question
The price elasticity of demand for a vertical demand curve is:
A. perfectly elastic
B. perfectly inelastic
C. unitary elastic
D. elastic
E. inelastic
A. perfectly elastic
B. perfectly inelastic
C. unitary elastic
D. elastic
E. inelastic
answer
B
question
point a: p = 10 q = 20
point b: p = 8 q = 25
In Exhibit 5-1, between points a and b, the price elasticity of demand measures:
A. 0.67
B. 1.5
C. 2.0
D. 1.56
E. 1.0
point b: p = 8 q = 25
In Exhibit 5-1, between points a and b, the price elasticity of demand measures:
A. 0.67
B. 1.5
C. 2.0
D. 1.56
E. 1.0
answer
E
question
What would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?
A. 0.25
B. 0.50
C. 0.80
D. 1.25
A. 0.25
B. 0.50
C. 0.80
D. 1.25
answer
C
question
If price is deuced and demand is price is price inelastic, then total revenue will:
A. increase
B. decrease
C. remain constant
D. cannot be determined with the available information
A. increase
B. decrease
C. remain constant
D. cannot be determined with the available information
answer
B
question
Consider the market for automobiles. If a dealer cuts prices 10 percent and finds he sells 20 percent more cars, then demand for autos is ______ and his total revenue will _________.
A. elastic; rise
B. elastic; fall
C. inelastic; rise
D. inelastic; fall
A. elastic; rise
B. elastic; fall
C. inelastic; rise
D. inelastic; fall
answer
A
question
Which of the following would most likely have a own price-elasticity coefficient greater than 1?
A. Cigarettes
B. Gasoline in the short run
C. Electricity
D. Airline travel in the long run
A. Cigarettes
B. Gasoline in the short run
C. Electricity
D. Airline travel in the long run
answer
D
question
Suppose the income elasticity of demand for used jet skis is 3.5. If the level of income decreases by 1 percent, the number of used jet skis sold will, ceteris paribus:
A. rise by 0.29 percent
B. rise by 3.5 percent
C. fall by 0.29 percent
D. fall 3.5 percent
A. rise by 0.29 percent
B. rise by 3.5 percent
C. fall by 0.29 percent
D. fall 3.5 percent
answer
D
question
If income rises from $100,000 to $110,000 for a year and as a result the quantity of nee boats demanded rises from 100 to 120 boats for the year, the value of the income elasticity of demand for boats is closest to:
A. 0.2
B. 1.9
C. 2.6
D. 3.9
A. 0.2
B. 1.9
C. 2.6
D. 3.9
answer
B
question
MP3 players and MP3 files are complementary goods. The cross-price elasticity of demand between MP3 players and MP3 files is expected to be:
A. Positive
B. Negative
C. Equal to zero
D. Undefined
A. Positive
B. Negative
C. Equal to zero
D. Undefined
answer
B
question
The cross price elasticity between two products has been measured at 2.0. If the price of the first product is increased by 8%, demand for the second product will
A. increase by 8%
B. decrease by 4%
C. increase by 4%
D. increase by 16%
A. increase by 8%
B. decrease by 4%
C. increase by 4%
D. increase by 16%
answer
D
question
Utility refers to the:
A. Satisfaction obtained from a good or service
B. Additional satisfaction obtained from one more unit of a good or service
C. Willingness to buy specific quantities of a good or service at a particular price
D. Decrease in satisfaction as more of a good or service is consumed
A. Satisfaction obtained from a good or service
B. Additional satisfaction obtained from one more unit of a good or service
C. Willingness to buy specific quantities of a good or service at a particular price
D. Decrease in satisfaction as more of a good or service is consumed
answer
A
question
Marginal utility for a good is computed as:
A. Total utility divided by quantity
B. Quantity divided by total utility
C. The change in quantity divided by total utility
D. The change in total utility divided by the change in quantity
A. Total utility divided by quantity
B. Quantity divided by total utility
C. The change in quantity divided by total utility
D. The change in total utility divided by the change in quantity
answer
D
question
The additional pleasure or satisfaction from a good declines as more of it is consumed in a given period. This is the definition of the:
A. law of demand
