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Man > Chapter 6,11,12 > Flashcards

Chapter 6,11,12 Flashcards

1
Q

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quality demanded, then the demand for golf balls is

A

Relatively elastic

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2
Q

For consumers who opt to pay a $10 monthly fee to have unlimited texting on their cell phones, but choose not to pay a $5 monthly fee to have unlimited call minutes, the unlimited texting option has a _____ than the unlimited minutes option.

A

Lower price elasticity of demand

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3
Q

Suppose the value of the price elasticity of supply is 4. What does this mean?

A

A 1 percent increase in the price of the good causes quality supplied to increase by 4 percent.

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4
Q

Refer to figure 6-1. A perfectly elastic demand curve is shown in

A

Panel B

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5
Q

If demand is perfectly inelastic, the absolute value of the price elasticity of demand is

A

Zero

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6
Q

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.

A

1.62

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7
Q

At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 9 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals, using the midpoint formula.

A

0.9

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8
Q

Total revenue equals

A

Price per unit times quantity sold.

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9
Q

Which of the following statements is true about the price elasticity of demand along a downward sloping linear demand curve.

A

It is elastic at high prices and inelastic at low prices.

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10
Q

Economists estimated that the price elasticity of beer is 0.23 and the income elasticity of beer is -0.09. This means that

A

An increase in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good.

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11
Q 
Facing stiff competition, Hendrix College, a small liberal arts institution in Conway, Ark, decided two years ago to bolster its academic offerings, promising students at least three hands on experiences outside the classroom, including research, internship and service projects. Although it raised tuition and fees by 29 percent, enrollment in the freshman class rose by 37 percent.
Based on the information above, the demand for Hendrix College education is
A

Relatively elastic

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12
Q

If the cross price elasticity of demand for computers and software is negative, this means the two goods are

A

Complements

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13
Q

Refer to figure 6-1. The demand curve on which elasticity changes at every point is given in

A

Panel C

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14
Q

Price elasticity of demand measures

A

How responsive suppliers are to price changes

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15
Q

Refer to figure 6-4. The inelastic segment of the demand curve.

A

Lies below the midpoint of the curve

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16
Q

If demand is inelastic, the absolute value of the elasticity of demand is

A

Less than one

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17
Q

If the demand for a life saving drug was perfectly inelastic and the price doubled, the quantity demanded would

A

Remain constant

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18
Q

Refer to figure 6-4. Which of the following statements is true about the price elasticity of demand?

A

The elastic portion of a straight line downward sloping demand curve corresponds to the segment above the midpoint.

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19
Q

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand? Use the midpoint formula.

A

2.69

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20
Q

When demand is elastic, a fall in price causes total revenue to rise because

A

The increase in quantity sold is large enough to offset the lower price.

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21
Q

For people who live near a bus route, a subway station, or a computer rail line, public transportation provides a substitute to driving their own cars. So, for these people, the cross price elasticity of the demand between gasoline and public transportation is

A

Positive

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22
Q

Jaycee jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to price to $20, the quantity sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand. Use the midpoint formula.

A

0.6

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23
Q

Price elasticity of supply is used to gauge

A

How responsive suppliers are to price changes

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24
Q

Suppose the value of the price elasticity of demand is 3. What does this mean?

A

A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent.

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25
Q

Refer to figure 6-7. Use the midpoint formula to calculate the value of the price elasticity of supply between g and h?

A

2

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26
Q

A service station owner in Staten Island, New York, was worried that raising the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price. If raising the price of gasoline would cause the owner to receive less total revenue from the sale of gasoline, the demand for gasoline is

A

Elastic

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27
Q

Suppose the cross price elasticity of demand between grapefruit juice and orange juice is approximately 6. What does this mean?

A

A 1 percent increase in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption

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28
Q

If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is

A

Elastic

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29
Q

Lars year, sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000. This year, his household income fell to $20,000 and sefton purchased 80 pounds of potatoes. All else constant, sefton income elasticity of demand for potatoes is

A

Negative, so sefton considers potatoes to be an inferior good

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30
Q

Suppose the California nurse Union successful secured a 12 percent increase in the wages of registered nurses. If a hospital responses by reducing the quantity of registered nurses hired and increasing the quantity of physicians assistants hired, what conclusion can you draw?

