looking for a gift may result in a. A greater quantity sold than before the customer is given a gift certificate b. A greater quantity sold than if the customer resorts to giving a cash gift c. The same quantity sold than before the customer is given a gift certificate d. The same quantity sold as if the customer resorts to giving a cash gift

If you were running an advertising campaign for designer men's suits, you should target families with: a. Lower incomes b. Higher incomes c. Poor taste in clothing d. Similar tastes and preferences

If you wish to open a store and you do not like risk, it would be wise to sell: a. Only normal goods b. A mix of normal and inferior goods c. All inferior goods d. None of the statements associated with this question are correct

Market Demand Curve

Illustrates the relationship between the total quantity and price per unit of a good all consumers are willing and able to purchase, holding other variables constant

am positive

Increase in M (income) will increase the consumption of good X, meaning it is a normal good

Rightward shift of demand curve:

Increase in demand

After a price decrease for good X, the new consumer equilibrium level of good X will be: A. lower than before the price change B. Higher than before the price change C. The same as before the price change D. Indeterminate without more information

Indeterminate without more information

Power of Buyers

Industry profits tend to be lower when customers or buyers have the power to negotiate favorable terms for the products or services produced in the industry - Buyer Concentration, price/value substitute producer or services, relationship specific investments, customer switching costs, government restraints

Input of Suppliers

Industry profits tend to be lower when suppliers have the power to negotiate favorable terms for their inputs - Supplier concentration, price/productivity of alternate inputs, relationship specific investments, supplier switching costs, government restraints

Point A in the figure below is: A. efficient since it produces 20 units of output at the lowest possible cost. B. inefficient since it produces 20 units of output at a cost greater than the minimum cost C. efficient since it produces 10 units of output at the lowest possible cost D. inefficient since it produces 10 units of output at a cost greater than the minimum cost

Inefficient since it produces 20 units of output at a cost greater than the minimum cost

If there are few close substitutes for a good, demand tends to be relatively: A. Unitary elastic B. Elastic C. Inelastic D. Neither elastic, inelastic, nor unitary elastic

Inelastic

Demand is perfectly elastic when the absolute value of the own price elasticity of demand is: A. One B. Infinite C. Zero D. Unknown

Infinite

Explicit Cost

Is a direct payment made to others in the course of running a business, such as wage, rent and materials

Second-degree price discrimination: Is the practice of posting a discrete schedule of declining prices for different ranges of quantities. results in transfer pricing. eliminates the problem of double marginalization. none of the answers are correct.

Is the practice of posting a discrete schedule of declining prices for different ranges of quantities.

The combinations of inputs that produce a given level of output are depicted by: A. Isocost curves B. Budget lines C. Isoquants D. Indifference curves

Isoquants

Consumer-Consumer Rivalry

It reduces the negotiating power of consumers in the marketplace. When limited quantities of goods are available, consumers compete with each other for the right to purchase the available goods

Joe consumes 10 units of food and 12 units of clothing. Since food is an inferior good, a gift to Joe of a $12 gift certificate at a clothing store will a. Induce Joe to eat more than 10 units of food b. Make Joe better off than a gift of $12 in cash c. Make Joe worse off than a gift of $12 in cash d. None of the statements associated with this question are correct

Joe consumes 48 units of food and 12 units of clothing. If food is an inferior good, a. Joe would strictly prefer receiving a $10 gift certificate at a clothing store to receiving $10 in cash b. Joe would strictly prefer receiving $10 in cash to receiving a $10 gift certificate at a clothing store c. Joe would be indifferent between receiving a $10 gift certificate at a clothing store and receiving $10 in cash d. Upon receiving a $10 gift certificate at a clothing store, Joe would consume less clothing and more food

Joe prefers a three pack of soda to a six-pack. What properties does this preference violate? a. Completeness b. Transitivity c. More is better d. Diminishing MRS

The Leontief production function implies: A. A positive MRTS B. L-shaped isoquants C. Straight-line isoquants D. Convex-shaped isoquants

L-shaped isoquants

For the multiproduct cost function C(Q1,Q2) = 100 + 2Q1Q2 + 4Q12,what is the marginal cost function for good one?

MC1 = 2Q2 + 8Q1.

