Term
Which of the following would result in a downward (leftward) shift in the demand curve for good X can be attributed to
a. a fall in the price of an input used in the production of the good
b. an increase in the price of a substitute good in production
c. an increase in the price of good X
d. an increase in the price of a complementary good in production
e. more than one of the above
f. none of the above |
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Definition
| d. an increase in the price of a complementary good in production |
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Term
Which of the following could result in an upward (rightward) shift of the demand curve for the normal good X?
a. a decrease in the price of a sub good (in consumption)
b an increase in the price of a comp good (in consumption)
c. a decrease in income
d. an increase in income
e. more than one of the above |
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Definition
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Term
A decrease in income results in:
a. a downward (leftward) shift in the demand curve for an inferior good
b. an upward (rightward) shift in the demand curve for an inferior good
c. a downward shift in the demand curve for a normal good
d. a movement along the demand curve
e. more than one of the above |
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Definition
| e. more than one of the above |
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Term
If demand price is elastic, an increase in price will cause a
a. larger percentage increase in QD than the percentage increase in price, thereby increasing total revenue
b. smaller percentage decrease in QD than the percentage increase in price, thereby decreasing total revenue
c. smaller percentage decrease in QD than the percentage increase in price, thereby increasing total revenue
d. larger percentage decrease in QD than the percentage increase in price, thereby decreasing total revenue |
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Definition
| d. larger percentage decrease in QD than the percentage increase in price, thereby decreasing total revenue |
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Term
The cross price elasticity is (assuming these goods are related in production):
a. negative for sub goods, positive for comp goods
b. always negative
c. negative for comp goods, positive for sub goods
d. none of these |
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Definition
| a. negative for sub goods, positive for comp goods |
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Term
A price-setting firm:
a. can lower the price of its product and sell more goods
b. can raise the price of its product and sell fewer units but will not lose all of its sales
c. possesses market power
d. sells a product that is somehow differentiated from the product sold by its rivals or sells in a limited geographic region with only one or few sellers
e. all of the above |
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Definition
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Term
Which of the following is NOT a fundamental assumption of perfect competition?
a. sellers are price takers
b. there exists a large number of competing firms, each of which supplies a small share of the entire industry output
c. there exists barriers to entry into the industry
d. the product shipped by each perfectly competitive firm is homogeneous |
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Definition
| c. there exists barriers to entry into the industry |
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Term
| You have estimated the demand for good X and have obtained the following estimated generalized demand function: Q=a+bPx+cM+dPy+ePz Q=900-18Px+15M+15Py-12Pz income (M)=20 everything in thousands From the estimated regression we can conclude: a. X and Y are substitutes b. X and Z are complements c. more than one of the above d. none of the above |
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Definition
| c. more than one of the above |
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Term
You have estimated the demand for good X and have obtained the following estimated generalized demand function:
Q=a+bPx+cM+dPy+ePz
Q=900-18Px+15M+15Py-12Pz
income (M)=20
everything in thousands
If the company sets Px=6, Py=4, and Pz=8, the forecasted predicted sales (jars demanded) of good X will be:
a. 1,456,000
b. 1,000,000
c. 856,000
d. 1,056,000
e. none of these |
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Definition
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Term
You have estimated the demand for good X and have obtained the following estimated generalized demand function:
Q=a+bPx+cM+dPy+ePz
Q=900-18Px+15M+15Py-12Pz
income (M)=20
everything in thousands
If the company sets Px=6, Py=4, Pz=8, what will be the cross price elasticity of demand for good X with respect to the price of good Y?