B. law of diminishing marginal utility
C. law of diminishing total utility
D. total revenue rule
A. law of demand
B. law of diminishing marginal utility
C. law of diminishing total utility
D. total revenue rule
answer
B
question
Consumer surplus measures
A. the difference between that maximum price consumer is willing to pay and the price actually paid
B. the difference between the minimum price a consumer is willing to pay and the price actually paid
C. the difference between the amounts of a good a consumer is willing to pay and how much of the good is available for sale
D. the sum of all of the marginal utilities for that good
A. the difference between that maximum price consumer is willing to pay and the price actually paid
B. the difference between the minimum price a consumer is willing to pay and the price actually paid
C. the difference between the amounts of a good a consumer is willing to pay and how much of the good is available for sale
D. the sum of all of the marginal utilities for that good
answer
A
question
Jose goes to an all-you-can-eat buffets at a Chinese restaurant and consumes three plates of food. He does not go back for a fourth plate of food because:
A. the price of the fourth plate is too high
B. he has reached the point of increasing marginal utility
C. the marginal utility of the fourth plate would be zero or even negative
D. his total utility would increase with the fourth plate of food
A. the price of the fourth plate is too high
B. he has reached the point of increasing marginal utility
C. the marginal utility of the fourth plate would be zero or even negative
D. his total utility would increase with the fourth plate of food
answer
C
question
A consumer maximizes total utility from a given amount of income when the:
A. amount spent for each product is the same
B. total utility obtained from each product is the same
C. marginal utility per dollar spent on each good is the same
D. marginal utility of the last unit each good is the same
A. amount spent for each product is the same
B. total utility obtained from each product is the same
C. marginal utility per dollar spent on each good is the same
D. marginal utility of the last unit each good is the same
answer
C
question
Q consumed : 1, 2, 3, 4
total utility : 15, ?, 30, ?
marginal utility : 15, 9, ?, 3
The marginal utility of the third unit is:
A. 3
B. 5
C. 6
D. 30
total utility : 15, ?, 30, ?
marginal utility : 15, 9, ?, 3
The marginal utility of the third unit is:
A. 3
B. 5
C. 6
D. 30
answer
C
question
Q consumed : 1, 2, 3, 4
total utility : 15, ?, 30, ?
marginal utility : 15, 9, ?, 3
The total utility when two units are consumed is:
A. 6
B. 9
C. 15
D. 24
total utility : 15, ?, 30, ?
marginal utility : 15, 9, ?, 3
The total utility when two units are consumed is:
A. 6
B. 9
C. 15
D. 24
answer
D
question
Assume the price of cola is $8 per unit and the price of pretzels is $4 per unit.
Units of cola: 1, 2, 3, 4, 5
TU of cola: 40, ?, 96, 112, 124
MU of cola: 40, 32, 24, ?, ?
Units of pretzels: 1, 2, 3, 4, 5
TU of pretzels: 30, ?, 66, 78, 84
MU of pretzels: 30, 20, 16, ?, ?
Suppose Michael has $28 to spend on cola and pretzels. What combination should he purchase in order to maximize his utility?
A. 3 colas and 4 pretzels
B. 1 cola and 5 pretzels
C. 3 coals and 1 pretzel
D. 2 colas and 3 pretzels
Units of cola: 1, 2, 3, 4, 5
TU of cola: 40, ?, 96, 112, 124
MU of cola: 40, 32, 24, ?, ?
Units of pretzels: 1, 2, 3, 4, 5
TU of pretzels: 30, ?, 66, 78, 84
MU of pretzels: 30, 20, 16, ?, ?
Suppose Michael has $28 to spend on cola and pretzels. What combination should he purchase in order to maximize his utility?
A. 3 colas and 4 pretzels
B. 1 cola and 5 pretzels
C. 3 coals and 1 pretzel
D. 2 colas and 3 pretzels
answer
D
question
Assume the price of cola is $8 per unit and the price of pretzels is $4 per unit.
Units of cola: 1, 2, 3, 4, 5
TU of cola: 40, ?, 96, 112, 124
MU of cola: 40, 32, 24, ?, ?
Units of pretzels: 1, 2, 3, 4, 5
TU of pretzels: 30, ?, 66, 78, 84
MU of pretzels: 30, 20, 16, ?, ?
If Michael has $40 to spend on cola and pretzels, what is his maximum utility possible?
