Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand?
A) 0.11 B) 0.37 C) 2.69 D) 9.33
If in a perfectly competitive industry, the market price facing a firm is below its average total cost but above average variable cost at the output where marginal cost equals marginal revenue
A) the industry supply will not change.
B) new firms are attracted to the industry.
C) some existing firms will exit the industry.
D) firms are breaking even.
Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that
A) an increase in the price of beer will increase the quantity demanded of beer and beer is a normal good. B) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good.
C) a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good.
D) an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a luxury
When marginal cost is increasing:
A) Total Cost must be increasing.
B) Average total cost must be increasing.
C) Average total cost must be decreasing.
D) Average fixed cost must remain the same.
When the total product curve is falling, the
A) Marginal product of labor is zero.
B) Marginal Product of labor is negative.
C) Average product of labor is increasing.
D) Average product of labor must be negative.
Which of the following statements is true?
A) The average product of labor is at its maximum when the average product of labor equals the marginal product of labor.
B) The average product of labor is at its minimum when the average product of labor equals the marginal product of labor.
C) The average product of labor tells us how much output changes as the quantity of workers hired changes.
D) Whenever the marginal product of labor is greater than the average product of labor the average product of labor must be decreasing.
Which of the following explains why the marginal cost curve has a U shape?
A) Initially, the marginal product of labor falls, then rises. B) Initially, the average product of labor rises, then falls. C) Initially, the marginal product of labor rises, then falls.
D) Initially, the average cost of production rises, then falls.
Which of the following statements is false?
A) Marginal cost will equal average total cost when marginal cost is at its lowest point.
B) When marginal cost is less than average total cost, average total cost will fall.
C) When marginal cost is greater than average total cost, average total cost will rise.
D) Marginal cost will equal average total cost when average total cost is at its lowest point.
What is the difference between "diminishing marginal returns" and "diseconomies of scale"?
A) Both concepts explain why marginal cost decreases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable.
B) Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable.
C) Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why fixed cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases.
D) Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases.
If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 units, then the average product of 12 workers is
A) 60 units.
B) 54 units.
C) 48 units.
D) 5 units.
If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should
A) increase its output.
B) reduce its output.
C) keep output constant and enjoy the above normal profit.
D) lower the price.
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