Econ 315 Midterm
Which curve does the marginal cost curve intersect at the (their) minimum point Average total cost curve Average fixed cost curve Average variable cost curve Average total cost curve and average variable cost curve
Average total cost curve and average variable cost curve
Fixed costs exist, only in The long run Capital intensive markets The short run Labor-intensive markets
The short run
If good a is an inferior good an increase in income leads to A decrease in the demand for good B A decrease in the demand for good A An increase in the demand for a good A No change in the quantity demanded a good A
A decrease in the demand for good A
Consumer-producer rivalry implies A lower price of a good favors both producers and consumers A higher price of a good hurts producers, while favoring consumers A higher price of a good favors producers while hurting consumers A lower price of a good hurts both producers and consumers
A higher price of a good favors producers while hurting consumers
The attempt by police union to take advantage of the specialized investment of 14, million by the city of Boston is example of
A hold up problem
The maximum legal price that can be charged in a market is A price floor An ad valorem tax The market equilibrium price A price ceiling
A price ceiling
If the absolute value of the own price elasticity of state is point for a decrease in price will lead to A reduction in total revenue An increase in total revenue No change in total revenue An increase or decrease in total revenue
A reduction in total revenue
Because of producer-producer rivalry, the price will tend to Be driven to a lower price Rise up to the maximum price the consumers are willing and able to pay Be the same as the competitive price Be the same as the monopoly price
Be driven to a lower price
A few years ago, the Boston Globe reported that the city of Boston plan to spend 14 million to convert the fleet center sports arena, an entertainment center into a appropriate venue for the Democratic national convention. The city engage Shawmut design and construction in contractual relationship to complete the work, which was supposed to start 48 days prior to the commencement of the DNC on July 26 however, when negotiations between Boston's mayor and the police union broke down the Boston police patrolman's association, took to the picket line surrounding the fleet center and prevented construction crews from beginning the work, the globe reported that a truck attempting to deliver. Steele turned around after a crowd of union members stood at a chain-link gate in front of the arena, shouting back it up and respect the line buddy. Moreover, the globe reported that on duty police officers who had been instructed to prevent pickets from restricting access, did not intervene. Given the tight construction schedule construction delays reportedly cost about $100,000 per day the above scenario was the result of a principal agent problem. Identify the principal in the situation The Democrati
Boston city officials
Generally when calculating profits as total revenue minus total cost, accounting profits are larger than economic profits, because economists take into account only explicit costs Only implicit costs Both explicit and implicit costs That both types of profits are always equal because the account for the same costs
Both explicit and implicit costs
The production function, Q equals L^5K^5 is called Cobb Douglas Leontief Linear Multiplicative
Cobb Douglas
If the cross price elasticity between goods, A and B is negative we know the goods are Inferior goods Complements Inelastic Substitutes
Complements
The behavior of bidders in an auction is an example of Consumer-consumer rivalry Consumer-producer rivalry Producer-producer rivalry Supplier-consumer rivalry
Consumer-consumer rivalry
Barnacle Inc. has a legal obligation to purchase 2 tons of structural steel per week to manufacture conveyor frames Contract Spot exchange Vertical integration
Contract
If a firms production function is Leontief and the wage rate goes up the Firm must use more labor, in order to minimize the cost of producing a given level of output Firm must used more capital in order to minimize the cost of producing a given level of output Firm must use less labor, in order to minimize the cost of producing a given level of output Cost minimizing combination of capital and labor does not change
Cost minimizing combination of capital and labor does not change
Assume that the price elasticity of demand is negative to for a certain firms products. if the firm raises price, the firms managers can expect total revenue to Decrease Increase Remain constant Either increase or remain constant, depending upon the size of the price increase
Decrease
Which of the following would not shift the demand for a good a? Drop in price of good A Drop in price of good B Consumer income Changing the level of advertising a good A
Drop in price of good A
Assuming La Niña does not impact the California wine producing region how will anemia impact the market for California wines Equilibrium quantity will increase and equilibrium price will decrease Equilibrium quantity and price will decrease Equilibrium price, and quantity will increase Equilibrium quantity will decrease and equilibrium price will increase
Equilibrium price, and quantity will increase
It is profitable to hire units of labor as long as the value of marginal product Is less than wage Exceeds average product Equals price Exceeds wage
Exceeds wage
According to the principal agent problem, if performance base rewards to managers are reduce/removed the profits of the firm will Rise Fall Remain constant Neither rise fall, nor remain constant
Fall
Which of the following payment plans does not give an incentive to managers to stop shirking Flat salary with additional pay based on profits of the firm Pay schedule based solely on profits earned by the firm Flat salary, regardless of firm profits A salary, including a percentage of the firms revenues
Flat salary, regardless of firms profits
Donaville caters to its retirement population by selling over 10,000 donuts each week to produce that many donuts weekly Donaville uses 1000 pounds of flour which must be delivered by 5 AM every Friday morning. How should the manager of Donaville acquire flour?