A. 40
B. 174
C. 190
D. 208
Units of cola: 1, 2, 3, 4, 5
TU of cola: 40, ?, 96, 112, 124
MU of cola: 40, 32, 24, ?, ?
Units of pretzels: 1, 2, 3, 4, 5
TU of pretzels: 30, ?, 66, 78, 84
MU of pretzels: 30, 20, 16, ?, ?
If Michael has $40 to spend on cola and pretzels, what is his maximum utility possible?
A. 40
B. 174
C. 190
D. 208
answer
B
question
Variable inputs are defined as any resource that:
A. varies with the size of the firm's plant
B. cannot be changed as output changes
C. can be changed as output changes
D. can be increased or decreased hourly
A. varies with the size of the firm's plant
B. cannot be changed as output changes
C. can be changed as output changes
D. can be increased or decreased hourly
answer
C
question
Which of the following best describes a production function?
A. the relationship between consumer preferences and market demand
B. the relationship between the quantity of labor employed and total cost
C. the relationship between the maximum amounts or output a firm can produce and various quantities of inputs
D. the relationship between price and quantity by sellers in a market
A. the relationship between consumer preferences and market demand
B. the relationship between the quantity of labor employed and total cost
C. the relationship between the maximum amounts or output a firm can produce and various quantities of inputs
D. the relationship between price and quantity by sellers in a market
answer
C
question
Workers: 1, 2, 3, 4, 5
Pizzas: 0, 4, 10, 15, 18, 19
Exhibit 6-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the second employee equals:
A. 4
B. 10
C. 14
D. 6
E. 15
Pizzas: 0, 4, 10, 15, 18, 19
Exhibit 6-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the second employee equals:
A. 4
B. 10
C. 14
D. 6
E. 15
answer
D
question
Hideki is the owner/operator of Hideki's Flower Shop. Last year he earned $100,000 in total revenue. His explicit costs were $60,000 paid to his employees and suppliers (assume that this amount represents the total opportunity cost of these resources). During the course of the year he received three offers to work for other flower shops with the highest offer being $60,000 per year. Calculate Hideki's accounting and economic profit.
A. accounting profit = $40,000; economic profit = $0
B. accounting profit = $60,000; economic profit = $40,000
C. accounting profit = $40,000; economic profit = negative $20,000
D. accounting profit = $0; economic profit = negative $40,000
A. accounting profit = $40,000; economic profit = $0
B. accounting profit = $60,000; economic profit = $40,000
C. accounting profit = $40,000; economic profit = negative $20,000
D. accounting profit = $0; economic profit = negative $40,000
answer
C
question
Which of the following is equivalent to ATC?
A. TFC + TVC
B. TFC + MC
C. The change in total cost divided by the change in output
D. (TFC + TVC) / Q
A. TFC + TVC
B. TFC + MC
C. The change in total cost divided by the change in output
D. (TFC + TVC) / Q
answer
D
question
In the short run, if averse variable cost equals $50, average total cost equals $75, and output equals 100, the total fixed cost must be:
AFC = 75 - 50 = 25
TFC = (25)(100) = 2500
A. $25
B. $2,500
C. $5,000
D. $7,500
AFC = 75 - 50 = 25
TFC = (25)(100) = 2500
A. $25
B. $2,500
C. $5,000
D. $7,500
answer
B
question
Output: 0, 1, 2, 3, 4
Total Cost: 16, 30, 42, 58, 78
At 2 units of output in above Table, the average variable cost is:
A. $13
B. $6
C. $12
D. $21
Total Cost: 16, 30, 42, 58, 78
At 2 units of output in above Table, the average variable cost is:
A. $13
B. $6
C. $12
D. $21
answer
A
question
Pizzas: 0, 1, 2, 3, 4, 5, 6, 7
Fixed Cost: 100, 100, 100, 100, 100, 100, 100
Variable Cost: $?, 5, 13, ?, ?, ?, 85, ?
Total Cost: $?, ?, ?, ?, 140, ?, ?, 215
Marginal Cost: $?, ?, ?, 10, ?, 020, ?, ?
By filling in the ?'s in the above table, the total cost of producing zero pizzas is shown to be equal to:
A. zero
B. $100
C. $5
D. $105
E. $95
Fixed Cost: 100, 100, 100, 100, 100, 100, 100
Variable Cost: $?, 5, 13, ?, ?, ?, 85, ?
