question
Monetary payments a firm makes to pay for resources are called
answer
explicit costs
question
If the price elasticity of demand for a product is equal to -.5, then a 10% decrease in price will increase quantity demanded by
answer
5%
question
When the price of a product is increased 15%, the quantity demanded decreases 10%. We can therefore conclude that the demand for this product is
answer
inelastic
question
If the demand for product X is inelastic, a 4 percent increase in the price of X will ____________ the quantity demand of X by ________ than 4 percent.
answer
increase; less
question
The price elasticity of demand of a linear demand curve is
answer
elastic in high-price ranges and inelastic in low-price ranges.
question
After eating four slices of pizza, you are offered a fifth slice for free. You turn down the fifth slice. Your refusal indicates that the
answer
marginal utility is positive for the fourth slice and negative for the fifth slice.
question
Assume that Alex would like to purchase a combination of product A and product B such that, after he is done spending his limited income, the MUa / Pa = 8 and MUb / Pb = 4. To maximize utility without spending more money, Alex should
answer
purchase more of product A and less of product B
question
The sole proprietor of the Milwaukee Machine Company generates an annual accounting profit of $78,000. She has a standing salary offer of $35,000 a year to work for a large corporation. If she had invested her capital outside her own company, she estimates it would have returned $22,000 this year. What is the sole proprietors economic profit?
answer
$21,000
question
Which of the following constitutes an implicit cost to the Asarta Manufacturing Company?
answer
Forgone interest income from using savings to pay for operating expenses.
question
If you know that when a firm produces 10 units of output, total cost is $1,030 and average fixed cost is $10, then total variable cost is
answer
$930
question
If a perfectly competitive firm is facing a situation where the price of its product is lower than the average total cost, which of the following statements is true?
answer
The firm is generating a loss, and if things are not expected to improve the firm will leave the industry.
question
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 500 units is $1.50. The market price of the product is $1.50. The minimum possible average variable cost is $1.00. To maximize profit or minimize losses, the firm should:
answer
continue producing 500 units.
question
A firm sells a product in a perfectly competitive market. The marginal cost of the product at the current output level of 200 units is $4. The minimum possible average variable cost is $3.50. The market price of the product is $3. To maximize profits or minimize losses, the firm should
answer
shut down
question
A perfectly competitive firm does not try to sell more of its product by lowering its price below the market price because
answer
it can sell all it wants to at the market price.
question
Which case below best represents a case of third-degree price discrimination?
answer
A major airline sells tickets to senior citizens at lower prices than to other passengers.
question
Discounted tickets for children into events is what type of of price discrimination?
answer
Third-degree price discrimination
question
At the profit maximizing level of output for a pure monopoly
answer
price is greater than marginal cost.
question
For a pure monopoly to sell a quantity of 10 units, the price must be $8. Marginal Revenue at this output level will be
answer
<$8
question
A pure monopoly may generate economic profits because
answer
of barriers to entry
question
Which of the following best approximates a pure monopoly?
answer
The NFL.
question
Which set of characteristics below best describes the basic features of monopolistic competition?
answer
Easy entry, many firms, and differentiated products.
question
The goal of product differentiation and advertising in monopolistic competition is to make:
answer
price less of a factor product differences more of a factor in consumer purchases.
question
A unique feature of an oligopolistic industry is
answer
mutual interdependence
question
Demand and marginal revenue curves are downward-sloping for monopolistically competitive firms because
answer
product differentiation allows each firm some degree of monopoly power.
question
The demand curve faced by a monopolistically competitive firm is
answer
more elastic than the monopolists demand curve
question
A monopolistically competitive firms marginal revenue curve
answer
is downward-sloping and lies below the demand curve.
question
The concept of price elasticity of demand measures:
answer
the sensitivity of consumer purchases to price changes.
question
The basic formula for the price elasticity of demand coefficient is
answer
percentage change in quantity demanded/percentage change in price.
question
The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a
answer
20 percent reduction in price.
question
The demand for a product is inelastic with respect to price if:
answer
Consumers are largely unresponsive to a per unit price change.
question
If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:
answer
increase the quantity demanded by about 25 percent.
question
Suppose that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand is:
answer
-1.45
question
If the demand for product X is inelastic, a 4 percent increase in the price of X will:
answer
Increase the quantity of X demanded by less than 4 percent.
question
If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will:
answer
Increase the amount demanded by more than 10 percent.
question
The price elasticity of demand is generally
answer
Negative, but the minus sign is often ignored.
question
The diagram shows two product demand curves. On the basis of this diagram, we can say that
answer
over range P1P2, price elasticity of demand is greater for D2 than for D1.
question
Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded
answer
decreased by 7 percent.
