question
A ________ only exists for the life of the owner, while a ________ has perpetual life.
answer
proprietorship; corporation
question
A ________ profits are taxed twice.
answer
corporation
question
A bad growing season for avocados will result in ________.
answer
a leftward shift of the supply curve
question
A bad state of nature for the production of tomatoes will shift the supply curve for tomatoes to the ________ and ________ the equilibrium price of tomatoes.
answer
left; increase
question
A news report discussing a medical study that found conclusive evidence of the positive health benefits of farm-raised eggs is likely to cause a rightward shift of the demand curve for farm-raised eggs.
answer
True
question
A price ceiling is a ________ legal price set by the government that causes a ________ in the market.
answer
maximum; shortage
question
A technological advance in the production of humidifiers will cause the short-run average total costs to produce humidifiers to ________ and the long-run average costs to ________.
answer
decrease; decrease
question
A technological advancement in the production of LED light bulbs will result in ________.
answer
a rightward shift of the supply curve
question
All of the following are true of a price ceiling except which one?
answer
It does not create deadweight loss.
question
All of the following cost curves have a U-shape except which one?
answer
average fixed cost
question
An increase in consumer incomes will shift the demand curve for luxury vehicles to the ________ and ________ both the equilibrium price and quantity of luxury vehicles.
answer
right; increase
question
As a result of a change in consumer tastes in favor of your firm's product, you should anticipate a ________ price for your product than the current equilibrium price and a ________ equilibrium quantity than the current equilibrium quantity.
answer
higher; higher
question
As a result of a technology advance in the production of your firm's product, you should anticipate a ________ price for your product than the current equilibrium price and a ________ equilibrium quantity than the current equilibrium quantity.
answer
lower; higher
question
At its current output level, Pretty Flowers Florist has average fixed costs equal to $5.40 and average variable costs equal to $3.20. What is Pretty Flowers Florist's average total cost at their current output level?
answer
$5.40+$3.20= $8.60
question
At its current output level, Pretty Flowers Florist has average total costs equal to $10.40 and average variable costs equal to $6.20. What is Pretty Flowers Florist's average fixed cost at their current output level?
answer
$10.40-$6.20=$4.20
question
At the equilibrium price, which of the following is true?
answer
The quantity demanded equals the quantity supplied.
question
Diseconomies of scale are often associated with ________.
answer
increased complexity and bureaucracy
question
Firms typically experience decreasing marginal returns to labor at ________ levels of employment due to ________.
answer
high; congestion
question
For any demand function, which of the following represents the dependent variable?
answer
the quantity demanded of a good
question
For any market, the total surplus is equal to the consumer surplus plus the producer surplus.
answer
True
question
If Big Brothers Hot Dog stand sold 500 hot dogs at a price $2 per hot dog, the total revenue is
answer
$500*$2= $1,000
question
If Excel estimates the demand function for a product to be: Q d = 1,500 - (5 × P) and a price of $125 is charged, the predicted quantity demanded for the product is 875.
answer
True
question
If Excel estimates the demand function for a product to be: Q d = 1,500 - (5 × P), the estimated regression equation indicates that the Law of Demand does not hold.
answer
False. Because the slope coefficient is negative, the estimated regression results indicate that the Law of Demand does hold.
question
If a 2 percent decrease in the price of a good leads to a 6 percent increase in the quantity demanded, the price elasticity of demand for the good equals ________.
answer
6/2=3.0
question
If a 5 percent increase in consumer incomes leads to a 10 percent increase in the quantity demanded for a good, the good is a(n) ________ good with an income elasticity of ________.
answer
normal; 2.0
question
If a corporation fails, the shareholders are responsible for repaying all of the debt.
answer
False. The shareholders have limited liability for debts.
question
If a decrease in the price of Good X causes the demand for Good Y to shift rightward, Goods X and Y are complements.
answer
True.
question
If a firm's long-run average cost is $4 and when output increases long-run average cost decreases to $3, the firm is experiencing ________.
answer
economies of scale
question
If a firm's total cost of production is equal to $90,000 and they have a fixed cost of $45,000, the company's variable costs are also $45,000.
answer
True.
question
If the Q d = (50 million) - (4 million × P) and Q S = (2 million) + (4 million × P), the equilibrium price for the product is ________.
answer
The question is giving us:
Qd = 50 - 4*P
Qs = 2 + 4*P
50 - 4P = 2 + 4P
To solve for P, you can first add 4.P to both sides:
50 - 4P + 4P = 2 + 4P + 4P
50 = 2 + 8*P
Then subtract 2 from both sides:
50 - 2. = 2 + 8*P - 2
48 = 8*P
Divide both sides by 8
48/8 = 8*P/8
6 = P
So the equilibrium price is $6.
