question
Returns to scale refers to the change in output when
answer
all inputs increase proportionally
question
Returns to scale is a concept that operates
answer
only in the long run
question
If a firm doubles inputs and produces three times the output, then there are
answer
increasing returns to scale
question
A cost function has economies of scale if
answer
The average total cost falls as production increases
question
Learning by doing will result in
answer
lower long-run average costs than short-run average costs
question
An increase in consumer incomes will lead to
answer
a rightward shift of the demand curve for plasma TVs.
question
A downward-sloping demand curve indicates that
answer
individuals have different valuations of the same product.
question
According to the (first) Law of Demand, the demand curve will
answer
.
slope downward
slope downward
question
The percentage change in the quantity demanded in response to a percentage change in price is known as the
answer
price elasticity of demand
question
Economies of scope exist between book publishing and magazine publishing if the cost of publishing
answer
A magazine is lower for book publishers than for other firms
question
If the price of a slice of pizza rises from $2.50 to $3.00, and quantity demanded falls from 10,000 slices to 7,400 slices, calculate the elasticity of demand.
answer
-1.64
question
Suppose each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the long run the firm will experience
answer
Constant returns to scale
question
A firm sets its optimal price where
answer
marginal revenue minus marginal cost equals zero (MR-MC=0)
question
A firm's profit is
answer
.
the difference between total revenue and total cost
the difference between total revenue and total cost
question
Elasticity of demand along a linear (straight line) demand curve
answer
changes along the curve.
question
Equilibrium is defined as a situation in which
answer
neither buyers nor sellers wish to change their behavior.
question
The supply curve is influenced by
answer
the prices of inputs required to produce the product.
question
At equilibrium, quantity sold equals quantity bought. This implies that
answer
to sell more producers require more in payment thatn consumers are willing to pay.
question
If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the elasticity of demand for OJ is
answer
inelastic
question
Travel webistes such as Travelocity® tend to offer reservation services for multiple travel modes, such as airlines and railroads. This is because
answer
once the firms have reservation technology in place for airlines, there are economies of scope in offering the same service for railroads
question
market equilibirum occurs
answer
through the interaction of self-interested consumers and producers
question
If oranges were found to cure cancer
answer
A. the equilibrium price of oranges would likely increase in the near term.
B. the equilibrium quantity of oranges would likely increase.
C. the equilibrium price of apples would likely fall.
D. all of the above (answer)
B. the equilibrium quantity of oranges would likely increase.
C. the equilibrium price of apples would likely fall.
D. all of the above (answer)
question
Suppose a market was currently at equilibrium. A rightward shift (increase) of the demand curve would cause
answer
an increase in price and quantity.
question
Which of the following is NOT a characteristic of perfectly competitive markets?
answer
It is hard to find a trading partner.
question
One difference between a monopoly firm and a competitive firm is that
answer
a monopoly firm faces a downward sloping demand curve
question
A rightward shift (increase) of the demand curve will lead to a(n)
answer
A. increase in the quantity supplied.
B. increase in the equilibrium price.
C. excess demand at the old equilibrium price.
D. all of the above
B. increase in the equilibrium price.
C. excess demand at the old equilibrium price.
D. all of the above
question
A drought in the Midwest U.S. will raise the price of wheat becasue of a
answer
leftward shift of the supply curve
question
Economists typically assume owners of firms wish to
answer
maximize profits.
question
The monopoly maximizes profit by setting
answer
Consumer surplus
question
Consumer surplus
answer
is the difference between what a consumer would willingly pay for a good and the price actually paid
question
Which of the following is true?
answer
Salt has a less elastic demand than ice cream
question
An economist estimated the cross-price elasticity for peanut butter and jelly to be +1.5. Based on this information, we know the goods are:
answer
substitutes
question
A elasticity of demand of -2.3 imples demand is
answer
elastic
question
As the price of DVDs is raised from $3 to $5, the quantity demanded fell from 200,000 units to 180,00 units. The elasticity of demand for DVDs is
answer
-0.21
(Q1-Q2)
---------
(Q1+Q2)
---------------
(P1-P2)
--------
(P1-P2)
(Q1-Q2)
---------
(Q1+Q2)
---------------
(P1-P2)
--------
(P1-P2)
question
Marginal cost is $8, elasticity of demand is -2.0, price of the product is $12. What is the current margin
answer
0.33
P-MC
--------
P
P-MC
--------
P
question
If your current margin is greater than your desired margin, you should
answer
lower price.
question
According to the law of diminishing marginal returns, marginal returns diminish
answer
eventually
question
When demand for a product falls, which of the following events would you NOT expect to occur?
answer
A decrease in the supply of the product
question
What would happen to revenues if a firm in a competitive industry raised price?
answer
They would fall to zero.
question
If a firm successfully develops a product differentiation strategy, the elasticity of demand for its product should
answer
decrease.
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