Flour should be acquired through a contract
Which of the following are measures of industry concentration Four firm concentration ratio and producer surplus HHI and consumer surplus Consumer surplus and producer surplus Four firm concentration, ratio, and HHI index
Four firm concentration, ratio, and HHI index
The small car market will have Lower equilibrium prices, and lower equilibrium quantity Lower equilibrium prices and higher equilibrium quantity Higher equilibrium prices and higher equilibrium quantity Higher equilibrium, prices and lower equilibrium quantity
Higher equilibrium prices and higher equilibrium quantity
As a result of increased tensions in the Middle East oil, production is down by 1.21 million barrels per day a 5% reduction in the world supply of crude oil. Explain the likely impact of this event on the market for gasoline in the market for small cars. The gasoline market will have : Higher equilibrium prices and higher equilibrium quantity Higher equilibrium prices and lower equilibrium quantity Lower equilibrium prices and higher equilibrium quantity Lower equilibrium prices and lower equilibrium quantity
Higher equilibrium prices and lower equilibrium quantity
Which of the following mergers is example of vertical integration Betholm Steele purchases US steel IBM purchase is a California computer chip company AT&T purchases MCI GM purchases Ford
IBM purchase is a California computer chip company
Trade will take place If the maximum that a consumer is willing and able to pay is less than the minimum price, the producer is willing and able to accept for a good If the maximum that a consumer is willing and able to pay, is greater than the minimum price, the producers willing and able to accept for a good Only if the maximum that a consumer are willing and able to pay, is equal to the minimum price, the producers willing and able to accept for a good If the maximum amount that are consumers are willing to pay equals zero
If the maximum that a consumer is willing and able to pay is greater than the minimum price, the producer is willing and able to accept for a good
As we move down along a linear demand curve, the price elasticity of demand becomes more Elastic Inelastic Log linear Variable
Inelastic
Isoquants are normally drawn with a convex shape because Inputs are perfectly substitutable Inputs are perfectly complementary Inputs are not perfectly substitutable Inputs are not perfectly complementary
Inputs are not perfectly substitutable
The combinations of inputs that produce a given level of output are depicted by Indifference curves Budget lines Isocost curves Isoquants
Isoquants
What happens to the optimal contract length when the marginal cost of writing a contract declines
It increases
For the first time in two years, big G (cereal division of General Mills) raised cereal prices by 4%. if as a result of this price increase the volume of all cereal sold by Big G changed by -5% what can you infer about the own price elasticity of demand for big G cereal?
It is elastic
Rapel valley in Chile is renowned for its ability to produce high-quality wine at a fraction of the cost of many other vineyards around the world. Rapel Valley produces over 20 million bottles of wine annually of which 5 million are exported to the United States. Each bottle entering the United States is subjected to a $.50 per bottle excise tax, which generates about 2.5 million tax revenues. strong La Niña weather patterns have caused unusually cold temperatures devastating many of the wine producers in that region of Chile. how will La Niña affect the supply and price of Chilean wine? It will cause supply to increase and price to decrease It will cause supply to decrease and price to increase It will cause supply to increase and price to increase It will cause supply to decrease and price to decrease
It will cause supply to decrease and price to increase
How will the demand for good Y change is consumer income increases? It will decrease It will increase It will stay the same
It will decrease
In an effort to stop the migration of many of the automobile manufacturing facilities from the Detroit area, Detroit city Council is considering passing a statute that would give investment tax credits to auto manufacturers effectively. This would reduce auto manufacturers cost of using capital and high tech equipment in their production processes. What is the likely impact of the statute on the number of workers this automaker hires?
