question

microeconomics

answer

A. is generally too complex and abstract to be of much use in making real-world business decisions.

B. studies the behavior of individual economic units or segments of the economy.

C. contributes to the understanding of ordinary business practices or tactics.

D. all of the above.

Correct --E. both b and c.

B. studies the behavior of individual economic units or segments of the economy.

C. contributes to the understanding of ordinary business practices or tactics.

D. all of the above.

Correct --E. both b and c.

question

During this year of operation, Quest Realty owned and occupied an office building in downtown Indianapolis. For this year, the building could have been leased to other businesses for $2,000,000 in lease income. Quest Realty also owned undeveloped land valued at $15,000,000. Owners of Quest Realty can earn a 14% rate of return annually on funds invested elsewhere.

Total implicit costs of using owner-supplied resources for Quest Realty for this year are

Total implicit costs of using owner-supplied resources for Quest Realty for this year are

answer

$4,100,000

question

A manager who does not see his or her goal as the maximization of profit

answer

both b and c

question

moral hazard

answer

is the cause of principal-agent problems.

question

St. Charles Hospital, located in an upper-income neighborhood of a large city, recently received a restored mansion as a gift from an appreciative patient. The board of directors decided to remodel the mansion and use it as recuperative quarters for patients willing to pay for luxurious accommodations. The cost to the hospital of using the mansion includes

answer

both b and c

question

Suppose Marv, the owner-manager of Marv's Hot Dogs, earned $82,000 in revenue last year. Marv's explicit costs of operation totaled $36,000. Marv has a Bachelor of Science degree in mechanical engineering and could be earning $40,000 annually as mechanical engineer.

answer

Marv's economic profit is $6,000

question

economic profit

answer

is negative when total costs exceed total revenues.

question

Economic theory is a valuable tool for business decision making because it

answer

identifies for managers the essential information for making a decision.

question

a risk premium is

answer

a measure calculated to reflect the riskiness of future profits.

question

In a perfectly competitive market,

answer

all firms produce and sell a standardized or undifferentiated product.

question

Owners of a firm want the managers to make business decisions which will

answer

both a and b are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods.

question

a market

answer

is any arrangement that brings buyers and sellers together to exchange goods or services.

question

During this year of operation, Quest Realty owned and occupied an office building in downtown Indianapolis. For this year, the building could have been leased to other businesses for $2,000,000 in lease income. Quest Realty also owned undeveloped land valued at $15,000,000. Owners of Quest Realty can earn a 14% rate of return annually on funds invested elsewhere.

answer

19,000,000

question

Consider a firm that employs some resources that are owned by the firm. When accounting profit is zero, economic profit

answer

must be negative and shareholder wealth is reduced.

question

A price-taking firm can exert no control over price because

answer

the firm's individual production is insignificant relative to total production in the industry.

question

During this year of operation, Quest Realty owned and occupied an office building in downtown Indianapolis. For this year, the building could have been leased to other businesses for $2,000,000 in lease income. Quest Realty also owned undeveloped land valued at $15,000,000. Owners of Quest Realty can earn a 14% rate of return annually on funds invested elsewhere.

answer

42,300,000

question

a price-setting firm

answer

can lower the price of its product and sell more units.

question

In markets characterized by oligopoly,

answer

entry into the market is restricted so that profit may be positive in the long run.

question

Firms with market power may try to limit entry of rival firms in the long run by setting the price of their product below the level that maximizes profit. This kind of pricing behavior

answer

is a strategic pricing decision because the manager is making the pricing decision with the goal of altering the behavior of rival firms to protect its profit in the long run.

question

Economic profit is the best measure of a firm's performance because

answer

the opportunity cost of using ALL resources is subtracted from total revenue.

question

At the beginning of 2015, market analysts expect Atlantis Company, holder of a valuable patent, to earn the following stream of economic profits over the next five years. At the end of five years, Atlantis will lose its patent protection, and analysts expect economic profit to be zero after five years.

If investors apply an annual risk-adjusted discount rate of 15%, the value of Atlantis Company in 2015 is $______________________, which is also the maximum price investors would be willing to pay for Atlantis Company.

