Sophia Microeconomics Milestone 2

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Southern New Hampshire University *

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Economics

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Jan 9, 2024

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25/27 that's 93% RETAKE 25 questions were answered correctly . 2 questions were answered incorrectly . 1 Given the information below, the accounting profit of the firm is __________. product price: $20.50 unit cost: $10.25 quantity sold: 500 quantity produced: 500  −$1,500  −$11,275  $2,025  $5,125 RATIONALE Accounting profit is total explicit revenue minus total explicit costs. Therefore, this would be calculated as follows: (500 × $20.50) − (500 × $10.25) = $10,250 − $5,125 = $5,125 CONCEPT Accounting Profit: Explicit Revenue and Costs Report an issue with this question 2 If variable costs for a firm are $800, the average total cost is $6, and the firm sells 175 units, what are the firm's fixed costs?  $975  $1,050

 $162.50  $250 RATIONALE Average Total Cost (ATC) = Total Cost/Total Output, so Total Cost = ATC x Total Output Total Cost = $6 x 175 = $1,050 Total Cost (TC) = Fixed Costs + Variable Costs, so Fixed Costs = TC - Variable Costs Fixed Costs = $1,050 - $800 = $250 CONCEPT Cost: Total and Average Report an issue with this question 3 Which of the following is an example of perfectly elastic demand?  Susie always purchases three bagels on Friday because the bakery runs a special that day.  Danny got a tip that the price of downloads on iTunes was going to increase, so he purchased 20 additional songs today.  The Smith family eats at the same pizza restaurant each week because they have the best sauce.  Juan stopped purchasing peaches from his cousin's stall at the farmer's market when his cousin was the only farmer to raise prices. RATIONALE Perfectly elastic demand is the horizontal demand curve where quantity varies but the price is constant. The quantity demanded would be zero at anything above that constant price. CONCEPT Classifying Elasticity Report an issue with this question

4 In microeconomics, the short run is a period of time __________.  during which at least one of a firm’s inputs is fixed  during which all of a firm’s inputs are variable  usually defined as less than 6 months  usually defined as less than 1 year RATIONALE This is the definition of short run in microeconomics. CONCEPT Costs of Inputs Report an issue with this question 5 Consider the following chart. How much is the marginal cost when total output increases from 320 pounds to 390 pounds? Total Output (Pounds) Total Cost (TC = FC + VC) Marginal 0 150 150 300 240 450 320 600 390 750 450 900 420 1050  $2.14  $2.50  $1.87  $2.33 RATIONALE

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Marginal Cost = Change in TC / Change in Total Output Calculation is ($750 - $600) / (390 - 320) = $150 / 70 = $2.14 CONCEPT Cost: Marginal Report an issue with this question 6 Consider the budget line graph below. If Mexican meals are $8 and Italian meals are also $8, what is the consumer’s total budget for possible combinations of meals?  $20  $40  $30  $50 RATIONALE Any combination on the budget line will add up to a total budget of $40. For example, point B shows 3 Mexican meals and 2 Italian meals. At $8 for each meal, this comes to $24 + $16 = $40. CONCEPT Consumer Choice: Budget Lines Report an issue with this question 7 Using the graph below, determine the profit maximizing-price and quantity to produce.  Profit-maximizing price = $30 Quantity to produce = 60 units

 Profit-maximizing price = $30 Quantity to produce = 15 units  Profit-maximizing price = $30 Quantity to produce = 30 units  Profit-maximizing price = $30 Quantity to produce = 45 units RATIONALE The price is constant here for perfect competition at $30. The quantity to produce will be where marginal revenue (MR) intersects marginal cost (MC) at 45 units. CONCEPT Profit Maximization Report an issue with this question 8 Based on this graph, the firm's break-even point is at a price of __________.  $26  $24  $14  $20 RATIONALE The break-even point is reached at the minimum point of the Average Total Cost curve, where price is just equal to the minimum average total cost. CONCEPT Shutdown Point, Break-Even Point, and the Supply Curve Report an issue with this question 9