Qd = 50 - 4*P
Qs = 2 + 4*P
50 - 4P = 2 + 4P
To solve for P, you can first add 4.P to both sides:
50 - 4P + 4P = 2 + 4P + 4P
50 = 2 + 8*P
Then subtract 2 from both sides:
50 - 2. = 2 + 8*P - 2
48 = 8*P
Divide both sides by 8
48/8 = 8*P/8
6 = P
So the equilibrium price is $6.
question
If the Q d = (50 million) - (4 million × P) and Q S = (2 million) + (4 million × P), the equilibrium quantity for the product is ________.
answer
Qd = 50 - 4*P
Replace P with 6:
Qd = 50 - 4*6 = 50 - 24 = 26 million units
Replace P with 6:
Qd = 50 - 4*6 = 50 - 24 = 26 million units
question
If the R 2 is large, you are ________ confident in the regression results because the predicted values are ________ the actual values.
answer
more; close to
question
If the cost of capital is $15 per hour, the wage paid to employees is $25 per hour, the marginal product of capital is 90 units per hour, and the marginal product of labor is 100 units per hour, to minimize its costs, the firm should ________.
answer
decrease the amount of labor used and increase the amount of capital used
question
If the cross-price elasticity between Goods X and Y is -2.0, the goods are ________ and an increase in the price of Good X will cause a(n) ________ in the quantity demanded of Good Y.
answer
complements; decrease
question
If the marginal ________ of an action exceeds its marginal ________ then the action ________ be performed.
answer
benefit; cost; should
question
If the market for salmon is in equilibrium, there is not a shortage or a surplus of salmon.
answer
True
question
If the number of demanders for electric cars increases at the same time as the number of suppliers of electric cars increases, which of the following is true?
answer
The equilibrium quantity will increase.
question
If the price of ground beef decreases, which of the following will occur?
answer
There will be a movement down the demand curve for ground beef.
question
If there is a shortage in the market, market forces will drive the quantity supplied to ________ and the quantity demanded to ________.
answer
increase; decrease
question
L Q
0 0
1 4
2 9
3 18
4 28
5 35
6 40
7 42
8 43
9 40
10 35
Refer to the table above. What is the marginal return to labor from increasing employment from 4 to 5 workers?
0 0
1 4
2 9
3 18
4 28
5 35
6 40
7 42
8 43
9 40
10 35
Refer to the table above. What is the marginal return to labor from increasing employment from 4 to 5 workers?
answer
35-28=7
question
Profit Using Accounting Costs Profit Using Opportunity Costs
Total Revenue $700,000 Total Revenue $700,000
Cost Cost
Nail technicians A Nail technicians A
Owner's Salary B Owner's Time C
Depreciation Allowance D
Cost of using building and equipment
(opportunity cost) $25,000
Total Cost Total Cost
Total Profit E Total Profit F
Happy Nails is a locally owned nail salon that is in its first year of business.
The nail salon employs 8 nail technicians that are paid $31,250 each and the owner's is paid $75,000.
If the owner did not own Happy Nails, she would work for a competitor for $85,000.
At the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth $85,000.
The accountant for Happy Nails uses straight-line depreciation for the 15-year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of A?
Total Revenue $700,000 Total Revenue $700,000
Cost Cost
Nail technicians A Nail technicians A
Owner's Salary B Owner's Time C
Depreciation Allowance D
Cost of using building and equipment
(opportunity cost) $25,000
Total Cost Total Cost
Total Profit E Total Profit F
Happy Nails is a locally owned nail salon that is in its first year of business.
The nail salon employs 8 nail technicians that are paid $31,250 each and the owner's is paid $75,000.
If the owner did not own Happy Nails, she would work for a competitor for $85,000.
At the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth $85,000.
The accountant for Happy Nails uses straight-line depreciation for the 15-year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of A?
answer
8*$31,250 = 250,000
question
Profit Using Accounting Costs Profit Using Opportunity Costs
Total Revenue $700,000 Total Revenue $700,000
Cost Cost
Nail technicians A Nail technicians A
Owner's Salary B Owner's Time C
Depreciation Allowance D
Cost of using building and equipment
(opportunity cost) $25,000
Total Cost Total Cost
Total Profit E Total Profit F
Happy Nails is a locally owned nail salon that is in its first year of business.