If investors apply an annual risk-adjusted discount rate of 15%, the value of Atlantis Company in 2015 is $______________________, which is also the maximum price investors would be willing to pay for Atlantis Company.

answer

$884,912

question

In markets characterized by monopolistic competition,

answer

entry into the market is relatively easy so that profit in the long run is zero.

question

During this year of operation, Quest Realty owned and occupied an office building in downtown Indianapolis. For this year, the building could have been leased to other businesses for $2,000,000 in lease income. Quest Realty also owned undeveloped land valued at $15,000,000. Owners of Quest Realty can earn a 14% rate of return annually on funds invested elsewhere.

Quest's accounting profit is

Quest's accounting profit is

answer

none of the above

question

Economic profit is the difference between

answer

total revenue and the opportunity cost of all of the resources used in production.

question

During this year of operation, Quest Realty owned and occupied an office building in downtown Indianapolis. For this year, the building could have been leased to other businesses for $2,000,000 in lease income. Quest Realty also owned undeveloped land valued at $15,000,000. Owners of Quest Realty can earn a 14% rate of return annually on funds invested elsewhere.

Total explicit costs of using market-supplied resources for Quest Realty for this year are

Total explicit costs of using market-supplied resources for Quest Realty for this year are

answer

38,200,000

question

Derrick owns and operates a bakery. Every Saturday he bakes a batch of fresh kolaches, and every Saturday he sells all the kolaches and has to turn some customers away. Which of the following statements is correct?

answer

both a and c

question

If the current price of a good is $10, market demand is Qd = 400 - 20P, and market supply is Qs = -50 + 10P, then

answer

both b and c

question

In which of the following cases will the effect on equilibrium output be indeterminate (i.e., depend on the magnitudes of the shifts in supply and demand)?

answer

Demand decreases and supply increases

question

In the figure, the equilibrium price and quantity are

answer

P = $6 and Q = 300.

question

Let supply remain constant at S; a decrease in income causes consumers to be willing and able to purchase 150 fewer units at each price than they were previously.

answer

The new equilibrium price and quantity will be P = $5 and Q = 200.

question

If the market price of a good is $150 and the supply price of the good is $70, what is the producer surplus if any?

answer

$80

question

Suppose an individual buyer values a pound of butter at $10. If the market price of butter is $8, what is the consumer surplus for this buyer?

answer

$2

question

If the market price of eggs rises at the same time as the market quantity of eggs purchased decreases, this could have been caused by

answer

a decrease in supply with no change in demand.

question

So long as the actual market price exceeds the equilibrium market price, there will be

answer

downward pressure on the price.

question

Let supply remain constant at S; an increase in the price of a substitute good causes consumers to be willing and able to buy 150 more units of the good at each price in the list than they were when demand was D. Which of the following statements is (are) true?

answer

both a and d

question

If a supply curve goes through the point P = $10 and Qs = 320, then

answer

$10 is the lowest price that will induce firms to supply 320 units.

question

If the price is $16, the resulting

answer

surplus will lead to a fall in price.

question

Scientists have developed a bacterium they believe will lower the freezing point of agricultural products. This innovation could save farmers $1 billion a year in crops now lost to frost damage. If this technology becomes widely used, what will happen to the equilibrium price and quantity in, for example, the potato market?

answer

price will decrease, quantity will increase

question

Increases in the wage rates of coal miners and decreases in the price of natural gas would cause the price of coal to

answer

rise, fall, or remain unchanged depending on the magnitude of the changes, but the equilibrium quantity of coal would fall.

question

A "puppy boom" and an increase in the price of horse meat would cause the market price of dog food to

answer

rise and the market output to rise, fall, or remain unchanged depending on the magnitude of the changes.

question

If price is $16 there is

answer

a surplus of 250 units.

question

If input prices increase, all else equal,

answer

supply will decrease

question

Suppose that more people want Orange Bowl tickets than the number of tickets available. Which of the following statements is correct?

answer

both a and c

question

In which of the following cases must price always fall?

