question
A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:
answer
total revenue will decrease.
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A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that:
answer
cross-price elasticity of demand for soda is -3.
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If the supply curve for a product is vertical, then the elasticity of supply is:
answer
equal to zero.
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Refer to Figure 5-1. Graph B represents a demand curve that is relatively __________. Total revenue __________ as the price decreases from $10 to $5.
answer
inelastic; decreases
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Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.
answer
inelastic
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Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.
answer
unit elastic
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A perfectly elastic supply curve is:
answer
horizontal
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If cola and iced tea are good substitutes for consumers, then it is likely that:
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their cross price elasticities are greater than zero.
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The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise:
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increasing the price of game tickets because demand is inelastic
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The longer the time period considered, the more the elasticity of supply tends to:
answer
increase
question
Introducing a tariff on vitamin Z would:
answer
increase American consumption of domestically produced vitamin Z.
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Tariffs are taxes imposed on _________________.
answer
imported products
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An import quota does which of the following?
answer
increases the price of the domestic goods to consumers
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Why would foreign firms export a product at less than its cost of production—which presumably means making a loss?
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This may be part of a long-term strategy in which foreign firms would sell at below the cost of production in the short-term for a time, and when they have driven out the domestic U.S. competition, they would then raise prices.
question
The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that:
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domestic producers can attain the economies of scale to allow them to compete in world markets.
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Which of the following is the best example of a quota?
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a limit imposed on the number of men's suits that can be imported from a foreign country
question
The race to the bottom scenario of global environmental degradation is explained roughly like this:
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Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits.
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The term _________________ refers to the additional utility provided by one additional unit of consumption.
answer
marginal utility
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Rick eats only french fries and burgers at his office cafeteria. His weekly lunch budget is $48. Each burger costs $6 and each order of fries costs $3. When deciding how much of each good to buy, Rick knows that 2 burgers and 4 orders of french fries will give him a utility of 8. At his utility-maximizing point, Rick's utility is:
answer
32
question
The step-by-step process of finding the choice with highest total utility involves a comparison of the:
answer
marginal utility gained and lost from different choices along the budget constraint.
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When Marietta chooses to only purchase a combination of goods that lie within her budget line, she:
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is maximizing utility.
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Refer to the diagram above. What is the significance of the point at the top of the backward bending of the supply curve marked L3?
answer
as wages increase over this range, the quantity of hours worked actually decreases.
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The most common pattern for marginal utility is ____________________.
answer
diminishing marginal utility
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Why would labor be treated as a variable cost?
answer
producing larger quantities of a good or service generally requires more workers
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In order to determine ____________, the firm's total costs must be divided by the quantity of its output.
answer
average cost
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Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit.
answer
total revenue
question
I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was
answer
$2.43
question
The table below sets out cost information for the production of volley balls. Some values are missing. Which of the following statements is correct?
answer
A = 42, E = 12
question
The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are ________________________.
answer
upward-sloping; more costly to produce
question
I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $8. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was
answer
$2.00
question
If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ .
answer
shutdown point
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It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ____________________.
answer
could likely result in a notable loss of sales to competitors
question
Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4?
answer
$5.00
question
For a perfectly competitive firm, the marginal cost curve is identical to the firm's ________________ .
answer
supply curve
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What happens in a perfectly competitive industry when economic profit is greater than zero?
answer
new firms may enter the industry and all of the above
question
If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses.
answer
average cost
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Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its
answer
marginal revenue is constant.
question
If a perfectly competitive firm is a price taker, then
answer
pressure from competing firms will force acceptance of the prevailing market price.
question
Idaho farmers can sell as large a quantity of their potato crop as they wish,
answer
provided each is willing to accept the prevailing market price.
question
Economic profit can be derived from calculating total revenues minus all of the firm's costs,
answer
including its opportunity costs.
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