ECON FINAL 3125
The demand for a product is given by P=1,800-20Q. If the firm wishes to sell 70 units , each unit should be priced at :
$400 P= 1800-20(70)
When a perfectly competitive firm maximizes profits, it is :
-making a production decision -maximizing the difference between total revenue (TR) and total cost (TC) -finding the production level at which its marginal revenue equals its marginal cost above average variable costs ( AVC)
What is true of the t-statistic ?
It tells us how many standard errors that coefficient estimate is from the value of zero
Marginal Cost
The change in total cost that results from a 1-unit increase in production
Marginal Revenue
The change in total revenue that results from a 1-unit increase in the quantity sold
Assuming that marginal cost is $60, and the price elasticity is demand -3.5, what is the optimal price a seller should charge to maximize profit ?
84
If the price elasticity is 1.74 and the price of a good increases from $10 to $12, we would expect total revenue to:
Decrease- if the good is price elastic and its price goes up, total revenue decreases
Which of the following production functions displays decreasing returns to scale?
Q=cL^.2 K^.5
In general, if the price or cost of fixed factor of production increases,
marginal costs are unchanged
If a perfect competitor sells additional units, ____________, and if a monopolist sells additional units _______________
marginal revenue stay the same, marginal revenues fall
Total Revenue for the competitive firm is equal :
- P x Q - economic cost + economic profit - MR x Q
Marginal Revenue measures:
- The change in total revenue resulting from a 1 unit change in output -The difference between the revenue gained from increasing output by 1 unit and the revenue lost from the resulting lower price - The slope of the total revenue curve.
In a perfectly competitive market in the long run:
- firms are attempting to maximize profit - economic profits are zero - there are no better uses for the firms resources
A firm can sell as much output as it wishes at the fixed price, P=$10 per unit. Then,
Marginal revenue is constant and equal to $10
Assume that a firm is producing at its profit -maximizing levels level of output. A decrease in fixed cost implies that:
Neither marginal revenue (MR) nor Marginal cost will change
A demand function has been estimated to be Qx=550-5Px+1.5Py-2Y. Based on this information we can conclude that:
Product X us an inferior good & Product y ( py) is a substitute good
Assume the arc price elasticity of demand for movie tickets is 1.6. If the price per ticket increase from $7.5 to 8.5, then using mid point percent formula the number of tickets demanded will
decrease by 20 percent
A good that has highly elastic demand is most likely to:
have a large number of substitute
The fact that a perfectly competitive firms total revenue curve is an upward sloping straight line implies that
product price is constant at all levels
A response bias occurs when:
responses do not reflect the true preferences and attitudes of the respondent
Computing the F statistic allows one to :
test the overall statistical significance of the regression equation
A regression coefficient measures:
the change in the dependent variable due to a unit change in a particular independent variable
Dummy Variables
used to correct for seasonality in time series
law of diminishing returns states :
When one input is increased, with all the other imputs unchanged , the marginal product of the input will eventually decline
True in a competitive market
a firm will always produce where price equals MC, and where price equals ATC only in the long run
