Econ 101 Exam 2

How does a lower price alleviate the problem of excess supply? A lower price increases the number of potential sellers and the number of potential buyers. A lower price increases the number of potential sellers and decreases the number of potential buyers. A lower price decreases the number of potential sellers and the number of potential buyers. A lower price decreases the number of potential sellers and increases the number of potential buyers.

A lower price decreases the number of potential sellers and increases the number of potential buyers.

For which pair of goods below would an increase in income have the same effect on both goods? A normal good and an inferior good. An inferior good and a luxury good. A normal good and a luxury good. A superior good and a normal good.

A normal good and a luxury good.

If by selling one more unit of a good, a certain business can increase revenue from $500 to $525. What is the marginal revenue in this case? $25 $500 $525 Marginal revenue cannot be calculated without knowing the quantity

$25

Output divided by the number of hours worked or by the number of workers is called average input. average product. marginal product. marginal revenue.

average product

If supply is inelastic, then a demand shift will have a ____ effect on _______ than on quantity. smaller; supply smaller; price bigger; supply bigger; price

bigger; price

The difference between long-term and short-term profit maximization is that, in the short term, businesses focus on achieving as much profit as they can, given that fixed costs cannot be changed. businesses focus on achieving as much profit as they can, given that they can vary all inputs, even to the point of shutting down. businesses are not able to maximize profits because they can vary all of their inputs, making the calculations too complicated. businesses focus on achieving as much profit as they can, but in the long term, businesses always eventually shut down.

businesses focus on achieving as much profit as they can, given that fixed costs cannot be changed.

If you add too many inputs, your business may experience increasing marginal revenue diminishing marginal product. diminishing cost input. accelerated product function.

diminishing marginal product.

Government action can cause a shift in Multiple Choice supply only. demand only. either supply or demand. Correct neither supply nor demand.

either supply or demand

To determine whether a particular good is a normal good, a luxury good, or an inferior good, you would want to observe what happens to demand for the good when __________ changes. supply price the price of raw materials income

income

Fixed costs are also known as __________ costs because they are much harder for a business to change. short-term long-term variable static

long-term

_________ is the added cost to produce one more unit of output. Marginal product Marginal revenue Average cost Marginal cost

marginal cost

The extra amount of output a business can generate by adding one more hour of labor is called marginal revenue. labor input. marginal cost. marginal product.

marginal product

What caused the decline in demand for red delicious apples? More varieties to choose from. Transportation issues. Consumers found them to be tasteless. Genetic manipulation scared consumers.

Consumers found them to be tasteless.

Which of the following formulas is correct? Profit = Revenue + Cost Profit = Revenue −Cost Revenue = Profit −Cost Revenue = Cost ÷ Profit

Profit = Revenue −Cost

Marginal ________ is the added revenue from producing and selling one more unit of output. income profit cost revenue

revenue

If a town begins requiring builders to build on one-acre lots, instead of on smaller quarter-acre lots, the supply curve for new homes will shift to the left. shift to the right. become steeper. become flatter.

shift to the left

Variable costs are relevant for long-term strategic planning. short-term everyday decision making. businesses only. calculating fixed cost percentages.

short-term everyday decision making.

If the price of gasoline rises, buyers will probably spend more on gasoline since the supply for gasoline is probably elastic. spend less on gasoline since the supply for gasoline is probably inelastic. spend more on gasoline since the demand for gasoline is probably inelastic. spend less on gasoline since the demand for gasoline is probably elastic.

spend more on gasoline since the demand for gasoline is probably inelastic.

The gap between quantity supplied and quantity demanded is usually closed over time by the demand curve. supply curve. market mechanism. invisible face.

market mechanism

Economists generally assume that the main goal of most businesses in the economy is to be responsible corporate citizens. maximize profits. provide jobs for the local population. avoid having to make very many decisions.

maximize profits.

A profit-maximizing business will increase production as long as marginal cost exceeds marginal revenue. marginal price exceeds average product. average product exceeds marginal price. marginal revenue exceeds marginal cost.

marginal revenue exceeds marginal cost.

A demand shift to the right generally leads to higher prices and lower quantities. lower prices and higher quantities. higher prices and higher quantities. lower prices and lower quantities.

higher prices and higher quantities.

When necessary, a higher price will simultaneously ________ the quantity supplied and ________ the quantity demanded, thus reducing the amount of excess ________. increase; decrease; demand increase; decrease; supply decrease; increase; demand decrease; increase; supply

increase; decrease; demand

The additional money a business gets from producing and selling one more unit of output is Multiple Choice marginal product. long-term revenue. marginal revenue. Correct average profit.

marginal revenue.