Which of the following sets of economic data is minimizing the cost of producing a given level of output? A. MPL = 40, MPK = 20, w = $16, r = $32 B. MPL = 20, MPK = 40, w = $32 r = $16 C. MPL = 20, MPK = 40, w = $16, r = $32 D. MPL = 40, MPK = 40, w = $16, r = $32

MPL = 20, MPK = 40, w = $16, r = $32

Consider a monopoly where the inverse demand for its product is given by P = 200 - 5Q. Based on this information, the marginal revenue function is: A. MR(Q) = 400 - 10Q B. MR(Q) = 200 - 10Q C. MR(Q) = 200 - 2.5Q D. MR(Q) = 400 - 2.5Q

MR(Q) = 200 - 10Q

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q1 - 2Q2. The firms' marginal costs are identical and are given by MCi = 2. Based on this information, the Stackelberg follower's marginal revenue function is: A. MRF(QL,QF) = 100 - QL - 2QF B. MRF(QL,QF) = 100 - 2QL - QF C. MRF(QL,QF) = 100 - 4QL - 2QF D. MRF(QL,QF) = 100 - 2QL - 4QF

MRF(QL,QF) = 100 - 2QL - 4QF

Managers can get workers to work longer hours a. By increasing wages on all hours worked b. By lowering wages on all hours worked c. With higher overtime pay in excess of regular hourly pay d. With lower overtime pay in excess of regular hourly pay

Managers can get workers to work longer hours by: a. Offering overtime pay b. Offering a higher flat wage rate on all hours worked c. Decreasing the hourly wage scale d. None of the statements associated with this question are correct

Which of the following is incorrect? A. Accounting profits generally overstate economic profits.B. Accounting profits do not take opportunity cost into account.C. Economic costs include not only the accounting costs but also the opportunity costs of the resources used in production.D.Managers should only be interested in accounting profits.

Managers should only be interested in accounting profits.

Many gourmet shops go out of business during recessions since they sell almost exclusively a. Inferior goods b. Normal goods c. Substitutes d. Complements

The optimal amount of studying is determined by comparing: A. Total benefit and the total cost of studying. B. Marginal benefit and the marginal cost of studying C. Marginal benefit and the total cost of studying D. Marginal benefit and the total benefit of studying

Marginal benefit and the marginal cost of studying

Firm managers should use inputs at levels where:

Marginal benefit equals marginal cost and Value marginal product of labor equals wage.

The change in total output attributable to the last unit of an input is the: A. average product B. marginal return C. marginal product D. total product

Marginal product

Total product begins to fall when:

Marginal product is zero.

At the point of consumer equilibrium, the slope of the budget line is equal to the: A. Indifference curve B. Marginal rate of substitution C. Market rate of indifference D. Consumer preferences

Marginal rate of substitution

The absolute value of the slope of the isoquant is the:

Marginal rate of technical substitution.

Profit Maximization Principle

Maximizing profits means maximizing the value of the firm, which is the present value of current and future profits

Mitchell's money income is $150, the price of X is $2, and the price of Y is $2. Given these prices and income, Mitchell buys 50 units of X and 25 units of Y. Call this combination of X and Y bundle J. At bundle J Mitchell's MRS is 2. At bundle J, if Mitchell increases consumption of Y by 1 unit how many units of X can he give up and still reach the same level of utility? a. ½ b. 1 c. 2 d. 4

Mitchell's money income is $150, the price of X is $2, and the price of Y is $2. Given these prices and income, Mitchell buys 50 units of X and 25 units of Y. Call this combination of X and Y bundle J. At bundle J Mitchell's MRS is 2. At bundle J, if Mitchell increases consumption of Y by 1 unit how many units of X must he give up in order to satisfy his budget constraint? a. ½ b. 1 c. 2 d. 4

Mitchell's money income is $150, the price of X is $2, and the price of Y is $2. Given these prices and income, Mitchell buys 50 units of X and 25 units of Y. Call this combination of X and Y bundle J. At bundle J Mitchell's MRS is 2. Given these prices and income, what is Mitchell's equilibrium consumption of X? a. X < 50 b. X = 50 c. X > 50 d. None of the statements associated with this question are correct

Which of the following market structures would you expect to yield the greatest product variety? A. Bertrand Oligopoly B. Perfect competition C. Monopolistic competition D. Monopoly

Monopolistic competition

Which of the following market structures would you expect to yield the greatest product variety? perfect competition monopoly bertrand oligopoly monopolistic competition

Monopolistic competition

We would expect the demand for jeans to be: A. More elastic than the demand for clothing B. The same as the demand for clothing C. Less elastic than the demand for clothing D. Neither more elastic, less elastic, nor the same elasticity as that of the demand for clothing.