Total Cost: $?, ?, ?, ?, 140, ?, ?, 215
Marginal Cost: $?, ?, ?, 10, ?, 020, ?, ?
By filling in the ?'s in the above table, the total cost of producing zero pizzas is shown to be equal to:
A. zero
B. $100
C. $5
D. $105
E. $95
answer
B
question
Pizzas: 0, 1, 2, 3, 4, 5, 6, 7
Fixed Cost: 100, 100, 100, 100, 100, 100, 100
Variable Cost: $?, 5, 13, ?, ?, ?, 85, ?
Total Cost: $?, ?, ?, ?, 140, ?, ?, 215
Marginal Cost: $?, ?, ?, 10, ?, 020, ?, ?
By filling in the ?'s in the above Table, the total cost of producing 5 pizzas is shown to be equal to:
A. $100
B. $105
C. $113
D. $123
E. $160
Fixed Cost: 100, 100, 100, 100, 100, 100, 100
Variable Cost: $?, 5, 13, ?, ?, ?, 85, ?
Total Cost: $?, ?, ?, ?, 140, ?, ?, 215
Marginal Cost: $?, ?, ?, 10, ?, 020, ?, ?
By filling in the ?'s in the above Table, the total cost of producing 5 pizzas is shown to be equal to:
A. $100
B. $105
C. $113
D. $123
E. $160
answer
E
question
Pizzas: 0, 1, 2, 3, 4, 5, 6, 7
Fixed Cost: 100, 100, 100, 100, 100, 100, 100
Variable Cost: $?, 5, 13, ?, ?, ?, 85, ?
Total Cost: $?, ?, ?, ?, 140, ?, ?, 215
Marginal Cost: $?, ?, ?, 10, ?, 020, ?, ?
By filling in the ?'s in the above Table, the variable cost of producing 4 pizzas is shown to be equal to:
A. $100
B. $40
C. $60
D. $85
E. $185
Fixed Cost: 100, 100, 100, 100, 100, 100, 100
Variable Cost: $?, 5, 13, ?, ?, ?, 85, ?
Total Cost: $?, ?, ?, ?, 140, ?, ?, 215
Marginal Cost: $?, ?, ?, 10, ?, 020, ?, ?
By filling in the ?'s in the above Table, the variable cost of producing 4 pizzas is shown to be equal to:
A. $100
B. $40
C. $60
D. $85
E. $185
answer
B
question
Computing Price Elasticity equation
answer
E = Q2 - Q1 / (Q2+Q1)/2 / P2 - P1 / (P2+P1)/2
question
Four factors that influence price elasticity
answer
Necessities v Luxuries
Availability of substitutes
Expenditure Share
Time
Availability of substitutes
Expenditure Share
Time
question
Necessities v Luxuries
Demand for necessities is relatively ___________
Demand for luxury goods is relatively ___________
Demand for necessities is relatively ___________
Demand for luxury goods is relatively ___________
answer
inelastic; elastic
question
Availability of Substitutes
The greater the availability of substitutes the _______ elastic is the product;s demand
The greater the availability of substitutes the _______ elastic is the product;s demand
answer
more
question
Relative Price to Income
Demand for low-priced goods is relatively ________
Demand for high-priced goods is relatively _________
Demand for low-priced goods is relatively ________
Demand for high-priced goods is relatively _________
answer
inelastic; elastic
question
Time
The more time you have to adjust to a price change the _________ elastic is your response
The more time you have to adjust to a price change the _________ elastic is your response
answer
more
question
total revenue = _________ x _________
answer
price; quantity sold
question
Elastic
Increase in price leads to _____ in total revenue
Decrease in price leads to _________ in total revenue
Increase in price leads to _____ in total revenue
Decrease in price leads to _________ in total revenue
answer
decrease; increase
question
Inelastic
Increase in price leads to _______ in total revenue
Decrease in price leads to _________ in total revenue
Increase in price leads to _______ in total revenue
Decrease in price leads to _________ in total revenue
answer
increase; decrease
question
Unitary Elastic
Increase in price leads to ________ in total revenue
Decrease in price leads to __________ in total revenue
Increase in price leads to ________ in total revenue
Decrease in price leads to __________ in total revenue
answer
no change; no change
question
Concept of Cross-Price Elasticity of Demand
A measure of the __________ of quantity of ____________ purchased to a change in the price of _____________
A measure of the __________ of quantity of ____________ purchased to a change in the price of _____________
answer
responsiveness; one good; another good
question
Ec =
answer
% change in Qx / % change in Py
question
if x, y are substitutes than Ec _______ 0
answer
>
question
if x, y are compliments than Ec ________ 0
answer
<
question
If popcorn sales declined 20% which the candy price dropped 10%, the cross-price elasticity of demand for popcorn = 20%Q / 10%P =______