The nail salon employs 8 nail technicians that are paid $31,250 each and the owner's is paid $75,000.
If the owner did not own Happy Nails, she would work for a competitor for $85,000.
At the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth $85,000.
The accountant for Happy Nails uses straight-line depreciation for the 15-year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of C?
Total Revenue $700,000 Total Revenue $700,000
Cost Cost
Nail technicians A Nail technicians A
Owner's Salary B Owner's Time C
Depreciation Allowance D
Cost of using building and equipment
(opportunity cost) $25,000
Total Cost Total Cost
Total Profit E Total Profit F
Happy Nails is a locally owned nail salon that is in its first year of business.
The nail salon employs 8 nail technicians that are paid $31,250 each and the owner's is paid $75,000.
If the owner did not own Happy Nails, she would work for a competitor for $85,000.
At the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth $85,000.
The accountant for Happy Nails uses straight-line depreciation for the 15-year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of C?
answer
$85,000
question
Profit Using Accounting Costs Profit Using Opportunity Costs
Total Revenue $700,000 Total Revenue $700,000
Cost Cost
Nail technicians A Nail technicians A
Owner's Salary B Owner's Time C
Depreciation Allowance D
Cost of using building and equipment
(opportunity cost) $25,000
Total Cost Total Cost
Total Profit E Total Profit F
Happy Nails is a locally owned nail salon that is in its first year of business.
The nail salon employs 8 nail technicians that are paid $31,250 each and the owner's is paid $75,000.
If the owner did not own Happy Nails, she would work for a competitor for $85,000.
At the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth $85,000.
The accountant for Happy Nails uses straight-line depreciation for the 15-year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of B?
Total Revenue $700,000 Total Revenue $700,000
Cost Cost
Nail technicians A Nail technicians A
Owner's Salary B Owner's Time C
Depreciation Allowance D
Cost of using building and equipment
(opportunity cost) $25,000
Total Cost Total Cost
Total Profit E Total Profit F
Happy Nails is a locally owned nail salon that is in its first year of business.
The nail salon employs 8 nail technicians that are paid $31,250 each and the owner's is paid $75,000.
If the owner did not own Happy Nails, she would work for a competitor for $85,000.
At the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth $85,000.
The accountant for Happy Nails uses straight-line depreciation for the 15-year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of B?
answer
$75,000
question
Profit Using Accounting Costs Profit Using Opportunity Costs
Total Revenue $700,000 Total Revenue $700,000
Cost Cost
Nail technicians A Nail technicians A
Owner's Salary B Owner's Time C
Depreciation Allowance D
Cost of using building and equipment
(opportunity cost) $25,000
Total Cost Total Cost
Total Profit E Total Profit F
Happy Nails is a locally owned nail salon that is in its first year of business.
The nail salon employs 8 nail technicians that are paid $31,250 each and the owner's is paid $75,000.
If the owner did not own Happy Nails, she would work for a competitor for $85,000.
At the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth $85,000.
The accountant for Happy Nails uses straight-line depreciation for the 15-year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of D?
Total Revenue $700,000 Total Revenue $700,000
Cost Cost
Nail technicians A Nail technicians A
Owner's Salary B Owner's Time C
Depreciation Allowance D
Cost of using building and equipment
(opportunity cost) $25,000
Total Cost Total Cost
Total Profit E Total Profit F
Happy Nails is a locally owned nail salon that is in its first year of business.
The nail salon employs 8 nail technicians that are paid $31,250 each and the owner's is paid $75,000.
If the owner did not own Happy Nails, she would work for a competitor for $85,000.
At the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth $85,000.
The accountant for Happy Nails uses straight-line depreciation for the 15-year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of D?
answer
100,000/15=$6,666.67
question
Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of $125,000 (including all benefits) per year. After much consideration, you turn down the offer to start your own accounting firm. You pay yourself $75,000 (including all benefits) a year. Which of the following represents the opportunity cost of your time?
answer
$125,000
question
The demand function for Super Big Bright LED light bulbs is Q d = (45 million) - (3.5 million × P). If the company charged a price of $8 per bulb, how many will be demanded?
answer
45-(3.5 * 8) =17 million
question
The firm's production function is the relationship between the firm's ________ and its maximum ________.
answer
inputs; outputs
question
The manager of Pretty Flowers Florist has realized that she is offering so many different kinds of floral arrangements that her total costs increase if she produces more of any kind of arrangement. This is an example of ________.
answer
diseconomies of scope
question
The price elasticity for insulin (a life-saving drug for diabetics) is likely to be ________.
answer
perfectly inelastic
question
The supply function for a half gallon of Happy Cow Milk is Q S = (0) + (2 million × P). If the company charged a price of $3.5 per half gallon, how many half gallons will be supplied?
answer
0+(2*3.5) = 7 million
question
Using Excel, Big Poppa's estimates the weekly demand function for its BBQ sandwiches to be Q d = 580.25 - (25.50 × P). What is the point elasticity of demand at a price of $5?
answer
When you're given the demand equation, the formula for elasticity would be:
e = b * P/Q
in which b is the slope of the demand function (the number multiplied by P in the demand function), P is the price, and Q the quantity.