question
The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase In the price of beef will cause the quantity of beef demanded to
answer
decrease by approximately 12 percent
question
If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then
answer
demand is price elastic
question
A steel mill raises the price of steel by 20%, which results in a 7% reduction in the quantity of steel demanded. The demand curve facing this firm is
answer
inelastic
question
Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are $.60 per bottle and $.40 per bag respectively. It can be concluded that:
answer
Mrs. Arnold should spend more on soda and less on pretzels
question
If the consumer has money income of $52 and the prices of J and K are $8 and $4 respectively, the consumer will minimize her utility by purchasing
answer
4 units of J and 5 units of K
question
Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa = 5 and MUb/Pb = 8. Ben should purchase:
answer
more of B and less of A
question
The marginal utility of the last unit of apples consumed is 12, and the marginal utility of the last unit of bananas consumed is 8. What set of prices for apples and bananas, respectively, would be consistent with consumer equilibrium?
answer
$6 and $4
question
What level of total utility does the rational consumer realize in equilibrium?
answer
51 utils
question
Marginal utility can be
answer
positive, negative, or zero.
question
The ability of a good or service to satisfy wants is called
answer
utility
question
Refer to the data. The value of Y is
answer
45
question
Refer to the data. The value for X is
answer
15
question
The data illustrate the
answer
law of diminishing marginal utility.
question
The law of diminishing marginal utility states that
answer
beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer
question
The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His local utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is
answer
8 units of utility.
question
Marginal utility is the
answer
change in total utility obtained by consuming one more unit of a good.
question
The theory of consumer behavior assumes that:
answer
consumers behave rationally, attempting to maximize their satisfaction.
question
To maximize utility, a consumer should allocate money income so that the
answer
marginal utility obtained from the last dollar spent on each product is the same.
question
Suppose that MUx/Px exceeds MUy/Py. To maximize utility the consumer who is spending all her money income should buy:
answer
more of X and/or less of Y
question
For a purely competitive seller, price equals:
answer
all of these
question
When a firm is maximizing profit, it will necessarily be:
answer
Maximizing the difference between total revenue and Total cost.
question
Us the table above. The table gives cost data for a firm that is selling in a purely competitive market. If the product price is $45, the firm will
answer
produce 5 units and realize a $15 economic profit.
question
Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:
answer
is realizing an economic profit of $40.
question
A competitive firm in the short run can determine the profit-maximizing (or loss minimizing) output by equating
answer
marginal revenue and marginal cost.
question
Use the above table. If the firms minimum average variable cost is $10, the firms profit-maximizing level of output would be
answer
3
question
Use the above table.At the profit-maximizing output, the firms total revenue is
answer
$48
question
The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.
answer
downsloping; perfectly elastic
question
Using the above table, the maximum possible total profit is
answer
$12
question
If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing:
answer
price and average variable cost
question
the above table gives cost data for a firm that is selling in a purely competitive market. At 5 units of output, average fixed cost, average variable cost, and average total cost are
answer
$10, $60, and $70, respectively
question
Marginal revenue is the
answer
change in total revenue associated with the sale of one more unit of output.
question
Use the above graph. This firm will earn only a normal profit if product price is
answer
P3
question
If a perfectly competitive firm sells 50 units of output at a market price of $10 per unit, its marginal revenue is
answer
$10
question
The profit maximizing rule can be restated for a purely competitive seller as P = MC because
answer
each additional unit of output adds exactly its price to total revenue.
question
One reason why the "fast-casual" restaurant market is competitive is that
answer
barriers to entry are low
question
The reason that the "fast-casual" restaurant market is monopolistically competitive rather than perfectly competitive is because
answer
products are differentiated
question
The key characteristics of a monopolistically competitive market structure include
answer
Many small (relative to the total market) sellers acting independently.
question
The key characteristics of a monopolistically competitive market structure include
answer
sellers selling similar but differentiated products.
question
If a firm faces a downward-sloping demand curve
answer
it must reduce its price to sell more units
question
A monopolistically competitive firm will
answer
have some control over its price because its product is differentiated
question
Which of the following is true of a typical firm in a monopolistically competitive industry?
answer
Product differentiation allows a successful firm to emerge as a market leader in the industry.
question
For a monopolistically competitive firm, marginal revenue
answer
equals the price
question
Using the table above, what is the marginal revenue of the 3rd unit?
answer
$5.50
question
Which of the following characterizes the market that Chipotle competes in?
answer
Barriers to entry are low.
question
A monopolistically competitive market is described as one in which there are
answer
a large number of firms selling similar, but not identical, products
question
In the United States, the average person mostly patronizes firms that operate in
answer
monopolistically competitive markets
question
Suppose a monopolistically competitive firm sells 25 units at a price of $10. Calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9.
answer
$4
question
What is the output (Q) that maximizes profit and what is the price (P) charged?
answer
P = $50; Q = 6 cases
question
What is Eco Energy's profit?
answer
$145
question
Us the above figure, If the firm is currently producing and selling Qa units, what is the price charged?
answer
P2
question
Us the above figure. What is the area that represents the loss made by the firm?
answer
the area P2cdP3
question
Use the above figure. Should the firm represented in the diagram continue to stay in business despite its losses?
answer
Yes, its total revenue covers its variable cost.
question
Victorias profit-maximizing quantity sold (Q) and price (P) are
answer
Q = 4; P = $6
question
Use the above table. At the profit-maximizing or loss-minimizing output level
answer
the firm makes a profit of $12
question
Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18. If the average total cost at this output is $16.55, then its total profit is
answer
$95.70
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
