question
according to the principle of diminishing returns, if the number of workers is increased beyond the point of diminishing returns, then the additional worker:
answer
increases total output by less than the amount of previous workers
question
which of the following would not shift the demand curve for beef
a) a widely publicized study which indicates beef increases one's cholesterol
b) a reduction in the price of cattle feed
c) an effective advertising campaign by pork producers
d) a change in the incomes of beef consumers
a) a widely publicized study which indicates beef increases one's cholesterol
b) a reduction in the price of cattle feed
c) an effective advertising campaign by pork producers
d) a change in the incomes of beef consumers
answer
b)
question
Diet Coke is a close substitute for Diet Pepsi. When Coca-Cola introduced Diet Coke in 1982, the price elasticity of demand for Diet Pepsi ______ and PepsiCo's ability to raise revenues through price increases ______.
answer
increased, was reduced
question
If demand for crops is inelastic, a good harvest will cause farm revenues to
answer
decrease because of a percentage fall in price greater than the percentage increase in quantity sold
(increase in supply, decrease in price)
(increase in supply, decrease in price)
question
which would best explain a decrease in both the price and the quantity of a product over a period of time?
a) a decrease in people's incomes, and the product is an inferior good
b) a long strike by workers who make the product
c) a decrease in the price of a substitute good
d) a technological improvement in production methods
a) a decrease in people's incomes, and the product is an inferior good
b) a long strike by workers who make the product
c) a decrease in the price of a substitute good
d) a technological improvement in production methods
answer
c)
question
Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $140. Amanda experiences:
answer
a consumer surplus of $10 and Tony experiences a producer surplus of $190
question
If a perfectly competitive firm produces an output level at which price is greater than marginal cost, then the firm should
answer
expand out put to earn greater profits with smaller losses
question
suppose a perfectly competitive firm and a monopolistic firm are both charging $5 for their respective products. From this, one can infer that
answer
the marginal benefit from selling an additional unit of output is $5 for the competitive form and less than $5 for the monopolist
question
if a production process exhibits diminishing returns, then as output rises
answer
marginal cost will eventually increase
question
Suppose a firm's total revenue is $100 when it sells 10 units, and $110 when it sells 11 units. The firm, therefore, is a(n):
answer
perfect competitor
question
If a perfectly competitive firm produces an output at which price is less than marginal cost, then the firm should
answer
reduce output to earn greater profits with smaller losses
question
If a monopolists marginal revenue exceeds its marginal cost at its current level of output, then to maximize profit the monopolist should
answer
increase output until marginal revenue=marginal cost
question
When the price of a perfectly competitive firm's output rises:
answer
the firm will produce more
question
How to find the optimal quantity of information?
answer
- where MB=MC of information
question
How to calculate expected value?
answer
Expected value = (prob of gain) x (value of gain) + (prob of loss) x (value of loss)
question
risk averse
answer
would refuse any fair gamble
question
risk neutral
answer
A balance between risk and payoff (anything fair=0 or higher)
question
How does a middleman add values to the economy?
answer
acts as an intermediary between the producer and consumer
- Provide benefits to manufacturers and consumers
Reduce risks and decrease searching costs
- Provide benefits to manufacturers and consumers
Reduce risks and decrease searching costs
question
What is adverse selection problems and what are the solutions?
answer
Adverse selection occurs when either the buyer or seller has more information about the product or service than the other.
- to eliminate asymmetric information by providing the relevant information regarding borrowers (sellers of securities) to investors (buyers of securities).
- to eliminate asymmetric information by providing the relevant information regarding borrowers (sellers of securities) to investors (buyers of securities).
question
The law of supply states that
answer
the quantity supplied of a good rises when the price rises
question
the law of demand implies that, other things remaining the same (cheeseburgers)
answer
as the price of a cheeseburger rises, demand for them will decrease
question
flour is a basic ingredient in bread making. if the price of flour increases,
answer
the supply of bread will decrease
question
Suppose the price for fully electric cars made by Toyota increases. The quantity of fully electric cars sold in the market will
answer
A) increase because Toyota will be willing to sell more fully electric vehicles
C) increase, because other auto manufacturers would want to enter the market and also sell fully electric vehicles
(Both A+C)
C) increase, because other auto manufacturers would want to enter the market and also sell fully electric vehicles
(Both A+C)
question
In a market in which the government has set a price ceiling below equilibrium price,
answer
a black market might develop
(price ceiling--> shortage)
(price ceiling--> shortage)
question
the price elasticity of demand for a good measures the responsiveness of
answer
quantity demanded to a 1% change in price of that good
question
which of the following is not true if a perfectly competitive firm
A) it faces a perfectly elastic demand curve
B) It is unable to influence the price of the good it sells
C) it always charges a price above the marginal cost of production
D) It sells only a small fraction of the total quantity exchanged in the market
A) it faces a perfectly elastic demand curve
B) It is unable to influence the price of the good it sells
C) it always charges a price above the marginal cost of production
D) It sells only a small fraction of the total quantity exchanged in the market
answer
C)
(price is charges is at P=MR=MC)
(price is charges is at P=MR=MC)
question
marginal cost curve is upward sloping because
answer
diminishing returns to variable factors of production
question
economies of scale exist when
answer
the average cost of production falls as output rises.
question
In general, when the price of a variable factor of production increases:
answer
marginal cost increases
question
in short run, don't shut down unless
answer
TR<VC
question
a decrease in the price a firm receives for its output will lead the firm to
answer
reduce output
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