In this question, b (the slope) is 25.50
P is $5.
To find Q, plug in $5 into the demand function:
Qd = 580.25 - (25.50 × P) = 580.25 - 25.50*5 = 452.75
Now that we have b, P, and Q, we can find elasticity:
e = b P/Q = 25.50 5 / 452.75 = 0.28
e = b * P/Q
in which b is the slope of the demand function (the number multiplied by P in the demand function), P is the price, and Q the quantity.
In this question, b (the slope) is 25.50
P is $5.
To find Q, plug in $5 into the demand function:
Qd = 580.25 - (25.50 × P) = 580.25 - 25.50*5 = 452.75
Now that we have b, P, and Q, we can find elasticity:
e = b P/Q = 25.50 5 / 452.75 = 0.28
question
Which of the following is an example of a proprietorship?
answer
a taxi driver
question
Which type of firm pays dividends?
answer
corporation
question
________ is an example of an implicit cost.
answer
The wear and tear on a firm's machinery
question
All of the following are characteristics of a perfectly competitive market except which one?
answer
barriers to entry
question
All of the following are homogeneous goods except which one?
answer
toothpaste
question
Perfectly competitive firms are earning economic profits at a market price of $10 and an average total cost of $8. If new firms enter and increase the average total cost for all firms, the market price will ________ until ________.
answer
fall; economic profit is equal to zero
question
Quantity Total Cost
495 1500
496 1505
497 1512
498 1520
499 1530
500 1545
501 1562
502 1580
The table above shows the total cost for Happy Cows, a perfectly competitive dairy farm, at various levels of production. The market price for Happy Cows dairy is $10 per unit of dairy product.
Refer to the table above. What is the profit-maximizing output level for Happy Cows?
495 1500
496 1505
497 1512
498 1520
499 1530
500 1545
501 1562
502 1580
The table above shows the total cost for Happy Cows, a perfectly competitive dairy farm, at various levels of production. The market price for Happy Cows dairy is $10 per unit of dairy product.
Refer to the table above. What is the profit-maximizing output level for Happy Cows?
answer
MC (change in cost)
5 (1505-1500)
7 (1512-1505)
8 (1520-1512)
10 (1530-1520)
15 (1545-1530)
17 (1562-1545)
18 (1580-1562)
MC become equal to price ($10) at the quantity 499.
So $499 is the profit maximizing quantity.
5 (1505-1500)
7 (1512-1505)
8 (1520-1512)
10 (1530-1520)
15 (1545-1530)
17 (1562-1545)
18 (1580-1562)
MC become equal to price ($10) at the quantity 499.
So $499 is the profit maximizing quantity.
question
Quantity Total Cost
495 1500
496 1505
497 1512
498 1520
499 1530
500 1545
501 1562
502 1580
The table above shows the total cost for Happy Cows, a perfectly competitive dairy farm, at various levels of production. The market price for Happy Cows dairy is $10 per unit of dairy product.
Refer to the table above. At the profit-maximizing output level, how much does Happy Cows earn in profit?
495 1500
496 1505
497 1512
498 1520
499 1530
500 1545
501 1562
502 1580
The table above shows the total cost for Happy Cows, a perfectly competitive dairy farm, at various levels of production. The market price for Happy Cows dairy is $10 per unit of dairy product.
Refer to the table above. At the profit-maximizing output level, how much does Happy Cows earn in profit?
answer
Profit = Total Revenue - Total Cost
Profit = P*Q - Total Cost
P=10, Q=499, and Total Cost is 1530.
Plug the numbers in the profit formula:
Profit = 10*499 - 1530 = 3460
Profit = P*Q - Total Cost
P=10, Q=499, and Total Cost is 1530.
Plug the numbers in the profit formula:
Profit = 10*499 - 1530 = 3460
question
In a perfectly competitive market, the market demand is ...., while the demand faced by an individual firm is .... because the firms are .....
answer
downward sloping, horizontal, price takers
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