Since most consumers spend very little on salt, a small increase in the price of salt will: A. reduce quantity demanded by a large amount B. not reduce quantity demanded by very much C. not change quantity demanded D. increase quantity demanded by a small amount
Since most consumers spend very little on salt, a small increase in the price of salt will:
A. reduce quantity demanded by a large amount
B. not reduce quantity demanded by very much
C. not change quantity demanded
D. increase quantity demanded by a small amount
2.Fred is considering opening a ski shop in Colorado. Assume Fred will incur the following costs: building rent= $100000/year, inventory= $250000/ year, energy=$50000/year, and labor (one clerk) = $10000/year. In addition, Fred’s current income as a computer programmer is $40000 per year. Assuming Fred would earn $ 460000 in revenues, he could expect to earn:
A. an accounting profit of $10000 per year
B. an accounting profit of $ 60000 per year
C. an economic profit of $ 10000 per year
D. an economic profit of $50000 per year
3.Suppose a firm employs only capital and labour (K and L) and its production function is Q = 2KL. If the quantities of labour and capital are fixed at K =10 and L = 25, then:
A. total output cannot exceed 125
B. average product is equal to zero
C. marginal product of labour is 10
D. marginal product of capital is 50
E. marginal product is minimized
4.Suppose a sole proprietorship is earning total revenues of $100000 and is incurring explicit costs of $ 75000. If the owner could work for another company for $30000 a year, we would conclude that:
A. the firm is incurring an economic loss
B. implicit costs are $25000
C. the total economic costs are $100000
D. the individual is earning an economic profit of $25000
5.Which of the following is correct?
A. In the short run, if a firm chooses to produce no output (i.e. shut down) its total costs of production will equal its total fixed costs.
B. If a firm decides to shut down, its short-run total costs will equal 0
C. As a firm increases output in the short run, the change in total costs is equal to the change in total variable costs.
D. A firm minimizes its total costs of production when
6.You are an efficient expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w=$40, r=$100, MPL= 20 and MPK = 40 the firm:
A. is cost minimizing
B. should use less L and more K to cost minimize
C. should use more L and less K to cost minimize.
D. is profit maximizing but not cost minimizing
7.Assume that after the fifth worker, each additional worker a firm hires is less productive that the previous worker. Based on this information, we can conclude that beyond the fifth worker, the average product of labor will:
A. increase
B. stay the same
C. decrease
D. cannot be determined without additional information
8.Suppose the production for good X is characterized by the following production function, Q=K^0.5L^0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $25 and the per-unit wage, w, is $ 15, then the average variable cost of using 81 units of capital and 9 units of labor is: (where ^ means raise to the power)
A. $5
B. $75
C. $80
D. there is insufficient information to determine the average variable costs
9.Lauren has 11 people working in her tangerine grove. The marginal product of the eleventh worker is 13 kilograms of tangerines. If she hires a twelfth worker, the marginal product of that worker will be _____ kilograms.
A. 14
B. 15
C. 12
D. The answer cannot be determined with the information available
10........a legal document that creates an extended relationship between a buyer and a seller.
A. Contracts
B. Spot exchange
C. Vertical integration
D. Horizontal integration
11.The industry elasticity of demand for gadgets is -2, while the elasticity of demand for an individual gadget manufacturer’s product is -2. Based on the Rothschild approach to measuring market power, we conclude that:
A. there is little
B. there is significant monopoly power in this industry
C. the Herfindahl index for this industry is -2
D. the Herfindahl index for this industry is 2
12.Spot checks:
A. measure presence only
B. monitor the effort of workers precisely
C. are the same as spot markets
D. must be frequent enough to induce workers not to risk getting caught shirking
13.If a cartel is unable to monitor its members and punish those firms that violate the agreement, then ______
A. the cartel will prosper in the long run.
B. the cartel will fail.
C. the member firms will each act as price setters.
D. the market will become a monopoly.
14.
A. only monopolistic competition allows for entry of other firms in the long run.
B. only monopolistically competitive firms will set MR = MC.
C. only competitive firms take the price as given.
D. only
15. A profit-maximizing monopolist who has to charge the same price for each unit produces at a constant marginal cost of $40 and faces demand QD = 50 − 0.25P . What is the monopolist’s price?
A. 40
B. 120
C. 160
D. 240
E. 0
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