answer

both c and d

question

If a demand curve goes through the point P = $6 and Qd = 400, then

answer

both a and c

question

If the price of a complement for tires decreases, all else equal,

answer

demand for tires will increase.

question

Let demand remain constant at D; an increase in wages causes firms to be willing and able to sell 150 fewer units at each price than they were before the wage increase.

answer

The new equilibrium price and quantity will be P = $7 and Q = 250.

question

f the demand price for the 2,000th unit of a good is $10, then

answer

both b and d

question

If price is $8,

answer

there will be a shortage of 150 units.

question

Consumer surplus

answer

all of the above

question

A firm is deciding whether or not to close down its plant and modernize by installing new technology. Which of the following should management ignore when making the decision?

answer

How much the present plant cost

question

A government agency is having problems with personal telephone calls made during working hours. Because each minute of a personal call costs the agency $0.50 in wasted wages, it has decided to hire operators to monitor calls. The agency wants to hire the number of operators that will minimize the total cost of personal calls.

answer

3

question

A Blue Ribbon Committee has decided that acid rain should be reduced and is trying to determine the optimal level of reduction. There are benefits from reducing acid rain (more wildlife and forests, better health, etc.), but there are also costs. The committee estimates that the marginal benefit of each unit of reduction is $1,400 - 5R, where R is units of reduction, and the marginal cost is 2R. If the committee wants to maximize the net benefit from reducing acid rain, what is marginal cost at the optimal level of reduction?

answer

$200

question

A computer services center has a problem with "malicious" computer usage. The center's director has decided to hire additional personnel to monitor computer usage. In order to minimize the total cost of the malicious usage, the director should hire the number of monitors at which

answer

the decrease in the cost of malicious usage from the last monitor hired equals the cost of hiring the last monitor.

question

Your firm sells club soda in both grocery stores and convenience stores. You have a budget of $550 for store displays, and must decide how to allocate this budget between grocery stores and convenience stores to maximize the total number of sales. The following table shows the total number of units that can be sold in grocery stores and convenience stores, according to the number of displays in each type of store. Displays in grocery stores cost $150 each and displays in convenience stores cost $100 each.

answer

3.3 additional sales.

question

The optimal level of activity is:

answer

3

question

A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll. The last doctor hired treated 1,600 extra patients in a year, while the last nurse hired treated 1,000 extra patients in a year. If doctors make $50,000 a year and nurses make $40,000 a year, then

answer

a and d

question

Based on the above information, if operators receive $400 a week, what is the lowest possible total cost of personal calls?

answer

$1450

question

A continuous choice variable

answer

none of the above

question

Given the above info, if each security guard is paid $200 a week and the cost of a stolen radio is $50, how many security guards should the firm hire?

answer

4

question

Based on the above information, what is the most the agency would be willing to pay the fifth operator?

answer

none of the above

question

If the marginal benefits of increasing study time are less than the marginal costs, then

answer

study time should be decreased.

question

Given the above information, with 10 hours of soliciting, the maximum possible amount of donations is

answer

$628

question

A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll. The last doctor hired treated 1,600 extra patients in a year, while the last nurse hired treated 1,000 extra patients in a year. If doctors make $40,000 a year, what do nurses make?

answer

$25,000 a year

question

Based on the above info, the marginal revenue from the fourth worker is

answer

$150

question

A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll. The last doctor hired treated 1,600 extra patients in a year, while the last nurse hired treated 1,000 extra patients in a year. If doctors make $64,000 a year and nurses make $40,000 a year, then

answer

the clinic is making the correct decision.

question

A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll. The last doctor hired treated 1,600 extra patients in a year, while the last nurse hired treated 1,000 extra patients in a year. If doctors make $80,000 a year and nurses make $40,000 a year, then

answer

the clinic could serve more patients by hiring fewer doctors and more nurses.

question

A Blue Ribbon Committee has decided that acid rain should be reduced and is trying to determine the optimal level of reduction. There are benefits from reducing acid rain (more wildlife and forests, better health, etc.), but there are also costs. The committee estimates that the marginal benefit of each unit of reduction is $700 - 5R, where R is units of reduction, and the marginal cost is 2R. If the committee wants to maximize the net benefit from reducing acid rain, what is the optimal level of pollution reduction?