It will decrease
The X corporation produces a good called X That is a normal good. it's competitor, Y corporation makes a substitute good that it markets under the name Y. Good Y is an inferior good. How will the demand for good X change if consumer income decreased It will stay the same It will decrease It will increase
It will decrease
How will the demand for good X change if the price of good Y increases It will increase It will stay the same It will decrease
It will increase
What would you expect to happen to the number of applicants if the starting salaries of managers with NBA degrees remained constant, but salaries of managers without such degrees increased by 22% It would increase It would not change There's no way of telling It would decrease
It would decrease
If A and B are complements an increase in the price of good A would Have no effect on the quantity demanded of B Lead to an increase in demand for B Lead to a decrease in demand for B Not lead to an effect on the quantity demanded of B, nor an increase or decrease in the demand for B
Lead to a decrease in demand for B
If A and B are complementary goods, a decrease in the price of good A would Have no effect on the quantity demanded of B Lead to an increase in demand for B Lead to a decrease in demand for B Not have an effect on the demand for B nor lead to an increase or decrease in the demand for B
Lead to an increase in demand for B
A lump sum or a fixed tax of one dollar on ticket rides in amusement parks will change the equilibrium price of ticket rides by One dollar Less than one dollar More than one dollar An indeterminable amount
Less than one dollar
The minimum average cost of producing alternate levels of output, allowing for optimal selection of all variables of production, is defined by the Long run average total cost curve Short run average fixed cost curve Short run marginal cost curve Long run marginal cost curve
Long run average total cost curve
Often owners of firms who hire managers must install incentive or bonus plans to ensure that the Company is financially secure Manager will work hard Manager will maintain employee morale Company will have positive economic profits
Manager will work hard
The absolute value of the slope of the Isoquant is the Marginal rate of technical substitution Marginal product of capital Marginal rate of substitution Value marginal, product of labor
Marginal rate of technical substitution
Would you answer change, if in addition to change in ram in food prices, the article indicated that consumer incomes are expected to fall over the next two years as economy dips into recession? Maybe price may ultimately increase or decrease Yes, price will now decrease No price will still increase Yes, price will now be unchanged
Maybe price may ultimately increase or decrease
Which of the following would most likely be scrutinized under the FTC and DOJ horizontal merger guidelines Merger a: two major players, in Internet services, and retailing- amazon.com, and eBay- merge Merger B: cigarette maker, Phillip Morris merges with the Molson Coors brewing Company Merger c: Lockheed Martin, a large firm that manufactures aircraft merges with United States steel
Merger a
We would expect the demand for jeans to be More elastic than the demand for clothing Less elastic than the demand for clothing The same as the demand for clothing Neither more elastic less elastic, nor the same elasticity as that of the demand for clothing
More elastic than the demand for clothing
Suppose the marginal product of labor is eight in the marginal product of capitals to the wage rate is four dollars and the price of capital is two dollars and in order to minimize cost the firm should use More capital and less labor More labor and less capital Three times more capital than labor 1/2 as much labor as capital
More labor and less capital
Is good Y a lower quality product than good X? Yes, good Y is a lower quality product than good X No good Y is a higher quality product than good X Not necessarily, it could be higher or lower quality No good Y is a product of identical quality to good X
Not necessarily, it could be higher or lower quality
Identify the agent in the situation Shama design and construction On duty police officers The Democratic national convention Boston city officials
On duty police officers
If the last unit of input increases total product, we know that the marginal product is Positive Negative Zero Indeterminate
Positive
The value of a firm is the Current value of profits Present discounted value of all future profits Average value of all future profits Total value of all future profits
Present discounted value of all future profits
Southwest airlines begins a "bags fly free" campaign, charging no fees for the first and second checked bags This situation best represents
Producer-producer rivalry
The recipe that defines the maximum amount of output that can be produced with K units of capital and L units of labor is the Production function Technological constraint Research and development schedule Total product
Production function
Technological advances will cause the supply curve to Shift to the left Shift to the right Become flatter Become steeper
Shift to the right
Boat lifts R us purchases, generic AC motors from a local distributor Contract Spot exchange Vertical integration
Spot exchange
Casper construction a home building contractor purchases 50 pounds of nails from the local Home Depot Vertical integration Spot exchange Contract
Spot exchange
Is consumers expect future prices to be higher They substitute current purchases for future purposes, a perishable products Stockpiling will happen when the products are durable in nature The position of the demand will not change The demand for automobiles today will not change
Stockpiling will happen when the products are durable in nature
Costs that are forever lost after they have been paid are Production costs Fixed costs Sunk costs Variable costs
Sunk costs