A

The cross price elasticity of demand between registered nurses and physicians assistance is positive

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31
Q

Refer to figure 6-1. A perfectly inelastic demand curve is shown in

A

Panel A

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32
Q

The price elasticity of supply is equal to

A

The percentage change in quantity supplied divided by the percentage change in price.

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33
Q

Refer to figure 6-4. At the midpoint of the demand curve, in absolute value.

A

The price elasticity coefficient is one

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34
Q

If, for a given percentage decrease in price, quantity supplied decreases by a proportionately smaller percentage, then supply is

A

Relatively inelastic

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35
Q

Suppose the demand for milk is relatively inelastic. What happens to sales revenue if the government imposes a price floor above the free market equilibrium price in the market for milk?

A

Sales revenue rises

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36
Q

If the price elasticity of demand for canned soup is estimated at 1.62. What happens to sales revenue if the price of canned soup rises?

A

It falls

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37
Q

Refer to figure 6-3. Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.

A

3.125

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38
Q

Cross price elasticity of demand is calculated as the

A

Percentage change in quantity demanded of one good divided by percentage change in price of a different good.

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39
Q

Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is welling to pay $6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers?

A

It is perfectly elastic

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40
Q

The absolute value of the price elasticity of demand for stork ice cream of 4. Suppose you’re told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded?

A

2.5 percent

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41
Q

Refer to figure 11-9. What is the combination of inputs that produces 200 gooseberry pies at the lowest cost?

A

Combination f:40 hours of labor and 24 units of capital

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42
Q

Refer to table 11-3. What is the average total cost of production when the firm produces 120 lanterns?

A

$14

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43
Q

Which of the following costs will not change as output changes?

A

Total fixed cost

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44
Q

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

A

2 chairs

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45
Q

Marginal cost is the

A

Additional cost of producing an additional unit of output.

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46
Q

Economic costs of production differ from accounting costs in that

A

Economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

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47
Q

Maximizing the level of output for a given total cost of production

A

Is equivalent to minimizing cost for a given level of output

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48
Q

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

A

Economics of scale

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49
Q

An expansion path shows

A

The least cost combination of inputs for each level of output

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50
Q

Which of the following is a factor of production that generally is fixed in the short run?

A

Capital

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51
Q

Refer to figure 11-7. The lines shown in the diagram are isocost lines. Which of the following shows a decrease in the price of capital while the price of labor remains unchanged?

A

The movement from BF to AF

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52
Q

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firms average fixed cost at that level of output?

A

$15

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53
Q

What is the firm’s total cost when it is minimizing its cost of production for 1800 units of output?

A

360

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54
Q

Higher isocost lines correspond to higher

A

Total costs of production

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55
Q

Which of the following are implicit costs for a typical firm?

A

Opportunity costs of capital owned and used by the firm

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56
Q

The difference between technology and technological change is that

A

Technology refers to the processes used by a firm to transform inputs into output while technological change in a firms ability to produce a given level of output with a given quantity of inputs

57
Q

At the minimum efficient scale

A

The firm has achieved the lowest possible average cost of production

58
Q

The production function shows

A

The maximum output that can be produced from each possible quantity of inputs

59
Q

An isocost lines shows

A

All the possible combination of two inputs a firm can use that have the same total cost

60
Q

When a firm produces 50,000 units of output, its total cost equals $6.5 million. When it increases its production to 70,000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is

A

$145

61
Q

Refer to figure 11-1. The marginal production of the 7th worker is

A

-2

62
Q

The marginal product of labor is defined as

A

The additional output that results when one more worker is hired, holding all other resources constant.

63
Q

Refer to figure 11-1. The average product of the 4th worker

A

Is 17

64
Q

The explicit cost of production is also called

A

Accounting cost

65
Q

What is the cost minimizing level of labor (L*) when the firm is producing 500 units of output?

A

10

66
Q

Refer to figure 11-7. The lines shown in the diagram are isocost lines. Which of the following shows an increase in the firms total cost while the price of labor and capital remain unchanged?

