Econ 2305-001 Exam 2 (chapter 4-5)
If consumers can easily switch to a close substitute when the price of a good increases; demand for that good is: a) elastic b) inelastic c) unit elastic d) perfectly inelastic
a
Suppose Sarah owns a small company that makes wedding cakes. The table below shows Sarah's total cost varies depending on the number of wedding cakes she makes each day. Sarah's fixed cost is __________ per day. number of cakes per day | total cost per day 0 | $100 a) $100 b) $10 c) $200 d) 20
a
Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14 and the rent on the office space is $50 per day. When the firm uses 9 employee-hours, it earns a daily ____________ of ____________. employee-hours per day | output per day 9 | 120 a) profit; $64 b) profit; $114 c) loss; $114 d) loss; $64
a
Suppose the price P on a given demand curve results in a price elasticity of demand equal to 1. Any price higher than P will lie on the ______ part of the demand curve and any price lower than P will lie on the _______ part of the demand curve a) elastic; inelastic b) unit elastic; inelastic c) inelastic; elastic d) elastic; unit elastic
a
Demand tends to be _____ in the short run than in the long run a) more elastic b) less elastic c) more variable d) less important
b
If the percentage change in quantity demanded is zero for any percentage change in the price of the good, demand is classified as: a) inelastic b) perfectly inelastic c) unit elastic d) perfectly elastic
b
Refer to the figure below. What is the slope of the supply curve? Price ($) | Quantity A: 2 | 4 B: 4 | 8 C: 6 | 12 a) 4 b) 1/2 c) 2 d) 1
b
The cost-benefit principle tells us that a firm should continue to expand production as long as: a) the firm's profit is positive b) price of the good is greater than its marginal cost c) it can sell another unit of the good d) the supply curve is upward sloping
b
Assume that each day a firm uses 13 employee-hours and an office unit of output. The price of each unit is $5, the hourly wage rate is $10, and rent on the office is $200 per day. Each day the firms earn a ______________ of _______________. a) profit; $370 b) loss; $200 c) profit; $170 d) loss; $170
c
If the price elasticity for a good equals one, the demand for that good is: a) elastic b) inelastic c) unit elastic d) perfectly elastic
c
When more firms enter an industry: a) the amount produced by each of the new firms will be greater than the amount produced by each of the original firms b) the industry supply curve will shift left c) the amount produced by each of the new firms will be less than the amount produced by each of the original firms d) the industry supply curve will shift right
d
If San Diego Opera decreases the price of their opera tickets and their total revenue falls, then this suggests that, at the original price, the demand for tickets to the San Diego Opera was: a) inelastic b) either elastic of inelastic c) elastic d) unit elastic
a
If the price falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to: a) 3 b) 0.333 c) 30 d) 0.30
a
Refer to the figure below. If Mallory and Rick are the only two consumers in this market and the price of soda is $0.75 per can, then what will be the market demand for soda each week? M demand for soda: $: $0.75 Q: 30 R demand for soda: $: $0.75 Q: 20 a) 50 b) 20 c) 30 d) 70
a
Which of the following is NOT a characteristic of a perfectly competitive market? a) each firm in the market sells a somewhat different variant of the good b) there are many sellers, each of which sells only a small fraction of the total quantity exchanged c) buyers and sellers are well-informed d) sellers can easily buy and sell the productive resources needed to enter the market
a
A good's nominal price is the? a) dollar price of the good relative to the average dollar price of all other goods and services b) absolute price of the good in dollar terms c) average real price of the good d) dollar price of the good relative to the real price of all other goods and services
b
An imperfectly competitive firm is one that: a) seeks to maximize revenue b) has at least some influence over the market price c) faces a perfectly inelastic demand curve d) charges any price it wants
b
The demand for a good is elastic if the price elasticity of demand is: a) equal to one b) greater than one c) less than one d) equal to zero
b
The primary objective of most private firms is to: a) maximize revenue b) maximize profit c) minimize cost d) maximize output
b
The percentage change in quantity supplied that results from a 1 percent change in price is known as the: a) cross-price elasticity of supply b) slope of the supply curve c) price elasticity of supply d) cross-price elasticity of demand
c
The price elasticity of demand for a good measures the responsiveness of: a) demand to a one percent change in price of that good b) price to a one percent change in the demand for that good c) quantity demanded to a one percent change in price of that good d) price to a one percent change in the quantity demanded of that good
c
When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically: a) greater than one b) negative c) positive d) less than one
c
a profit-maximizing perfectly competitive firm must decide: a) only what price to charge, taking output as fixed b) both what price to charge and how much to produce c) only how much to produce, taking price as fixed d) only which industry to join, taking price and output as fixed
c
For a given seller, the figure below shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. What is this seller's reservation price for the 250th unit? 2, 150 4, 250 6, 300 14, 350 a) $2 b) $14 c) $8 d) $4
d
If the demand curve is horizontal, the demand is: a) perfectly inelastic b) unit elastic c) elastic d) perfectly elastic
d
In general, perfectly competitive firms maximize their profit by producing the level of output at which: a) marginal cost is maximized b) total cost is minimized c) total cost equals total revenue d) marginal cost equals price
d
Refer to the table below. To increase output from 99 to 132 units requires ______ extra employee-hours; to increase output from 132 to 165 units requires ________ extra employee-hours. Output Number of Employee Per day hours per day 0 0 33 1 66 2 99 4 132 7 165 11 a) 11; 18 b) 7; 11 c) 4; 3 d) 3; 4
d
The figure below shows a single consumer's demand for ice cream at the student union. In increase in the number of students on this campus would cause: a) the demand curve shown about to shift to the left b) no change in the market demand curve for ice cream from the student union c) the demand curve shown above to shift to the right d) the market demand curve for ice cream from the student union to shift to the right
d
The responsiveness of the quantity demanded of one good to change in the price of a different good is measured by the: a) price elasticity of demand b) income elasticity of demand c) price elasticity of supply d) cross-price elasticity of demand
d
The short run is best defined as: a) one year or less b) a period of time sufficiently short that all factors of production are variable c) the period of time between quarterly accounting reports d) a period of time sufficiently short that at least one factor of production is fixed
d