answer
2, a relatively elastic response
question
Concept Income Elasticity of demand
A measure of _________ of quantity __________ to a change in __________
A measure of _________ of quantity __________ to a change in __________
answer
responsiveness; purchased; income
question
Ei =
answer
% change in Qx / % change in Income
question
Your income rises by 10%. You go to the movies more and buy 20% more popcorn. Income elasticity of demand for popcorn is ________
Ei = 20%Q / 10%Income
Ei = 20%Q / 10%Income
answer
2
question
Price Elasticity (E) =
answer
% change in Qx / % change in Px
question
Price Elasticity of Supply =
answer
% change in QS / % change in P
question
Concept of Price Elasticity of Supply:
A measure of the ___________ of the quantity ___________ of a good to change in the _________ of that good
A measure of the ___________ of the quantity ___________ of a good to change in the _________ of that good
answer
responsiveness; shipped; price
question
Four factors that affect consumer choice
answer
taste; income; expectations; other goods
question
enjoyment, pleasure by shopping/goods
answer
utility
question
total amount of satisfaction obtained from the consumption of a sense of products
answer
total utility
question
the change in the total utility obtained b consuming one additional (marginal) unit of a product
answer
marginal utility
question
MU =
answer
change TU / change Q
question
as more quantity of a good is consumed over a given time period, total utility increases by a decreasing amount, e.e. marginal utility DECLINES
answer
law of diminishing marginal utility
question
actual happiness is ________
answer
declining
question
If MU is __________ total utility must be increasing
answer
positive
question
If MU is __________ total utility must be decreasing
answer
negative
question
the difference between the price you are willing to pay v what you actually pay
answer
consumer surplus
question
the mix of consumer purchases that maximize the utility attainable for available income
answer
optimal consumption
question
1. marginal utility per dollar spent on all olds must equal
AND
2. total expenditure must equal total income
AND
2. total expenditure must equal total income
answer
utility maximization rule
question
MUx / Px =
answer
MUy / Py
question
total expenditure =
answer
PxQx +PyQy = Income
question
Production Function
shows the _____ quantity of a good _________ from different combinations of ____________
shows the _____ quantity of a good _________ from different combinations of ____________
answer
max; attainable; factor inputs
question
__________ is the time FRAME in which there are fixed factors of production
answer
short run
question
___________ is the time HORIZON over which all inputs are VARIABLE
answer
long run
question
__________ are inputs that manager cannot adjust is the short run
answer
fixed inputs
question
__________ are inputs the manager can adjust to altar production
answer
variable inputs
question
MPPL =
answer
change in Q / change in L
question
MMPK =
answer
change in Q / change in K
question
Diminishing Marginal Returns
as you add more _________ to __________ there will be a _______ where it starts ________
as you add more _________ to __________ there will be a _______ where it starts ________
answer
variable input; fixed input; point; declining
question
__________ is a payment made for the use of a resource
answer
explicit costs
question
__________ is the value of resources used in production, even when no direct payment is made
answer
implicit costs
question
economic costs =
answer
explicit costs + implicit costs
question
____________ is the costs of production that doesn't change when the rate of output is altered
answer
Total fixed costs (tfc)
question
_____________ is the codes of production that change when the rate of output is altered
answer
Total variable cost (tvc)
question
______________ is the market value of all resources used to produce a good or service
answer
Total cost (tc)
question
Total costs =
answer
Fixed costs + Variable costs
question
ATC =
answer
TC / Q
question
AFC =
answer
TFC / Q
question
AVC =
answer
TVC / Q
question
MC =
answer
VTC / VQ
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