Consider the indifference curve graph below. The slope between points A and C is __________ and is known as the __________.  −2.67; marginal rate of substitution (MRS)  +1.33; marginal rate of transformation (MRT)  −2.67; marginal rate of transformation (MRT)  −1.33; marginal rate of substitution (MRS) RATIONALE Using the formula for slope, we get the following: The slope of the indifference curve is known as the marginal rate of substitution. CONCEPT Indifference Curves and Budget Lines: Trade-Offs, Opportunity Cost, and Slope Report an issue with this question 10 Sleek Hair Accessories has produced 35,000 hair bands that cost the company $0.03 each to make. They recently sold 35,000 of the hair bands to a local drug store at $0.11 each. Their opportunity cost is $1,000. What is Sleek Hair Accessories’ economic profit?  $2,500  $2,350  $1,800

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 $1,500 RATIONALE Economic profit is (total explicit revenue plus total implicit revenue) minus (total explicit cost plus total implicit cost). So, the economic profit would be (35,000 × $0.11) − ((35,000 × $0.03) + ($1,000)) = ($3,850) − ($1,050 + $1,000) = ($3,850) − ($2,050) = $1,800. CONCEPT Economic Profit: Implicit Revenue and Costs Report an issue with this question 11 According to __________, individual preferences are shaped by society.  traditional economics  heuristics  behavioral economics  rational choice theory RATIONALE This is the way behavioral economics views individual preferences. CONCEPT Explaining Consumer Behavior: Traditional versus Behavioral Economics Report an issue with this question 12 Your business produces widgets, which you know to be price inelastic. To increase total sales revenue, you should __________.  decrease the price  increase the price  sell less of the product  keep the price the same RATIONALE

Price inelastic means that the percentage change in quantity is less than the percentage change in price, so raising the price will only cause a smaller percentage decrease in quantity sold and therefore increase total sales revenue. CONCEPT Revenue: Total and Average Report an issue with this question 13 Consider the indifference curves below. Which curve should you choose to get the highest level of individual satisfaction?     RATIONALE Indifference curve represents the highest level of individual satisfaction. CONCEPT Consumer Choice: Indifference Curves Report an issue with this question 14 The sensitivity of the quantity demanded of Cola B to a change in the price of Cola A is known as __________.  income elasticity

 cross-price elasticity  own-price elasticity  product elasticity RATIONALE When we measure the sensitivity of the quantity demanded of one product to a change in the price of a related product, this is known as cross-price elasticity. CONCEPT Defining Elasticity Report an issue with this question 15 Since Peter was promoted, he and his partner occasionally spend $75 for two meals and drinks at a Korean barbecue restaurant. If the income elasticity for this expense is 2, which of these statements is true?  It is an inferior good.  It is a substitute.  It is a complement.  It is a luxury good. RATIONALE An income elasticity of 2 indicates a luxury good. CONCEPT Income Elasticity Report an issue with this question 16 Calculate Marginal Revenue when output rises from 380 to 420 pounds. Total Output (Q) (Pounds) (1) Price per Pound ($1.50) (2) Total Revenue (3) Margina

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0 $1.20 $0.00 100 $1.20 $120.00 250 $1.20 $300.00 320 $1.20 $384.00 380 $1.20 $456.00 420 $1.20 $504.00 430 $1.20 $516.00 390 $1.20 $468.00  $2.50  $2.00  $1.20  $1.00 RATIONALE Marginal Revenue = Change in Total Revenue / Change in Total Output ($504 - $456) / (420 - 380) = $48 / 40 = $1.20 CONCEPT Revenue: Marginal Report an issue with this question 17 Consider the graph below. What concept is shown here?  Constant returns-to-scale  Increasing cost industry  Decreasing cost industry  Diseconomies of scale

RATIONALE Costs continue to decrease as production increases. CONCEPT Long Run for the Firm Report an issue with this question 18 One month ago, Olivia purchased 300 pages of printer paper at $1 per sheet. Today she learned that the price of the printer paper had risen to $1.50 per sheet, so she purchased only 100 sheets. The own-price elasticity calculated using the midpoint formula is __________.  -2.5  0.5  1.25  -1 RATIONALE Apply the midpoint formula: CONCEPT Own-Price Elasticity Report an issue with this question 19 Which of the following is an assumption made by rational choice theory?  Rational individuals do consider what others have chosen before making a decision.  Rational individuals make decisions for themselves and others based on the costs and benefits of the decision.  Rational individuals make decisions that are often based solely on emotions.

