question
If demand for a product falls at the same time supply rises, which of the following might we expect?
answer
Equilibrium price would fall, and equilibrium quantity could either rise or fall.
question
Which of the following will NOT cause the demand curve for turkey meat to shift?
answer
Sudden decrease in price of turkey meat.
question
If the market for a certain product experiences an increase in supply and there is no change in demand, which of the following results is expected to occur?
answer
Equilibrium price would fall. Equilibrium quantity would rise.
question
If the price of CD players decreases, what can we expect to happen in the market for compact discs?
answer
The equilibrium price of compact discs will rise.
question
Suppose that both the equilibrium price and quantity of golf clubs rise. Which of the following explanations would best explain this outcome?
answer
An increase in demand for golf clubs with no change in supply.
question
Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for
answer
razors to increase.
question
Which of the following events could cause an increase in the supply of ceiling fans?
answer
The number of sellers of ceiling fans increases.
question
As part of an estate settlement Mary received $1 million. She decided to use the money to purchase a small business in Anywhere, USA. If Mary would have invested the $1 million in a risk-free bond fund she could have made $100,000 each year. She also quit her job with Lucky.Com Inc. to devote all of her time to her new business; her salary at Lucky.Com Inc. was $75,000 per year. At the end of the first year of operating her new business, Mary's accountant reported an accounting profit of $150,000.
What was Mary's economic profit?
What was Mary's economic profit?
answer
$25,000 loss
question
As part of an estate settlement Mary received $1 million. She decided to use the money to purchase a small business in Anywhere, USA. If Mary would have invested the $1 million in a risk-free bond fund she could have made $100,000 each year. She also quit her job with Lucky.Com Inc. to devote all of her time to her new business; her salary at Lucky.Com Inc. was $75,000 per year. At the end of the first year of operating her new business, Mary's accountant reported an accounting profit of $150,000.
What are Mary's implicit costs of operating her new business?
What are Mary's implicit costs of operating her new business?
answer
$175,000
question
Which of the following would be categorized as an implicit cost?
(i) forgone investment opportunities
(ii) wages of workers
(iii) raw materials costs
(i) forgone investment opportunities
(ii) wages of workers
(iii) raw materials costs
answer
(i) forgone investment opportunities
question
John owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements?
answer
the cost of shoe polish.
question
Joe wants to start his own business. The business he wants to start will require that he purchase a factory that costs $400,000. Joe currently has $500,000 in the bank earning 3 percent interest per year. Suppose Joe purchases the factory using $200,000 of his own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Joe's annual opportunity cost of purchasing the factory?
answer
$18,000
question
Scott used $4,000,000 from his savings account that paid an annual interest of 5% and a $60,000 loan at an annual interest rate of 5% to purchase a hardware store. After one year, Scott sold the business for $4,100,000. His economic profit is:
answer
None. He runs an economic loss of $103,000
question
Accountants and Economists differ in their calculations of profits in that
answer
accountants consider explicit costs only
question
A business owner makes 50 items a day. She spends 8 hours in producing those items. If hired elsewhere she could have earned $10 an hour. The item sells for $10 each. Production occurs seven days a week. If the explicit costs total $10,000 a month the economic profit for the month equals (assume a 30-day month):
answer
$2,600
question
After graduating from college, Jim had two choices. He can either move to Florida, from Philadelphia, where he can work as an analyst and earn $60,000 or he can stay in Philadelphia and work in a car dealership earning $59,000. His opportunity cost of moving to Florida includes
answer
$59,000
question
You are at an all-you-can-eat-buffet. You feel almost full. However they just brought out your favorite dessert and you can either choose to eat that or a helping of tapioca pudding. If you choose the cupcakes, the pudding would be your
answer
Opportunity cost
question
Would incentive pay work better for employees selling tickets to a concert at a box office or employees selling clothing at a retail store?
answer
For employees selling clothing at a retail store.
question
If the annual interest rate is 5%, the net present value of receiving $550 a year from now is:
answer
$523.80
question
If the interest rate is 11%, $500 received at the end of 12 years is worth how much today?
