ECON 2301 review

Refer to Figure 8.8. At the market price of $8 per bushel, if this farmer produces the profit-maximing level of soybean, the profit would be?

0.

Refer to Figure 8.8. This farmer's profit-maximing level of output is _____ units of output.

1,000.

If the supply is unit elastic, the price elasticity of supply is:

1.0.

Refer to Figure 9.1. For this farmer to maximize profits he should produce _____ bushels of wheat.

12.

Refer to Figure 7.4. The average product with three workers is?

14.

Refer to Figure 6.8. The marginal utility of the first movie rental is?

15.

Refer to Figure 7.4. The marginal product of the second worker is?

20.

Economic Cost

Include both a normal rate of return on investment and the opportunity cost of each factor of production.

Total variable cost _____ as output increases, and total fixed cost ____ as output increases.

Increases; Does not Change.

When the price of fresh fish increases 10%, quantity demanded decreases 5%. The price elasticity of demand for fresh fish is ____ and total revenue from fresh fish sales will ______.

Inelastic; Increase.

When total product is maximized, marginal product;

Is zero, but average price is positive.

Macroeconomics

Large, big picture.

Refer to Figure 7.1. Which technology is the most labor intensive?

A.

The determinate of elasticity include?

Availability of Substitutes, Time, and Price Relative to Income.

If the marginal product of labor is less than the average product of labor, then the:

Average product must be decreasing, as well as marginal product.

Consumer Surplus is?

The difference between the maximum a person is willing to pay and current market price.

Every point on a U-Shaped long-run average cost curve represents?

The minimum cost at which the associated output level can be produced when the scale of plant can be changed.

In the long run,

There are no fixed factors of production.

When there is an overproduction in a market,

There is a deadweight loss.

If the market price of coffee is $3.00 per pound but the government will not allow coffee growers to charge more than $2.00 per pound of coffee, what will happen?

There will be a shortage of coffee.

A perfectly price inelastic demand curve will be a _____ line.

Vertical.

Among the methods of nonprice rationing are?

Waiting in line, Coupons, and Favored Customers.

Refer to Figure 71. If the hourly wage rate is $7 and the hourly price of capital is $10, which production technology should be selected?

C.

Richard is consuming X and Y so that he is spending his entire income and MUx/Px = 6 and MUy/Py = 10. To maximize utility, he should?

Consume less X and more Y.

If two products are complements, the _____ elasticity of demand is _____.

Cross-price; negative.

Refer to Figure 6.3. Molly's budget constraint is AC. It would swivel to AD if the price of:

DVDs decreased.

Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store reduces the price of a milkshake from P3 to P4, its total revenue will?

Decrease.

For constant returns to scale, a(n) _______ in a firm's scale of production leads to _____ average total cost.

Decrease; no change in.

In the short run average costs eventually increase because of _______, and in the long run average costs eventually increase because of ______.

Diminishing returns; diseconomies of scale.

On the upward sloping portion of a firm's long-run average cost curve, is is experiencing?

Diseconomies of scale.

Refer to Figure 4.6. At equilibrium, produce surplus is area?

E + F + G.

Firms that are "breaking even" are:

Earning zero economic profit.

If economic profit is zero, a firm:

Earns exactly a normal rate of return.

Refer to Figure 4.3. An example of an effective price ceiling would be government setting the price of pencils at?

$0.40.

Refer to Figure 6.1. Assume Tom is on budget constraint AC and the price of a hot dog is $2.50. Tom's monthly income is?

$100.

Refer to Figure 9.1. If this farmer is maximizing his profits, his TVC is?

$108.

Refer to Figure 9.1. If this farmer is maximizing his profits, his total costs would be?

$132.

Refer to Figure 9.1. This farmers fixed cost are?

$24.

Jane has $500 a week to spend on clothing (c) and food (f). The price of clothing is $25 and the price of food is $10. What is the equation for Jane's budget constraint?

$25 x Clothing + $10 x Food = $500.

