Economics Midterm 2 Review

Refer to the figure below. If the price of a latte increases from $2.00 to $2.50: total expenditure would increase total expenditure would stay the same total expenditure would decrease the change in total expenditure, if any, would depend on the supply curve

total expenditure would decrease

Economic profit is equal to: accounting profit pus implicit costs total revenue minus accounting profit total revenue minus the sum of explicit and implicit costs accounting profit minus explicit costs

total revenue minus the sum of explicit and implicit costs

The table below shows a pizzeria's fixed cost and variable cost at different levels of output. Pizza's sell for $20 When the pizzeria makes 100 pizzas a day, its fixed cost is _____ and its total cost is _____. $350; $850 $500; $850 $500; $1350 $850; $1650

$500; $1350

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is: 0.05 0.5 2 5

0.5

When Acme Dynamite produces 50 units of output, its variable cost is $2,000, and its fixed cost is $500. It sells each unit of output for $25. When Acme Dynamite produces 250 units of output, its profit is: $6,250 $5,750 $4,250 $3,750

$3,750

Refer tot eh figure below. At a price $2, the total expenditure of lattes each hour equals: $30 $40 $60 $80

$60

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7/hour as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below. What is John's opportunity cost of cleaning windows for an hour? $14 $8 $7 $2

$7

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is: (P/Q) x (1/slope) (Q/P) x (1/slope) (P/Q) x (1/slope) Q x P x (1/slope)

(P/Q) x (1/slope)

Refer to the figure below. What is the price elasticity of supply at point A 4 2 1 1/2

1

If the price elasticity of chicken is 2, then a 20% decrease in price of chicken will lead to a: 10% decrease in the quantity demanded of chicken 10% increase in the quantity demanded of chicken 40% decrease in the quantity of chicken 40% increase in the quantity demanded of chicken

40% increase in the quantity demanded of chicken

Fran runs a doughnut shop in a tiny 3-person town. The table below shows the quantity demand by the three townspeople at various prices. When the price of a doughnut is 25 cents, what is the market demand for doughnuts? 9 doughnuts 13 doughnuts 16 doughnuts 20 doughnuts

16 Doughnuts

The figure below shows a single consumer's demand for ice cream at the student union During a regular semester, there are 500 students on campus. Each student's weekly demand for ice cream is shown above. When the price of ice cream is $2.00 per scoop, those 500 students purchase a total of ______ scoops per week from the student union 2,000 2,500 3,000 5,000

3,000

If a one percent increase in the price of oranges leads to a five percent increase in the quantity supplied, the price elasticity of supply for oranges is ______. 1/5 1/2 5 2

5

The following graph depicts demand. The price elasticity of demand at point A is: 5/2 5/8 2/5 8/5

5/2

Which of the following will cause a decrease in the supply of jeans An increase in the wages paid to workers who make jeans A decrease in the demand for jeans A decrease in the price of jeans A decrease in the expected future price of jeans

An increase in the wages paid to workers who make jeans

According to the law of demand, when the price of shoes ______ people will consume. Rises, more Falls, more Rises, the same amount Falls, the same amount

Falls, more

Refer to the figure below. Suppose this demand curve shows the demand for lattes at a single coffee shop that charges $2.00 for a latte, if the manager wants to increase total revenue, what should the manager do? Increase the price from $2.00 to $3.00 Increase the price from $2.00 to $2.50 Reduce the price from $2.00 to $1.00 Reduce the price from $2.00 to $1.75

Reduce the price from $2.00 to $1.75

Which of the following is NOT an example of an explicit cost? The overtime wages paid to workers The income the owner could have earned in his or her next best employment opportunity The salaries paid to the managers who help run the business The rent the owners pays each month to lease office space

The income the owner could have earned in his or her next best employment opportunity

Which of the following is the most likely to be a fixed factor of production at a farm? The land on which the farm is located The number of workers hired to harvest the crops The amount of fertilizer used each week The amount of water used each day

The land on which the farm is located

The short run is best defined as: one year or less a period of time sufficiently short that al factor of production are variable the period of time between quarterly accounting reports a period of time sufficiently short that at least one factor of production is fixed

a period of time sufficiently short that at least one factor of production is fixed