Which of the following conditions is true when a producer minimizes the cost of producing a given level of output The MRTS is equal to the ratio of input prices The marginal product for dollars spent on all inputs is equal The marginal product of all inputs are equal The MRTS is equal to the ratio of input prices in the marginal product for dollar spent on all input is equal
The MRTS is equal to the ratio of input prices in the marginal product per dollar spent on all input is equal
Consider the market for bicycles (a normal good). all else being constant when income decrease The demand curve shift to the left and less bicycles are demanded at each given price The supply curve shifts to the right and more bicycles are available at each given price The supply curve shifts to the left and less bicycles are available at each given price The demand curve shifts to the right and more bicycles are demanded at each given price
The demand curve shift to the left and less bicycles are demanded at each given price
A manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is $15 per hour and capital is rented at nine dollars per hour. If the marginal product of labor is 40 units of output per hour and the marginal product of capital is 80 units of output per hour. Should the firm increase decrease or leave unchanged the amount of capital using its production process The Firm should leave capital unchanged The firm should increase capital The firm should decrease capital
The firm should increase capital
Spot exchanges are generally preferred when Transaction costs are high The input market is competitive There is opportunism Bargaining costs are high
The input market is competitive
A property of a production function, stating that as less of one input is used, increasing amounts of another input must be employed to produce the same level of output is known as The law of diminishing marginal labor The law of diminishing marginal rate of technical substitution The law of diminishing marginal utility The law of diminishing marginal returns
The law of diminishing marginal rate of technical substitution
The decline in marginal productivity experience when input usage increases holding all other inputs constant is known as The law of diminishing marginal rate of technical substitution The law of diminishing marginal utility The law of diminishing marginal labor The law of diminishing marginal returns
The law of diminishing marginal returns
In general, what happens to the level of consumer surplus is the price of good falls?
The level of consumer surplus increases as the price of a good falls
Which of the following conditions is true when a producer minimizes the cost of producing a given level of output The marginal product per dollar spent on all input is equal The MRTS is equal to the ratio of quantity of inputs The marginal products of all inputs are equal The marginal product per dollar spent on all inputs is equal and the MRTS is equal to the ratio of quantity of inputs
The marginal product per dollar spent on all input is equal
You are the manager of a midsize company that assembles personal computers. You purchase most components such as random access, memory (RAM) - in a competitive market. based on your marketing research consumers earning over $80,000 purchase 1.5 times more ram than consumers with lower incomes. one morning, you pick up a copy of the Wall Street Journal and read an article indicating that input components for RAM are expected to rise in price, forcing manufacturers to produce ram at a higher unit cost Based on this information, What can you expect to happen to the price you pay for random access memory?
The price will increase for random access memory
The industry elasticity of demand for gadget is -2. The elasticity of demand for an individual gadget manufacturers product is -2. based on the Rothschild approach to measuring market power we conclude that There is little monopoly power in this industry There is significant monopoly power in this industry The herfindahl index for this industry is -2 The herfindahl index for this industries 2
There is significant monopoly power in this industry
Exxon mobile uses the oil extracted from its wells as to produce raw, polypropylene a type of plastic Contract Vertical integration Spot exchange
Vertical integration
In electronics company takes over one of its original suppliers in a merger this an example of Vertical integration Horizontal integration Cointegration Conglomerate integration
Vertical integration
It is estimated that over 100,000 students were applied to the top 30 MBA programs in the United States this year. using the concept of net present value and opportunity cost, when is it rational for an individual to pursue an MBA degree When the cost of attending school are near zero When the net present value of attending graduate school is greater than zero When the benefits of attending school are greater than zero When the net present value of attending graduate school is at least $100,000
When the net present value of attending graduate school is greater than zero
A potential problem with piece-rate plans is that Workers will have a tendency to underproduce the good Workers have no incentive to work hard Workers may put a little emphasis on the quality of the good It is difficult for managers to enforce
Workers may put little emphasis on the quality of the good
Can you predict whether revenues on sales if it's lucky charms brand increased, or decreased? No, you can't tell Yes, it decreased Yes, it increased
Yes, it decreased
Suppose the firm achieves total revenue of $1000 by selling 100 units while facing total cost of $900. if the firm produces and sells 101 units, their total revenue is $1009 and their total cost is $905. Should the firm produce and sell the extra unit? No, since marginal profits are declining Yes, since marginal profits are positive Yes, since profits are positive No, since profits are declining
Yes, since marginal profits are positive
