question

Which answer best defines elasticity?

answer

Elasticity is a measure of the sensitivity of one variable to a change in another.

question

Which of the following is the best example of inelastic demand?

answer

Tom bought banners sold in town before. They were high quality, so he bought the same number of banners there again, despite an increase in price.

question

John was ordering orange cones to use for soccer drills. If John decides to purchase cones now, he will buy 10 sets at $5 per set. If he decides to purchase the cones at a later time when the demand decreases, he will purchase 14 sets at $3 per set. The own-price elasticity of the soccer cones, calculated using the mid-point formula, is __________.

answer

-0.67

question

A store recently marked a hydration belt on sale, lowering the price by 40% from $20 to $12. The store also sells a hydration bottle, which is similar to the belt except that runners can hold it in their hands with a strap while running. When the store lowered the price of the hydration belt, the quantity of hydration bottles sold decreased by 28%. Using the cross-price elasticity formula, the cross-price elasticity is __________ and the goods are __________.

answer

0.70; substitutes

question

Ashley received a raise at work that increased her monthly income from $1,000 to $1,250 (an increase of 25%). Last year, Ashley bought 20 slices of cake for her birthday party. With her increased income, she is able to buy 24 slices for her birthday this year (an increase of 20%). The income elasticity calculated using the formula for income elasticity is __________ and the cake slices are a __________ good.

answer

0.8; normal

question

Mental rules of thumb used to shortcut a decision-making process are referred to as __________.

answer

heuristics

question

Rational choice theory states that individuals makes decisions __________.

answer

based on an optimization of their own level of benefit

question

When you choose the point of tangency where the indifference curve touches the budget line, you are __________.

answer

making the optimal choice for a combination of two goods

question

Consider the following chart. What is the marginal utility per the price for the fourth unit of Chicken Fajitas? The price of a Chicken Fajita is $10.

answer

+1.4 utils per dollar

question

If the marginal utility per price of Good A is $5.00 and the marginal utility per price for Good B is $4.50, what does the utility-maximizing rule tell you to do if the budget allows it?

answer

Purchase one more unit of Good A, and compare again.

question

With the price of a Chicken Fajita at $10.00, the price of a Cheese Quesadilla at $5.00, and a total budget available of $48.00, what does the utility-maximizing rule tell you the optimal quantity of Chicken Fajitas and Cheese Quesadillas is, as well as the number of dollars required to purchase them?

answer

3 Chicken Fajitas; 3 Cheese Quesadillas: $45 dollars spent.

question

The slope of the indifference curve is the __________, and the slope of the budget curve is the __________.

answer

marginal rate of substitution; marginal rate of transformation.

question

Consider the budget line graph below. If Mexican meals are $10 and Italian meals are also $10, what is the consumer's total budget for possible combinations of meals?

answer

$100

question

Consider the indifference curve below, and choose the statement that is true.

answer

A, B, and C have the same level of satisfaction.

question

The income remaining after deducting all explicit and implicit costs from all explicit and implicit revenue is known as __________.

answer

economic profit

question

Carrie's Cakes charges $15 per cake, and Carrie sells 10 cakes each day. Carrie's cost of production is $80 in total each day. Based on this information, Carrie's accounting profit per day is __________.

answer

$70

question

Before Kelly opened up her boutique, she worked as a hair stylist in a salon and earned a $33,000 annual salary. Below is a list of Kelly's financial facts for her shop's first year in business.

$145,000 = total revenue

$20,000 = rental fees

$8,000 = utilities

$30,000 = salary for assistant manager

$50,000 = merchandise

Kelly's economic profit for her shop's first year was __________.

$145,000 = total revenue

$20,000 = rental fees

$8,000 = utilities

$30,000 = salary for assistant manager

$50,000 = merchandise

Kelly's economic profit for her shop's first year was __________.

answer

$4,000

question

The total physical product curve represents the total physical amount of output possible given __________.

answer

different quantities of inputs

question

Which of the following statements is true if a firm finds that, with three workers, it can produce 45 units?

answer

The average product of labor is 15 units.

question

Consider the following chart. What is the marginal product of labor (MPL) of the third worker?

answer

+90

question

Which of the following is a variable input for a transportation company?

answer

Wages for drivers who are paid per trip

question

The formula for average total cost is either Total Cost/Total Output, or __________.

answer

Average Fixed Cost + Average Variable Cost

question

Consider the following chart. How much is the marginal cost when total output increases from 440 pounds to 520 pounds?

answer

$0.625

question

You own a small business and from past experience you know that your product is price elastic. To increase total sales revenue, you should .

answer

decrease the price

question

Calculate Marginal Revenue when output rises from 320 to 380 pounds.

answer

$2.50

question

Using the graph below, determine the profit-maximizing price and quantity to produce.

answer

Profit-maximizing price = $80

Quantity to produce = 120 units

Quantity to produce = 120 units

question

At which output level will the short-run supply curve of a profit-maximizing, perfectly competitive firm start?

answer

25 units

question

When will the firm pictured in the graph shut down?

answer

At any price below P2

question

Consider the long-run cost curve below. At about what production level do economies of scale run out and constant returns begin ?

answer

450 units