A

The movement from CE to BF

67
Q

Refer to table 11-3. What is the average variable cost per unit of production when the firm produces 90 lanterns?

A

$5.44

68
Q

If, when a firm doubles all its input, its average cost of production increases, then production display

A

Diseconomies of scale

69
Q

If production displays economies of scale, the long run average cost curve is

A

Downward sloping

70
Q

Refer to figure 11-1. The marginal product of the 3rd worker is

A

15

71
Q

What is the cost minimizing level of capital (K*) when the firm is producing 500 units of output?

A

10

72
Q

An isoquant shows

A

The combinations of two inputs that yield the same total product

73
Q

A characteristic of the long run is

A

All inputs can be varied

74
Q

The slope of an isoquant measures

A

The rate at which inputs can be substituted for each other keeping total output constant

75
Q

Refer to figure 11-7. The lines shown in the diagram are isocost lines. Which of the following shows an increase in the price of labor while the price of capital remains unchanged?

A

The movement from BF to BD

76
Q

Refer to figure 11-7. The lines shown in the diagram are isocost lines. If the price of labor is $50 per unit, then along the isocost AF, the total cost

A

Is $500

77
Q

The average total cost of production

A

Equals total cost of production divided by the level of output

78
Q

If diminishing marginal returns have already set in for Golden Lark Woodworks, and the marginal product of the 6th carpenter is 8 chairs, then the marginal product of the 7th carpenter is

A

Less than 8 chairs

79
Q

When the average total is $16 and the total cost is $800, then the number of units the firm is producing is

A

50

80
Q

Which of the following equations is correct?

A

AFC+ACV=ATC

81
Q

Refer to figure 11-9. Suppose Hilda hires labor at $8 per hour and capital costs $10 per unit. What is the minimum cost of producing 200 gooseberry pies?

A

$560

82
Q

A firm has successfully adopted a positive technological change when

A

It can produce more output using the same inputs

83
Q

Marginal cost is equal to the

A

Change in total cost divided by the change in output

84
Q

If a producer is not able to expand its plant capacity immediately, it is

A

Operating in the short run

85
Q

Refer to figure 11-3. What is the variable cost of production when the firm produces 115 lanterns?

A

$1,157

86
Q

Refer to figure 11-6. The movement from isoquant T to isoquant U depicts

A

An increase in output

87
Q

If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 units, then the average product of 12 workers is

A

5 units

88
Q

The absolute value of the slope of an isocost line equals the ratio of

A

The prices of the two inputs

89
Q

The formula for total fixed cost is

A

TFC=TC-TVC

90
Q

Refer to table 11-3. What is the marginal cost per unit of production when the firm produces 100 lanterns?

A

$32

91
Q

Refer to figure 12-14. Consider a typical firm in a perfectly competitive industry which is incurring short run losses. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long run equilibrium?

A

Panel A

92
Q

Refer to figure 12-4. If the market price is $30, the firms profit maximizing output level is

A

180

93
Q

Refer to table 12-2. What is Margie’s total revenue if she sells 250 pounds of apples?

A

$750

94
Q

Refer to figure 12-11. Suppose the prevailing price is $20 and the firm is currently producing 1,350 units. In the long run equilibrium, the firm represented in the diagram

A

Will reduce its output to 1,100 units

95
Q

If a firm shuts down in the short run it will

A

Suffer a loss equals to its fixed costs

96
Q

What is always true at the quantity where a firms average total cost equals average revenue?

A

The firm breaks even

97
Q

Refer to figure 12-2. Suppose the firm is currently producing Q2 units. What happens if it expands output to Q3 units?

A

It makes less profit

98
Q

Refer to table 12-1. What is the fixed cost of production?

A

$1,000

99
Q

The price of a sellers product in perfect competition is determined by

A

Market demand and market supply

100
Q

Refer to table 12-1. Suppose the fixed cost of production ties by $500 and the price per unit is still $8. What happens to the firm’s profit maximizing output level?

A

It will remain the same

101
Q

Assume after the record year for US farm income in 2013, farmers are expected to break even in 2014. This means that at the quantity being produced in 2014.