Remark: * means multiplication, / means division, and ^ means exponentiation.
Remark: * means multiplication, / means division, and ^ means exponentiation.
answer
500/(1 + 0.11)^12
question
A manufacturer produces 1,000 basketballs each day, which it sells to customers for $30 each. All costs associated with production and sales total $10,000; however, if the manufacturer were to produce one additional basketball per day, total costs would increase to $10,100. From these amounts, we can tell that:
answer
marginal cost equals $100.
question
Marginal cost tells us the
answer
amount by which total cost rises when output is increased by one unit
question
Marginal cost is equal to average total cost when:
answer
average total cost is at its minimum.
question
To maximize profits, you should produce at the point where
answer
marginal benefits and marginal costs are just equal.
question
Which of the following would be considered an extent decision?
answer
A business manager is trying to decide how many workers to hire for a new line of business.
question
A baseball manufacturer is currently producing 10,000 baseballs. At this production level, marginal cost is $2.50 and average total cost is $2.00. Baseballs sell for $3.00 at this production level, and marginal revenue is $2.25. From this information, we can conclude that:
answer
the manufacturer is producing too many baseballs.
question
Which of the following costs do not vary with the amount of output a firm produces?
answer
fixed costs.
question
A business incurs the following costs per unit: Labor $125/unit; Materials $45/unit and rent $250,000/month. If the firm produces 1,000,000 units a month, the total variable costs equal
answer
$170Million
question
A business incurs the following costs per unit: Labor $125/unit; Materials $45/unit and rent $250,000/month. If the firm produces 1,000,000 units a month, the total fixed costs equal
answer
$250,000
question
For a restaurant, all the following are fixed costs, except
answer
Raw material cost
question
Marginal revenue is computed as
answer
change in total revenue per one unit increase in quantity sold.
question
You run a small auto service shop. Your fixed expenses per week are $2,000 and your average customer invoice (price) is $600 with an associated marginal cost of $500. What is your weekly break-even quantity?
answer
20 cars
question
What are some of the solutions for a hold-up problem?
answer
Mergers, Contracts, and Exchange of 'hostages'
question
Demand is said to be inelastic if
answer
the quantity demanded changes only slightly when the price of the good changes.
question
Income elasticity of demand measures how
answer
the quantity demanded changes as consumer income changes.
question
Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to
answer
fall by 40 percent.
question
In the spring and summer of 1993, Chronic Wasting Disease wiped out 25% of the elk herd in Wyoming, and the number of state hunting licenses issued was reduced accordingly. In order to compensate for the decrease in license issuances, Wyoming dramatically increased the price. Unfortunately, this strategy proved unsuccessful as the state reported a 50% decrease in total elk license revenues for '93. Which of the following most accurately describes this economic situation?
answer
The demand for Wyoming elk hunting is price elastic.
question
Suppose the price of Twinkies decreases from $1.45 to $1.25 and, as a result, the quantity of Twinkies demanded increases from 2,000 to 2,200. Using the midpoint method, the price elasticity of demand for Twinkies in the given price range is:
answer
0.64
question
The government decided to reduce taxes on fast-food to increase revenue. The government assumes that fast-food products have
answer
An elastic demand
question
Jim recently graduated from college. His income increased dramatically, from $5000 a year to $60,000 a year. Jim decided that instead of using the bus, he would buy himself a car. This implies that
answer
The car is a normal good for Jim
question
If the current margin is greater than the desired margin, the firm should
answer
Decrease price
question
A research firm's findings concluded that the demand for movie tickets is price elastic in the afternoon but inelastic in the evenings. Given this information, to increase overall revenue the theatre owners should
answer
Reduce the ticket prices for the afternoon shows and increase the ticket prices for the evening shows
question
The demand for Dell laptops is more price elastic than the demand for laptops as a whole. This can be best explained by the fact that
answer
There are more substitutes for Dell laptops than for laptops as whole
question
The manager of a gas station noticed that when prices in the convenience store of the gas station decreased, gas sales increased. This could possibly be because the convenience store products are
answer
usually complements to the gas sales
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