More elastic than the demand for clothing

In a perfectly competitive market, each firm has the following cost function: C = 49 + 5Q + Q^2. The market price is $35 and the market demand is Qd = 185 - P, where P is the market price. Given the cost function and the market price, will more firms enter or leave the market in the long run? A. More firms will leave the market B. More firms will enter the market C. No firms will enter nor leave the market D. We cannot tell

More firms will enter the market

Joe prefers a three-pack of soda to a six-pack. What properties does this preference violate? A. More is better B. Completeness C. Diminishing MRS D. Transitivity

More is better

Joe prefers a three pack of soda to a six-pack. What properties does this preference violate?

More is better.

Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use: A. Three times more capital than labor B. More labor and less capital C. More capital and less labor D. None of the answers are correct

More labor and less capital

When firm 1 enjoys a first mover advantage in a stackelberg duopoly, it will produce: A) less output and charge the same price as firm 2 B) Less output and charge a higher price than firm 2 C) more output and charge a lower price than firm 2 D) more output and charge the same price as firm 2

More output and charge the same price as firm 2

Suppose that production for good X is characterized by the following production function, Q = K^.5L^.7. Suppose both K and L are multiplied by 3. Then output Q will be multiplied by: A. More than 3 B. Less than 3 C. Exactly 3 D. There is insufficient information to determine the change in output

More than 3

Most workers view leisure and income as a. Goods b. Bads c. Goods and bads, respectively d. Bads and goods, respectively

The higher the interest rate, the greater the: A. present value.B. net present value.C. Both present value and net present value are correct.D.Neither present value nor net present value is correct.

Neither present value nor net present value is correct.

In a sweezy oligopoly, a decrease in a firm's marginal cost generally leads to: Increased output and a lower price reduced output and a higher price higher output and a higher price none of the above

None of the Above

For a cost function C = 100 + 10Q + Q^2, the marginal cost of producing 10 units of output is: A. 200 B. 10 C. 210 D. None of the answers are correct

None of the answers are correct

If the production function is Q = KL and capital is fixed at 1 unit, then the marginal product of labor when L = 25 is: A. 15 B. 1/10 C. 1/4 D. None of the answers are correct

None of the answers are correct

In a Sweezy Oligopoly, a decrease in a firm's marginal cost generally leads to: A. Increased output and a lower price B. Higher output and a higher price C. Reduced output and a higher price D. None of the answers are correct

None of the answers are correct

Which of the following is true? A. In oligopoly a change in marginal cost has an effect on output or price B. In Cournot oligopoly firms produce an identical product at a constant marginal cost and engage in price competition C. In Bertrand oligopoly each firm believes that its rivals will hold their output constant if it changes it output D. None of the answers are correct

None of the answers are correct

Which of the following is true? in oligopoly a change in marginal cost never has an effect on output or price. In Bertrand oligopoly each firm believes that its rivals will hold their output constant if it changes its output. In cournot oligopoly firms produce an identical product at a constant marginal cost and engage in price competition. None of the answers is correct.

None of the answers is correct

Which of the following is true? A. If income increases, a consumer will always consume more of a good. B. Indifference curves may intersect. C. At any point of consumer equilibrium, the MRS always equals 1. D. None of the statements are correct.

None of the statements are correct

A farm must decide whether or not to purchase a new tractor. The tractor will reduce costs by $2,000 in the first year, $2,500 in the second, and $3,000 in the third and final year of usefulness. The tractor costs $9,000 today, while the above cost savings will be realized at the end of each year. If the interest rate is 7 percent, what is the net present value of purchasing the tractor? A. $6,764B. $9,362C. $18,362D.None of the statements associated with this question are correct.