Economics Short Answers / Multiple Choice. Needs to be finished in the next 2 hours.

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An important determinant of the price elasticity of demand is the (Points : 2)

        price of inputs.         level of technology.         availability of substitutes.         quantity of the good supplied

2. The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to ________ and demand is described as (Points : 2)

        0.2; inelastic         5; inelastic         0.2; elastic         5; elastic

3. If the income elasticity of demand for a good is negative, the good is said to be: (Points : 2)

        an inferior good         a substitute good.         a normal good.         a positive good.

4. The cross-price elasticity of electricity with respect to the price of natural gas has been estimated as being equal to 0.2. This implies that:(Points : 2)

        natural gas and electricity are both normal goods         electricity and natural gas are complements         electricity and natural gas are substitutes         one of the two goods is inferior and the other is normal, but we need additional information to determine which of them is normal.

5. A newspaper typically consumes a smaller fraction of a consumer's budget than a home entertainment system. Therefore, you would expect the demand for (Points : 2)

        a home entertainment system to be more price-elastic.         a home entertainment system to be more price-inelastic.         newspapers to be more price-elastic.         the two to be equally price-elastic.

6. Paolo owns a pizza shop. The price of pizza recently increased from $3 to $5 a slice. Paolo responded by increasing the quantity of slices he supplied from 100 to 150 slices per day. Using the midpoint method, calculate Paolo's price elasticity of supply. (Points : 2)

        5/4         4/5         3/4         5/2

7. We know that when the price of gasoline goes up, consumers reduce quantity demanded depending on the time given for adjustment. This quantity adjustment is: (Points : 2)

        greater in the long run than in the short run.         greater in the short run than in the long run         the same in both the short run and the long run.         undetermined, all A, B and C previous answers are possible.

8. When a public transit system (such as a subway or bus line) raises its fares, it may experience an increase in total revenue. This suggests that demand is: (Points : 2)

        unstable.         price-inelastic         price-elastic         price unit-elastic

9. After eating six chocolate candy bars in ten minutes, Jody says, "You would have to pay me to eat another chocolate candy bar!" This statement best illustrates (Points : 2)

        the law of demand.         the substitutability among goods.         the law of diminishing marginal utility.         that chocolate candy bars are an inferior good.

10. Which of the following is an implicit cost of the business? (Points : 2)

        wages paid to part-time employees         the job offer you did not accept at a local catering service         bread, meat, and vegetables used to produce the items on your menu         your monthly utility bill.

11. To maximize her grade in Physics, Stacey should study until (Points : 2)

        her marginal cost of studying begins to increase         her marginal benefit of studying begins to decrease         her marginal benefit of studying equals her marginal cost of studying         her marginal cost of studying reaches zero.

12. Accountants use only ________ costs in their computations of short-run total cost. (Points : 2)

        opportunity         implicit         explicit         variable

13. Table: Marginal Analysis of Sweatshirt Production:

Quantity of shirts

Total Benefit (in dollars)

Total Cost (in dollars)

0

$0

$0

1

16

9

2

32

20

3

48

33

4

64

48

5

80

65

Given the information above, the optimal quantity of sweatshirts that will be produced is. [Hint: Find out the MB and MC.] (Points : 2)

        2         3         4         5

14. Sunk costs (Points : 2)

        affect economic profit.         are the losses associated with failed business ventures.         are an important component of marginal analysis.         are the same as fixed costs.

15. The relationship between an individual's consumption bundle and utility is called a: (Points : 2)

        demand function.         production function.         consumption function.         utility function

16. If Vanessa consumes more pomegranates and fewer bananas, the ________ of pomegranates will _______, and the ________ of bananas will ________. (Points : 2)

        marginal utility; fall; marginal utility; rise         marginal utility; rise; marginal utility; fall         total utility; fall; marginal utility; rise         marginal utility; rise; total utility; rise

17. Marginal Utility per dollar of M&Ms

Quantity (bags) of M & M

Total Utility in Utils

0

0

             1            

6

2

10

3

13

4

15

5

16

Andy's total utility from eating snack-size bags of M&Ms is given in the table above.  The price of M&Ms is $2 per bag.  Andy's marginal utility per dollar of the second bag of M&Ms is: (Points : 2)

        16 units of satisfaction per dollar         10 units of satisfaction per dollar         5 units of satisfaction per dollar         2 units of satisfaction per dollar

18. While eating pizza, you discover that the marginal benefit of eating one more slice is greater than the marginal cost of that slice. You then conclude: (Points : 2)

        you will be better off if you eat one more slice         you will be no better off and no worse off from eating one more slice         you will be worse off if you eat one more slice         the total cost of eating the pizza will be more than the total benefit of eating the pizza

19. The production function provides information about: (Points : 2)

        a firm's profit level.         the transformation of inputs into output.         the location of the firm's production.         a firm's market structure.

20. You own a small deli that produces sandwiches, soups, and other items for customers in your town. Which of the following is a fixed input for the production function at your deli? (Points : 2)

        the dining room where customers eat their meals.         the loaves of bread used to make sandwiches.         the cans of tomato sauce used to make soups.         the employees hired to help make the food.

21. Use the table below to answer the following questions.

Units

Total Fixed Cost

Total Variable

of Output

(dollars)

Cost (dollars)

1

150

25

2

150

48

3

150

70

4

150

100

a) What is the total cost of producing 3 units? Include calculations and explain your answer. b) What is the average cost of 3 units? Include your calculations and explain your answer.  c) What is the marginal cost of producing the third unit of output? Include calculations and explain your answer.

(Points : 6)

             

22. Table: Production of Cabinets:

Quantity of Labor (workers)

Quantity of cabinets per day, Q

Marginal Product of Labor (Cabinets per worker per day)

0

0

 

1

5

5

2

11

6

3

16

5

4

20

4

5

23

3

6

25

2

7

26

1

8

25

-1

Look at the table The Production of Cabinets.   a) If each cabinet-maker could be hired at no cost, how many workers would your firm employ? Include your calculations and explain your answer. b) After which worker does the firm begin to experience diminishing returns to labor? Include your calculations and explain your answer.  c) If each cabinet is sold at $10 and workers are paid $36 per day, how many workers would be hired per day? (Points : 9)