A technological innovation that reduce a firm's marginal cost will lead to: an increase in the quantity supplied by the firm, but no change in the firm's supply an increase in the firm's supply a decrease in the quantity supplied by the firm, but no change in the firm's supply a decrease in the supply

an increase in the firm's supply

A firm earns a normal profit when its accounting profit is positive economics profit is positive economics profit is zero accounting profit is zero

economics profit is zero

If the absolute value of the slope of demand curve is .025 price is $8 per unit, and quantity demanded is 12 unites, then demand for this good is: perfectly elastic elastic unity elastic inelastic

elastic

If the price elasticity of demand for a good is greater than one, then the demand for that good is: elastic inelastic unit elastic perfectly elastic

elastic

When the demand for a good is inelastic, that good is likely to have: many close complements few close complements many close substitutes few close substitutes

few close substitutes

All else equal, compared to small-budget items such as paper towels, the price elasticity of demand for big-ticket items such as refrigerators is _______. higher lower very low equal

higher

One implication of the shape of the demand curve facing a perfectly competitive is that: if the firm increases its price about the market price, it will earn higher revenue if the firm decreases its price below the market price, it will earn higher revenue if the firm increases its price above the market price, it will earn zero revenue the market would be unable to reach a new equilibrium if demand changed

if the firm increases its price about the market price, it will earn zero revenue

Which of the following is NOT true of a perfectly competitive firm? It faces a perfectly elastic demand curve It is unable to influence the price of the good it sells It seeks to maximize revenue It sells only a small fraction of the total quantity exchange in the market

it seeks to maximize revenue

A profit-maximizing firm will only produce a positive amount of output if: its total revenue is greater than its total cost its total revenue is greater than its fixed cost its total revenue equals its total cost its total revenue is greater than or equal to its variable cost

its total revenue is greater than or equal to its variable

A situation is efficient if it is: possible to find a transaction that will make at least one person better off, even if others are made worse off. possible to find a transaction that will make everyone better off. possible to find a transaction that will make at least one person better off without harming others. not possible to find a transaction that will make at least one person better off without harming others.

not possible to find a transaction that will make at least one person better off without harming others

Adam Smith coined the term "invisible hand" t describe the process by which the actions of independent, self-interested buyers and seers will: always lead an economy to ruin often lead to the most efficient allocation of resources always lead to the most efficient allocation of resources often lead to increasing inequality

often lead to the most efficient allocation of resources

A seller's supply curve shows the seller's: willingness to pay for an additional unity of output at each quantity opportunity close of producing an additional unit of output at each quantity hourly wage for producing an additional unity of output at each quantity profit from producing an additional unit of output at each quantity

opportunity cost of producing an additional unit of output at each quantity.

The following graph depicts demand At point D, demand is: price inelastic price elastic unity elastic perfectly price elastic

price inelastic

The table below shows a pizzeria's fixed cost and variable cost at different levels of output. Pizza's sell for $20 each. When the pizzeria makes 100 pizzas a day, it earns an economic ____ of ____. loss, $650 profit, $650 loss, $500 profit, $1,150

profit, $650

In surveying their alumni, State U's economics department discovered that ramen noodle consumption declined once students graduated and found jobs. One conclusion the survey team might draw from this result is that: there is excess demand for ramen noodles the equilibrium price for ramen noodles is too high college graduates have a high reservation price for ramen noodles ramen noodle are an inferior good

ramen noodles are in inferior

If a firm's total revenue is less than its variable cost when the firm produces the level of output at which price equals marginal cost, then the firm should: not change its level of output even if it's earning an economic loss in the short run shut down produce more so that its total revenue increases purchase more fixed factors of production

shut down

If cross-price elasticity of demand between two goods is positive, the two substitutes inferior complements normal

substitutes

The price elasticity of demand is a measure of: the change in quantity demanded of a good that results in its price the change in price of a good that results from a change in its quantity demanded the demand for a good how consumers respond to excess demand

the change in quantity demanded of a good that results from a change in its price

When more firms enter an industry: the amount produced by each of the new firms will be greater than the amount produced buy each of the original firms. the industry supply curve will shift left the amount produced by each of the new firms will be less than the amount produced by each of the original firms the industry supply curve will shift right

the industry supply curve will shift right