Refer to Figure 9.1. This farmer's shutdown point is at a price of?

$7.

Refer to Figure 5.2. If the price of a hamburger increases from $6 to $8, the price elasticity of demand equals ______. Use the midpoint formula.

-1.4.

Refer to Figure 5.3. Use the midpoint formula. If the price of a garden burger increases from $8 to $10, the price elasticity of demand equals _____ and demand is _____.

-4.5; elastic.

Marginal Cost is _____ and average variable cost when _______.

Equal to; average variable cost is minimized.

An industry is in ______ if firms have no incentive to enter of exit in the _____ run.

Equilibrium; long.

Total revenue increases if price ______ and demand is _____.

Falls; elastic.

An increase in the price reduces the consumption. Such a price rise will induce households to spend?

Less of their income on steak.

The less time that elapses, the:

Less price elastic is the demand for the product.

If marginal product is greater than average product, then:

Marginal product could either be increasing or decreasing.

The marginal cost curve intersects the average variable cost curve at the _______ value of the average variable cost curve.

Miniumum.

Refer to Figure 5.5. As the price of good W decreased, the demand for good Y shifted from D1 to D2. The cross-price elasticity of demand between W and Y is?

Negative.

If P = MC and MC > ATC, then a perfectly competitive firm will earn ______ profits.

Positive.

Refer to Figure 4.3. The government setting the price of pencils at $0.50 would be an example of an effective?

Price Ceiling.

Refer to 8.1. Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, what production technique should this firm use to produce 2 units of output?

Production technique B.

Cross-price elasticity of demand measures the response in the:

Quantity of one good demanded to a change in the price of another good.

Luxury items tend to have ____ demand, and necessities tend to have ______ demand.

Relatively elastic; inelastic.

Refer to Figure 8.7. Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basket is $22. To maximize profits, Exotic Fruit should sell ____ fruit baskets and their profit is _____.

Six; $14.

Microeconomics

Small, individualistic.

A rise in the price of Pepsi that causes a household to shift its purchasing pattern toward Coke and away from Pepsi is the _____ effect of a price change.

Substitution.

Refer to Figure 9.2. In which of the following price ranges will the firm continue to operate, but at a loss?

$6-$7.

Refer to Figure 9.1. This farmer would be breaking even if price was?

$10.

Refer to Figure 6.8. The total utility of the three movies is _____ and the marginal utility of the third movie is _____.

28;3.

Refer to Figure 4.6. At equilibrium, consumer surplus is area?

A + B + C.

A price floor is?

A minimum price set by the government that sellers may charge for a good.

The price elasticity of demand for kale in Texas is -2, and the price of elasticity demand for kale in California is -0.5. In other words, demand in Texas is _______, and demand in California is ______.

Elastic; Inelastic.

Refer to Figure 6.4. Bill's budget constraint is AC. If the black bean price decreases, Bill's budget constraint will be?

AD.

Marginal utility is the ____ satisfaction gained by consuming ______ of a good.

Additional; one more unit.

If a decrease in income results in an increase in the quantity demanded for a product, the product is ______, and the value of the income elasticity of demand is _____.

An inferior good; negative.

If an increase in income results in a decrease in the quantity demanded for a product, the product is _____ , and the value of the income elasticity of demand is _____.

An inferior good; negative.

The cross-price elasticity of demand between good X and good Y is -3. Given this information, which of the following statements is true?

Goods X and Y are complements.

The diamond/water paradox states that things with the ____ value in use frequently have ____ value in exchange.

Greatest; little or no.

Assume leisure is a normal good. The substitution effect of a wage decrease implies a ______ demand for leisure and a _____ labor supply.

Higher; lower.

A perfectly price elastic demand curve will be a ______ line.

Horizontal.

In a "black market,"

Illegal trading at market prices takes place.

Firms cannot enter an industry in which positive profits are being earned in:

The short run.

Economics

The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided, how people make choices, and is a behavioral or social science.