In response to an increase in income, a buyer's demand for a particular good will always rise. will always fall. won't change. may rise or fall.

may rise or fall

Movement along the demand curve means that the demand schedule ________ and the price ________. stays the same; changes changes; stays the same stays the same; also stays the same changes; also changes

stays the same; changes

The short-term cost function assumes that all variable costs are equal. fixed costs can be easily changed. fixed costs can't be changed. variable costs can be fixed

fixed costs can't be changed.

In 2004, the worldwide demand curve for cement moved to the right. What does this mean? At any price, the quantity demanded was lower. At any price, the quantity demanded was higher. At the market price only, the quantity demanded was lower. At the market a given price only, the quantity demanded was higher.

At any price, the quantity demanded was higher.

Suppose that in a certain market there is an increase in demand, but the market price does not quickly adjust to a new equilibrium price. What situation will exist in this market until the price adjusts? Excess demand, because the market price is higher than the equilibrium price Excess demand, because the market price is lower than the equilibrium price Excess supply, because the market price is higher than the equilibrium price Excess supply, because the market price is lower than the equilibrium price.

Excess demand, because the market price is lower than the equilibrium price

Suppose a local food truck owner incurs a total cost of $200 per month even if he makes and sells no food, but that his total cost rises to $202 if he makes and sells one hamburger. Which of the following is true? His marginal cost is $200, and the average cost of the first hamburger is $2. His fixed cost is $200, and the marginal cost of the first hamburger is $202. His variable cost is $200, and the fixed cost of the first hamburger is $2. His fixed cost is $200, and the marginal cost of the first hamburger is $2.

His fixed cost is $200, and the marginal cost of the first hamburger is $2.

The total cost of production is determined by adding the costs of which of the following? Labor, capital, land, intermediate inputs, and business know-how Labor, capital, revenue, and marginal product Labor, capital, land, and revenue Business know-how, capital, and land

Labor, capital, land, intermediate inputs, and business know-how

What word describes the money that customers pay for the output of a business? Cost Revenue Input Output

Revenue

________ is the amount of money a company receives for selling its product or service. Profit Revenue Cost Average marginal revenue

Revenue

______ shows the potential cost for each level of output. The product function The average marginal cost The cost function The production process

The cost function

In the long run,hotel room prices that are falling as a result of excess supply will ______ the quantity of hotel rooms supplied in a market. have no effect on increase decrease eliminate

decrease

When a demand curve shifts to the right demand has increased, so equilibrium price increases, and equilibrium quantity increases. demand has decreased, so equilibrium price decreases, and equilibrium quantity decreases. demand has increased, so supply also shifts to the right, and the equilibrium price increases. demand has decreased, so supply also shifts to the right, and the equilibrium price decreases.

demand has increased, so equilibrium price increases, and equilibrium quantity increases.

If the supply of a good increases, the equilibrium price of that good falls while quantity demanded rises. rises while quantity demanded also rises. falls while quantity demanded also falls. rises while quantity demanded falls.

falls while quantity demanded rises.

In the short run, the quantity of available hotel rooms is not particularly responsive to changes in price because hotels take time to build and to destroy. This implies that the short-run supply of hotel rooms is: elastic. inelastic. in equilibrium. greater than demand.

inelastic

One strategy for long-term profit maximization is innovation. offering consistently higher prices. being the lowest-price competitor. utilization of private business incubators.

innovation

The goods or services purchased by a business for immediate use in the production process are known as intermediate inputs. intermediate outputs. production inputs. production outputs.

intermediate inputs.

The price of labor per unit times the amount of labor used is called Multiple Choice marginal cost. marginal labor. labor cost. Correct labor input.

labor cost.

nputs used by a business in the production process include revenue. profit. labor. cost.

labor.

What name is given to the economic process of turning inputs into outputs that a business will sell to customers? Multiple Choice Revenue Profit Profit maximization Production

production

The __________ summarizes the output of the business, given the level of inputs. marginal function average cost marginal revenue production function

production cost

The main objective of a business in a market economy is profit maximization. controlling costs. decreasing revenue. maximizing the production function.

profit maximization.

The technology or knowledge necessary for a production process is called production input. business know-how. technology input. knowledge input.

business know-how.

A demand shift affects sellers' willingness to sell at various prices. buyers' willingness to purchase at various prices. sellers' willingness to sell at the equilibrium price only. buyers' willingness to purchase at the equilibrium price only.

buyers' willingness to purchase at various prices.

Higher interest rates can cause the ________ curve for new cars to ________. demand; shift to the right. demand; shift to the left. supply; shift to the right. supply; shift to the left.

demand; shift to the left.