a. -1.97
b. -.43
c. .43
d. 1.23
e. cannot calculate given the info
f. none of the above |
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Definition
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Term
You have estimated the demand for good X and have obtained the following estimated generalized demand function:
Q=a+bPx+cM+dPy+ePz
Q=900-18Px+15M+15Py-12Pz
income (M)=20
everything in thousands
If the company sets Px=6:
a. the own-price elasticity of demand is inelastic and a price cut would increase total revenue
b. the own-price elasticity of demand is inelastic and a price cut would decrease total revenue
c. the own-price elasticity of demand is elastic and a price cut would increase total revenue
d. the own-price elasticity of demand is elastic and a price cut would decrease total revenue
e. none of the above |
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Definition
| b. the own-price elasticity of demand is inelastic and a price cut would decrease total revenue |
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Term
You have estimated the demand for good X and have obtained the following estimated generalized demand function:
Q=a+bPx+cM+dPy+ePz
Q=900-18Px+15M+15Py-12Pz
income (M)=20
everything in thousands
A decrease in the price of good Z, everything else held constant, would:
a. shift the demand curve for good X rightwards
b. shift the demand curve for good Z leftwards
c. would result in a higher equilibrium (market) price and quantity of good X
d. would result in a lower equilibrium (market) price and quantity of good X
e. more than one of the above |
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Definition
| e. more than one of the above |
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Term
When demand is inelastic:
a. marginal revenue is negative
b. the percentage change in price exceeds the percentage change in quantity
c. an increase in price (in the inelastic range) causes total revenue to rise
d. all of the above
e. none of the above |
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Definition
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Term
For a price setter, marginal revenue
a. is the addition to total revenue from producing one more unit of output
b. decrease as the firm produces more output
c. is equal to price at any level of output
d. both a and b
e. both a and c |
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Definition
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Term
Consider the market for good X, a decrease in the expected price of good X can be expected to:
a. cause the supply curve to shift right today, rising market price
b. cause the demand curve to shift left today, rising market price
c. cause supply to shift left and demand to shift left with an ambiguous effect on the market
d. cause supply to shift left and demand to shift right, causing market price to rise
e. none of the above |
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Definition
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Term
QD=500,000-50,000P
QS=-100,000+100,000P
The equilibrium price and quantity of good X is:
a. 4 and 30,000
b. 4 and 300,000
c. 40 and 30,000
d. none of the above |
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Definition
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Term
QD=500,000-50,000P
QS=-100,000+100,000P
Suppose that the govt. creates a price control that lowers the price to 2. There would be a resulting
a. excess supply equal to 30,000
b. excess demand equal to 300,000
c. excess demand equal to 400,000
d. none of the above |
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Definition
| b. excess demand equal to 300,000 |
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Term
Total revenue increased for a firm operating in the elastic range of its demand curve. Which of the following statements is correct?
a. The firm must have raised price
b. The firm must have lowered price
c. QD must have decreased
d. QD must have increased
e. more than one of the above |
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Definition
| e. more than one of the above |
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Term
A price-taking firm can exert no control over price because
a. the demand curve facing the individual firm is downward sloping
b. of a lack of substitutes for the product
c. the firm's individual production is insignificant relative to production in the industry
d. many other firms produce a product that is nearly identical to its product
e. both c and d |
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Definition
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Term
In which of the following cases must price always rise?
a. demand increases and supply increases
b. demand decreases and supply decreases
c. supply increases and demand remains constant
d. demand decreases and supply increases
e. none of the above |
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Definition
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Term
Suppose Marv, the owner/manager of Rod's and Reels, earned 240,000 in revenue last year. Marv's explicit costs of operation totaled 300,000. Marv has BA in education and could alternatively be earning 40,000 annually as a high school teacher.
a. Marv's total economic cost is 300,000
b. Marv's accounting profit is -100,000
c. Marv's economic profit is -60,000
d. Marv's economic profit is -100,000 |
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Definition
| d. Marv's economic profit is -100,000 |
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Term
A price-taking firm can exert no control over price because
a. price is determined by market forces
b. price is determined by the intersection supply and demand
c. the firm's individual production is insignificant relative to industry output
d. many other firm's produce a product that is nearly identical to its product
e. all of the above |
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Definition
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Term
Suppose that supply increases and demand decreases. What effect will this have on price and quantity?
a. price will increases and quantity may rise or fall
b. price will decrease and quantity will increase
c. price will decrease and quantity will decrease
d. none of the statements associated with this question are correct |
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Definition
| d. none of the statements associated with this question are correct |
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Term
Suppose the demand for X is given by
Qx=100-2Px+4Py+10M+2A where A is the advertising budget for good X. If A increases by 10,000, then the demand for X will
a. decrease by 20,000
b. decrease by 100,000
c. increase by 100,000
d. increase by 20,000 |
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Definition
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Term
You are a manager of a supermarket, and know that the income elasticity of peanut butter is exactly -1.4. Due to the recession, you expect incomes to drop by 15% next year. How should you adjust your purchase of peanut butter?