answer

$100

question

A dentist's office, which wants to serve the maximum number of patients given a fixed payroll, currently has two dentists and four dental hygienists. Dentists earn $60,000 a year and hygienists earn $15,000 a year. If the office is hiring the optimal combination of dentists and hygienists, and the last dentist hired served 120 additional patients, how many patients will the last hygienist hired add?

answer

30

question

Given the above information, with a payroll of $32 (per hour), how should the manager allocate this budget?

answer

Hire two cashiers and four baggers

question

Given the above information, what is the maximum possible number of customers that can be served with a payroll of $32?

answer

936

question

A firm will maximize profit by producing that level of output at which

answer

both b and c

question

A clinic uses doctors and nurses to serve the maximum number of patients given a limited annual payroll. The clinic currently has 10 doctors and 30 nurses. The last doctor hired can serve 300 additional patients, while the last nurse hired can serve 200 additional patients. If doctors make $60,000 a year and nurses make $20,000 a year, the clinic

answer

could serve more patients with the same payroll by hiring more nurses and fewer doctors.

question

A firm can maximize profit (net benefit) by choosing to produce that level of output at which

answer

the additional revenue from the last unit sold equals the additional cost of that unit.

question

if profits depend on both how much is produced (output) and the level of quality, then a profit-maximizing firm should choose the levels of output and quality at which

answer

none of the above

question

A manager wishes to estimate an average cost equation of the following form:

C = a + bQ + cQ2

whereQ is the level of output. Letting Z = Q2 and using least-squares estimation, the manager obtains the following computer output:

Picture

Given the above information, when output is 20 units, what is average cost?

C = a + bQ + cQ2

whereQ is the level of output. Letting Z = Q2 and using least-squares estimation, the manager obtains the following computer output:

Picture

Given the above information, when output is 20 units, what is average cost?

answer

$160

question

In a linear regression equation of the form Y = a + bX, the slope parameter b shows

answer

ΔY/ ΔX.

question

Refer to the following computer output from estimating the parameters of the nonlinear model

Y = aRbScTd

The computer output from the regression analysis is:

Picture

Based on the info above, the estimated value of a is

Y = aRbScTd

The computer output from the regression analysis is:

Picture

Based on the info above, the estimated value of a is

answer

0.50

question

If an analyst believes that more than one explanatory variable explains the variation in the dependent variable, what model should be used?

answer

a multiple regression model

question

A firm is experiencing theft problems at its warehouse. A consultant to the firm believes that the dollar loss from theft each week (T) depends on the number of security guards (G) and on the unemployment rate in the county where the warehouse is located (U measured as a percent). In order to test this hypothesis, the consultant estimated the regression equation T = a + bG + cU and obtained the following results:

Picture

Based on the above information, hiring one more guard per week will decrease the losses due to theft at the warehouse by _________ per week.

Picture

Based on the above information, hiring one more guard per week will decrease the losses due to theft at the warehouse by _________ per week.

answer

$480.92

question

A manager wishes to estimate an average cost equation of the following form:

C = a + bQ + cQ2

whereQ is the level of output. Letting Z = Q2 and using least-squares estimation, the manager obtains the following computer output:

Picture

Given the above information, when output is 40 units, what is average cost?

C = a + bQ + cQ2

whereQ is the level of output. Letting Z = Q2 and using least-squares estimation, the manager obtains the following computer output:

Picture

Given the above information, when output is 40 units, what is average cost?

answer

$480

question

A parameter estimate is said to be statistically significant if there is sufficient evidence that the

answer

true value of the parameter does not equal zero.

question

In a multiple regression model, the coefficients on the independent variables measure

answer

the change in the dependent variable from a one-unit change in that independent variable, all other influences held constant.

question

A firm is experiencing theft problems at its warehouse. A consultant to the firm believes that the dollar loss from theft each week (T) depends on the number of security guards (G) and on the unemployment rate in the county where the warehouse is located (U measured as a percent). In order to test this hypothesis, the consultant estimated the regression equation T = a + bG + cU and obtained the following results:

Picture

Based on the above information, which of the following is correct at the 1% level of significance?