A

MR=ATC

102
Q

Profit is the difference between

A

Total revenue and total cost

103
Q

If the market price is $25, the average revenue of selling five units is

A

$25

104
Q

An individual seller in perfect competition will not sell a price lower than the market price because

A

The seller can sell any quantity she wants as the prevailing market price

105
Q

The supply curve of a perfectly competitive firm in the short run is

A

The portion of the firms marginal cost curve above the minimum point of the average variable cost curve

106
Q

A perfectly competitive firms supply curve is its

A

Marginal cost curve above its minimum average variable cost

107
Q

Refer to figure 12-4. If ten market price is $30 and if the firm is producing output, what is amount of its total variable cost?

A

$3,960

108
Q

For a perfectly competitive firm, average revenue is equal to

A

The market price

109
Q

Refer to figure 12-4. What is the amount of its total fixed cost?

A

$2,520

110
Q

If a perfectly competitive firms price is less than its average total cost but greater than its average variable cost, the firm

A

Is incurring a loss

111
Q

For a firm in a perfectly competitive market, price is

A

Equal to both average revenue and marginal revenue

112
Q

Refer to figure 12-2. The firm breaks even at an output level of

A

Q4 units

113
Q

Refer to table 12-2. How many pounds of apples should Margie sell to maximize her profit?

A

This can be best determined only when all of the values for market price, total revenue, average revenue and marginal revenue are given.

114
Q

Refer to figure 12-1. If the firm is producing 700 units

A

It should cut back its output to maximize profit

115
Q

In perfect competition

A

The market demand curve is downward sloping while demand for an individual sellers product is perfectly elastic

116
Q

For a perfectly competitive firm, which of the following is not true at profit maximization?

A

Market price is greater than marginal cost

117
Q

Refer to table 12-1. If the market price of each camera case is $8 and the firm maximizes profit, what is the amount of the firms profit or loss?

A

Profit of $440

118
Q

Which of the following is not true for a firm in perfect competition?

A

Average revenue is greater than marginal revenue

119
Q

Refer to figure 12-10. The total cost at the profit maximizing output level equals

A

$3,300

120
Q

Refer to figure 12-4. If the market price is $30, should the firm represented in the diagram continue to stay in business?

A

Yes, because it is covering part of its fixed cost

121
Q

A very large number of small sellers identical products imply

A

The inability of one seller to influence price

122
Q

Refer to figure 12-2. What happens if the firm produces more than Q4 units?

A

It makes a loss

123
Q

Marginal revenue is

A

The change in total revenue divided by the change in the quantity of output.

124
Q

Refer to figure 12-10. At the profit maximizing output level, the firm earns

A

A profit of $2,700

125
Q

Refer to figure 12-12. Consider a typical firm in a perfectly competitive industry that makes short run profits. Which of the diagram in the figure shows the effect on the industry as it transition to a long run equilibrium?

A

Panel B

126
Q

Refer to figure 12-4. If the market price is $30 and the firm is producing output, what is the amount of the firms profit or loss?

A

Loss of $1,080

127
Q

Refer to table 12-1. The firm will not produce in the short run if the output price falls below.

A

$2.80

128
Q

Refer to figure 12-2. What is the amount of profit if the firm produces Q2 units?

A

It is equal to the vertical distance c to g

129
Q

If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

A

$40

130
Q

Refer to the table 12-1. If the market price of each camera case is $8, what is the firms total revenue?

A

$3,200

131
Q

The marginal revenue curve for a perfectly competitive firm

A

Is the same as it’s demand curve

132
Q

Refer to table 12-1. If the market price of each camera case $8, what is the profit maximizing quantity?

A

400 units

133
Q

Producing where marginal revenue equals marginal cost is equivalent to producing where

A

Total profit is maximized

134
Q

If, for a given output level, a perfectly competitive firms price is less than its average variable cost, the firm

A

Should shut down

135
Q

Refer to figure 12-10. Total revenue at the profit maximizing level of output is

A

$6,000

136
Q

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?

A

The firm will not sell any output

137
Q

Both individual buyers and sellers in perfect competition

A

Have to take the market price as a given

138
Q

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of the production is $20,000. The price of each good is $10. Should the firm continue to produce in the short run?

A

Yes, it should continue to produce because it is minimizing its loss

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