 Rational individuals have perfect information regarding all possible choices and make these decisions without cost. RATIONALE This is one of the assumptions of rational choice theory. CONCEPT Rational Choice Theory Report an issue with this question 20 When a firm uses four laborers, it can produce 300 units daily. A fifth laborer allows the firm to produce 440 units daily. Which of the following is true regarding production?  The total product for the fifth laborer is 300 units.  The average product for the fifth laborer is 60 units.  The average product for the fifth laborer is 88 units.  The total product for the fifth laborer is 740 units. RATIONALE Average Product of Labor (APL) = total output / number of workers. 440 units / 5 workers = 88 units CONCEPT Production: Total and Average Report an issue with this question 21 Producing at a point under the total physical product curve is __________.  inefficient  ideal

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 impossible  recommended RATIONALE Producing at any point under the curve is productively inefficient because the firm has the ability to produce more. CONCEPT Production Function Report an issue with this question 22 The optimal choice of chicken meals and vegetarian meals for and in the diagram below is __________.  4 chicken meals and 12 vegetarian meals  14 chicken meals and 6 vegetarian meals  10 chicken meals and 10 vegetarian meals  8 chicken meals and 6 vegetarian meals RATIONALE The optimum choice is the point of tangency where the indifference curve ( ) touches the budget line ( ). CONCEPT Optimal Consumer Choice and Effects of Changes Report an issue with this question 23 Economic profit is defined as __________.  total revenue minus total cost, including both explicit and implicit types of costs and revenue

 explicit revenue only, minus the costs of doing business  taxable income minus costs  total revenue minus total cost, where total revenue includes only explicit revenue and total cost includes only explicit costs RATIONALE This is the definition of economic profit. CONCEPT The Goal of the Firm Report an issue with this question 24 Consider the chart below. The marginal utility for the third unit of Chicken Fajitas is _____. Quantity of Chicken Fajitas (1) Total U (2) 0 0 1 35 2 65 3 85 4 100 5 110 6 115 7 112  20 utils  85 utils  30 utils  65 utils RATIONALE (85- 65) / (3-2) = +20/+1 = 20 utils

CONCEPT Utility and Consumer Choice Report an issue with this question 25 Janet is shopping for bottles and formula for her baby. Last month, the price of her favorite brand of formula was $15 per can. She bought six bottles last month. This month, the price of the cans of formula has increased by 20%. As a result, she will buy 50% fewer new bottles. The cross-price elasticity for the new bottles calculated using the cross-price elasticity formula is __________ and the goods are __________.  -2.5; complements  2.5; substitutes  1.2; substitutes  -1.2; complements RATIONALE The cross-price elasticity formula is , where Product X and Product Y are related goods. The cross-price elasticity is -0.50/0.20 = -2.5. The negative number indicates the products are complements. CONCEPT Cross-Price Elasticity Report an issue with this question 26 Consider the following chart. What is the marginal product of labor (MPL) of the seventh worker? Land (20 Acres) (1) Labor (Workers) (2) Total Product (Pounds) (3) Marginal Product of La (4) 20 acres 0 0 - 20 acres 1 100 +100 20 acres 2 220 +120

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20 acres 3 290 +70 20 acres 4 350 +60 20 acres 5 380 +30 20 acres 6 400 +20 20 acres 7 390  -20  +20  +10  -10 RATIONALE Marginal Product of Labor (MPL) = Change in TP / Change in Labor). (390 - 400) / (7 - 6) = -10 / 1 = -10 CONCEPT Production: Marginal Report an issue with this question 27 If the marginal utility per the price of Good A is $2.50, and the marginal utility per the price for Good B is $2.50, what does the utility- maximizing rule tell you to do?  Purchase 1 more unit of Good B and compare again.  Purchase 1 more unit of Good A and compare again.  Purchase 1 less unit of both Good A and Good B.  Check to see if the budget will allow you to purchase one more of each good, and if it is within the budget, do so. RATIONALE The utility-maximizing rule tells you to keep adding one more of the higher marginal utility per the price good until they are both equal. Then check to see if the budget will allow one more of each good, and do so if the budget allows it.

CONCEPT Utility-Maximizing Rule Report an issue with this question  About  Contact Us  Privacy Policy  Cookie Policy  Terms of Use  Your Privacy Choices © 2023 SOPHIA Learning, LLC. SOPHIA is a registered trademark of SOPHIA L

Sophia Microeconomics Milestone 2

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