$2.50

Marginal Cost = Change in TC / Change in Total Output Calculation is ($900 - $750) / (450 - 390) = $150 /60 = $2.50

he number of businesses serving meals in shopping mall food courts falls.

**What happens to the demand for labor and the wages in these businesses?**

**This type of industry is classified as __________.**

**Which of the following is a correct statement about how information asymmetry affects a market outcome?**

**The minimum efficient scale on the long-run cost curve below occurs at about what output level?**

Interest rates rise on your savings account at your bank, and you decide to save 5% more from your paycheck to take advantage of the increased rates. **Which of the six core principles of the economic way of thinking does this decision illustrate?**

**What are the correct terms for the square red area and then the triangular blue area in this diagram?**

**Which of the the following is the best definition of an economy?**

A social system that coordinates the interaction among decision-makers about the use of society’s scarce resources.

Consider the budget line graph below.

**If Mexican meals are $8 and Italian meals are also $8, what is the consumer’s total budget for possible combinations of meals?**

Consider the graph below.

**What is the quantity of labor for the bilateral monopoly, and by how much does it change from the competitive market?**

*Q*; it falls by QE − *Q*.

**Calculate consumer surplus and producer surplus using the diagram below.**

Consumer Surplus = $18.0 million Producer Surplus = $13.5 million

You are using the formula for the area of the triangle above the equilibrium price for consumer surplus, and the triangle below the equilibrium price for producer surplus.

Consumer Surplus = ½ (3 million * ($26 - $14)) = $18.0 millionProducer Surplus = ½ (3 million * ( $14 - $5)) = $13.5 million

**If the variable costs for a firm are $40,000, the fixed costs are $20,000, and the firm sells 100 units, what is the firm's average total cost?**

$600

RATIONALE

Total Cost (TC) = Fixed Costs + Variable Costs

$20,000 + $40,000 = $60,000

Average Total Cost (ATC) = Total Cost/Total Output

$60,000/100 = $600

Consider the negative externality graph.

**If the firms take into account the harm to society, which of the following statements is correct?**

**What quantity ( Q) will the profit-maximizing monopolist below produce, what price (P) will they charge, and how much will their profit or loss be?**

*Q* = 4 units *P* = $4,000Profit = $6,000

RATIONALE

The quantity produced is where MR = MC, or 4 units. Price is taken from the demand curve at $4,000. Profit or loss is (*P* − ATC) × quantity = ($4,000 − $2,500) × 4 = $1,500 × 4 = $6,000.

**At a market price of $0.25, a __________ of __________ units exists. Buyers will tend to __________ the price until it reaches a price of __________.**

$1.50

RATIONALE

Marginal Revenue = Change in Total Revenue / Change in Total Output ($555 - $465) / (370 - 310) = $90 / 60 = $1.50

Consider the diagram below.

**If the price falls to $2.00, should this perfectly competitive firm continue to produce or shut down temporarily?**

**The optimal choice of chicken meals and vegetarian meals for IC2 and B2 in the diagram below is __________.**

Consider the graph below. Suppose qO = 400, pO = $25, and ATC = $18 at 400 units.

**Is the profit-maximizing firm in an oligopoly market making a profit or loss, and by how much?**

$2,800 profit

RATIONALE

The quantity produced is where MR = qO, or 400 units. Price is taken from the demand curve and given as $25. Since ATC is given as $18, profit or loss is (*P* − ATC) × quantity = ($25 − $18) × 400 = $7 × 400 = $2,800. The firm is earning a profit.

**Given the information below, the accounting profit of the firm is __________.**

product price: $40unit cost: $10quantity sold: 200quantity produced: 200

$6,000

RATIONALE

Accounting profit is total explicit revenue minus total explicit costs. Therefore, this would be calculated as follows:

(200 × $40) − (200 × $10) = $8,000 − $2,000 = $6,000

Consider the indifference curves below.

**Which curve shows the lowest level of individual satisfaction?**

**Which of the following is a reason why firms in a perfectly competitive market have no market power?**

John wants to calculate his customers' reaction to a price increase for the milk he sells in his grocery store.

**What would be the correct formula for him to use?**

Consider the indifference curve graph below.

**The slope between points A and C is ____________ and is known as the ____________.**

**Which point or points in the following Production Possibilities Model represent(s) the current maximum production possibilities given our resource constraints?**