quiz 2 eco

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QUESTION 1

1. Below-normal profits signal a need for industry

	1.	regulation
	2.	contraction
	3.	expansion
	4.	wage increases

2 points

QUESTION 2

1. Freely competitive markets

	1.	reduce consumer choice
	2.	ignore social costs
	3.	ignore social benefits
	4.	allocate goods via supply and demand

2 points

QUESTION 3

1. Marginal cost is

	1.	the change in output following a one-dollar change in cost
	2.	the change in cost following a one-unit change in output
	3.	the change in average cost following a one-unit change in output
	4.	the change in cost following a managerial decision

2 points

QUESTION 4

1. At the profit-maximizing level of output

	1.	marginal revenue equals marginal cost
	2.	marginal cost equals zero
	3.	average profit equals zero
	4.	marginal profit equals average profit

2 points

QUESTION 5

1. Shortage is a condition of

	1.	excess supply
	2.	a deficiency in demand
	3.	market equilibrium
	4.	excess demand

2 points

QUESTION 6

1. The quantity of product X supplied can be expected to rise with a fall in

	1.	prices of competing products
	2.	price of X
	3.	energy-saving technical change
	4.	input prices

2 points

QUESTION 7

1. A demand curve expresses the relation between the quantity demanded and

	1.	income
	2.	advertising
	3.	price
	4.	all of the above

2 points

QUESTION 8

1. Change in the quantity demanded is

	1.	a movement along a single demand curve
	2.	an upward shift from one demand curve to another
	3.	a reflection of change in one or more of the nonprice variables in the product demand function
	4.	a downward shift from one demand curve to another

2 points

QUESTION 9

1. A supply curve expresses the relation between the quantity supplied and

	1.	technology
	2.	wage rates
	3.	price
	4.	all of the above

2 points

QUESTION 10

1. Change in the quantity supplied reflects a

	1.	change in price
	2.	switch from one supply curve to another
	3.	change in one or more nonprice variables
	4.	shift in supply

2 points

QUESTION 11

1. Holding all else equal, an unnecessary increase in federally-mandated auto safety requirements leads to a decrease in

	1.	auto demand
	2.	the quantity of autos supplied
	3.	auto supply
	4.	the quantity of autos demanded

2 points

QUESTION 12

1. Farmers in certain areas of the U.S. can grow either wheat or corn. If the price of corn increases the

	1.	supply of wheat will shift to the right
	2.	supply of wheat will shift to the left
	3.	supply of both corn and wheat will shift, but in opposite directions
	4.	supply of corn will shift to the right

2 points

QUESTION 13

1. A brand of dress shoes was put on sale for 20% off. This led to an increase of sale by 15%. The price elasticity of demand for this product is

	1.	relatively elastic
	2.	relatively inelastic
	3.	unitary elastic
	4.	perfectly inelastic

2 points

QUESTION 14

1. The concept of cross-price elasticity is used to examine the responsiveness of demand

	1.	to changes in income
	2.	for one product to changes in the price of another
	3.	to changes in "own" price
	4.	to changes in income

2 points

QUESTION 15

1. When the cross-price elasticity EPX = 3

	1.	demand rises by 3% with a 1% increase in the price of X
	2.	the quantity demanded rises by 3% with a 1% increase in the price of X
	3.	the quantity demanded rises by 1% with a 3% increase in the price of X
	4.	demand rises by 1% with a 3% increase in the price of X

2 points

QUESTION 16

1. With elastic demand, a price increase will

	1.	lower marginal revenue
	2.	lower total revenue
	3.	increase total revenue
	4.	lower marginal and total revenue

2 points

QUESTION 17

1. A direct relation between the price of one product and the demand for another holds for all

	1.	complements
	2.	substitutes
	3.	normal goods
	4.	inferior goods

2 points

QUESTION 18

1. According to the law of diminishing marginal utility

	1.	as the consumption of a given product rises, the added benefit eventually diminishes
	2.	as the production cost for a given product rises, the added benefit eventually diminishes
	3.	the demand curve for some products is upward-sloping
	4.	as the price of a given product rises, the added benefit eventually diminishes

2 points

QUESTION 19

1. The demand for a product tends to be inelastic if

	1.	it is expensive
	2.	a small proportion of consumer's income is spent on the good
	3.	consumers are quick to respond to price changes
	4.	it has many substitutes

2 points

QUESTION 20

1. Two products are complements if the

	1.	cross-price elasticity of demand is less than zero
	2.	cross-price elasticity of demand equals zero
	3.	cross-price elasticity of demand is greater than zero
	4.	price elasticity of demand for each good is greater than zero

2 points

QUESTION 21

1. The law of diminishing returns

	1.	deals specifically with the diminishing marginal product of fixed input factors
	2.	states that the marginal product of a variable factor must eventually decline as increasingly more is employed
	3.	can be derived deductively
	4.	states that as the quantity of a variable input increases, with the quantities of all other factors being held constant, the resulting output must eventually diminish

2 points

QUESTION 22

1. The returns to scale characteristic of a production system

	1.	is measured by the way in which inputs can be varied in an unbroken marginal fashion rather than incrementally
	2.	illustrates the distinct, or "lumpy," pattern of input combination
	3.	shows the relation between output and the variation in all inputs
	4.	is the relation between output and variation in only one of the inputs employed

2 points

QUESTION 23

1. The marginal product concept is

	1.	used to describe the relation between output and variation in all inputs in a production function
	2.	the change in output associated with a one-unit change in an individual factor
	3.	total product divided by the number input units employed
	4.	the complete output from a production system

2 points

QUESTION 24

1. Total product divided by the number of units of variable input employed equals

	1.	average product
	2.	marginal revenue product
	3.	returns to scale
	4.	marginal product

2 points

QUESTION 25

1. Marginal revenue product equals

	1.	marginal revenue multiplied by marginal product
	2.	marginal product multiplied by total revenue
	3.	total revenue multiplied by total product
	4.	marginal revenue multiplied by total product

2 points

QUESTION 26

1. The long-run is a period of time

	1.	during which at least one input is variable
	2.	during which at least one input is fixed
	3.	sufficient to vary all inputs in the production process
	4.	greater than one year

2 points

QUESTION 27

1. Marginal cost equals

	1.	average variable cost at its maximum point
	2.	the change in total fixed cost divided by the change in quantity
	3.	the change in total variable cost divided by the change in quantity
	4.	total cost divided by quantity

2 points

QUESTION 28

1. The unique characteristic of a firm in perfectly competitive market equilibrium is

	1.	MR continues to decrease
	2.	P > AC
	3.	P > MR
	4.	P = MC

2 points

QUESTION 29

1. The distinction between a firm and an industry does not exist in

	1.	imperfectly ccompetitive markets
	2.	Oligopoly
	3.	monopoly
	4.	perfect competition

2 points

QUESTION 30

1. In a perfectly competitive market

	1.	sellers and buyers have perfect information
	2.	entry and exit are difficult
	3.	sellers produce similar, but not identical products
	4.	each seller can affect the market price by changing output

2 points

QUESTION 31

1. Assume the following demand and supply equations:

Demand: Q = 480 - 35P

Supply: Q = 200 +16P

What is the equilibrium Price? What is the equilibrium quantity?

10 points

QUESTION 32

1. Assume that a popular brand of dress shirt was selling at $80.00 in a department store. After one week, the store sold 75 shirts. In the next week, the store declared 25% sale on the dress shirt. As a result, sale of the dress shirt increased to 85 in the week.

(a.) What is the price elasticity of demand?

(b). What is the quantitative relationship between the price of the shirt and its quantity?