a. buy 10.7% less peanut butter
b. buy 2.1% more peanut butter
c. buy 21% more peanut butter
d. none of the above |
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Definition
c. buy 21% more peanut butter
(income elasticity of peanut butter x -15%) |
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Term
Suppose demand is given by
Qx=50-4Px+6Py+Ax, where Px=4, Py=2, and Ax=50. What is the advertising elasticity of demand for good X?
a. 1.12
b. 0.38
c. 1.92
d. 0.52 |
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Definition
d. 0.52
(plug in variables and place advertising over QD) |
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Term
Generally when calculating profits as total revenue minus total costs, accounting profits are larger than economic profits because economists take into account
a. only explicit costs
b. only implicit costs
c. both explicit and implicit costs
d. both types of profits are always equal because they account for the same costs |
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Definition
| c. both explicit and implicit costs |
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Term
Which of the following is a correct statement about the own-price elasticity of demand?
a. demand tends to be more inelastic in the short term than in the long term
b. demand tends to be more elastic as more substitutes are available
c. demand tends to be more inelastic for goods that comprise a smaller share of a consumer's budget
d. all of the statements are correct |
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Definition
| d. all of the statements are correct |
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Term
The demand for most agricultural products is rather inelastic with respect to own price. Thus, when bad weather reduces the size of crops (decrease in supply)
a. farmer's income rises
b. the marginal revenue of selling one more unit of an agricultural product is negative
c. the percentage decrease in crop sales exceeds the percentage increase in price
d. both a and b
e. both b and c |
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Definition
| c. the percentage decrease in crop sales exceeds the percentage increase in price |
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Term
Which of the following would not tend to make demand for a good X more elastic?
a. a major competitor of good X goes out of business
b. a product X is improved so that it becomes more durable
c. incomes fall, which increases the share of families' budgets spent on X
d. both a and c |
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Definition
| a. a major competitor of good X goes our of business |
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Term
For an unconstrained optimization problem with a continuous choice variable, the optimal level of activity is that level of the activity for which
a. total benefit exceeds total cost by the maximum amount
b. marginal benefit minus marginal cost equals zero
c. total benefit equals total cost
d. marginal benefit equals zero
e. both a and b |
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Definition
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Term
If the marginal benefits of increasing study time are less than the marginal costs, then
a. study time should be decreased to zero
b. study time should be decreased
c. no conclusion about the relative merits of more or less study time is possible
d. there is too little study time
e. study time should be increased |
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Definition
| b. study time should be decreased |
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Term
If the market price of eggs rises at the same time as the market quantity of eggs purchased decreases, this could have been caused by
a. an increase in demand with no change in supply
b. a decrease in supply with no change in demand
c. an increase in supply and an increase in demand
d. an increase in supply and a decrease in demand |
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Definition
| b. a decrease in supply with no change in demand |
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Term
Given the following:
A new national chain opens new multi screen movie theaters in most U.S. cities.
Movie theaters cut the price of popcorn and soft drinks in half.
What do you predict happen to the equilibrium price of movie tickets? The equilibrium quantity of movie tickets?
a. price will increase, quantity will be ambiguous
b. price will be ambiguous, quantity will increase
c. price will decrease, quantity will be ambiguous
d. price will be ambiguous and quantity will decrease |
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Definition
| b. price will be ambiguous, quantity will increase |
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Term
A firm will maximize profit by producing that level of output at which
a. the additional revenue from the last unit sold exceeds the additional cost of the last unit by the larger amount
b. the additional revenue from the last unit sold equals the additional cost of the last unit
c. total revenue exceeds total cost by the largest amount
d. total revenue equals total cost
e. both b and c |
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Definition
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Term
Which of the following is an example of an implicit cost for a firm?
a. the value of time worked by the owner
b. any wages and salaries paid to employed
c. forgone rent on property owned by a firm
d. both a and c |
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Definition
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Term
Which of the following economic forces promote profitability in the long run?
a. existence of strong barriers to entry
b. a large number of complementary products
c. a large number of close substitute products
d. bother a and b
e. all of the above |
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Definition
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