Picture

Based on the above information, which of the following is correct at the 1% level of significance?

answer

all of the above

question

Refer to the following computer output from estimating the parameters of the nonlinear model

Y = aRbScTd

The computer output from the regression analysis is:

Picture

Based on the info above, the nonlinear relation can be transformed into the following linear regression model:

Y = aRbScTd

The computer output from the regression analysis is:

Picture

Based on the info above, the nonlinear relation can be transformed into the following linear regression model:

answer

1n Y = 1na + b1nR +c1nS + d1nT

question

In a linear regression equation of the form Y = a + bX, the intercept parameter a shows

answer

the value of Y when X is zero.

question

A manager wishes to estimate an average cost equation of the following form:

C = a + bQ + cQ2

whereQ is the level of output. Letting Z = Q2 and using least-squares estimation, the manager obtains the following computer output:

Picture

Given the above information, which of the parameter estimates are statistically significant at the 1% significance level

C = a + bQ + cQ2

whereQ is the level of output. Letting Z = Q2 and using least-squares estimation, the manager obtains the following computer output:

Picture

Given the above information, which of the parameter estimates are statistically significant at the 1% significance level

answer

All parameter estimates except b̂ are statistically significant.

question

If the p-value is 10%, then the

answer

null hypothesis should not be rejected if the level of significance is 5%

question

In the nonlinear function Y = aXbZc , the parameter c measures

answer

both b and c

question

For the equation Y = a + bX, the objective of regression analysis is to

answer

both a and c

question

Refer to the following computer output from estimating the parameters of the nonlinear model

Y = aRbScTd

The computer output from the regression analysis is:

Picture

Based on the info above, which of the parameter estimates are statistically significant at the 90% level of confidence?

Y = aRbScTd

The computer output from the regression analysis is:

Picture

Based on the info above, which of the parameter estimates are statistically significant at the 90% level of confidence?

answer

All the parameter estimates are statistically significant.

question

In a regression equation, the ______ captures the effects of factors that might influence the dependent variable but aren't used as explanatory variables.

answer

random error term

question

A manager wishes to estimate an average cost equation of the following form:

C = a + bQ + cQ2

whereQ is the level of output. Letting Z = Q2 and using least-squares estimation, the manager obtains the following computer output:

Picture

Given the above information, the value of R2 indicates that _______ of the total variation in C is explained by the regression equation.

C = a + bQ + cQ2

whereQ is the level of output. Letting Z = Q2 and using least-squares estimation, the manager obtains the following computer output:

Picture

Given the above information, the value of R2 indicates that _______ of the total variation in C is explained by the regression equation.

answer

76.79%

question

A firm is experiencing theft problems at its warehouse. A consultant to the firm believes that the dollar loss from theft each week (T) depends on the number of security guards (G) and on the unemployment rate in the county where the warehouse is located (U measured as a percent). In order to test this hypothesis, the consultant estimated the regression equation T = a + bG + cU and obtained the following results:

Picture

Based on the above information, a one percent increase in the level of unemployment in the county results in an increase in losses due to theft of __________ more losses per week.

Picture

Based on the above information, a one percent increase in the level of unemployment in the county results in an increase in losses due to theft of __________ more losses per week.

answer

$211

question

A firm is experiencing theft problems at its warehouse. A consultant to the firm believes that the dollar loss from theft each week (T) depends on the number of security guards (G) and on the unemployment rate in the county where the warehouse is located (U measured as a percent). In order to test this hypothesis, the consultant estimated the regression equation T = a + bG + cU and obtained the following results:

Picture

Based on the above information, if the firm hires 6 guards and the unemployment rate in the county is 10% (U = 10), what is the predicted dollar loss to theft per week?

Picture

Based on the above information, if the firm hires 6 guards and the unemployment rate in the county is 10% (U = 10), what is the predicted dollar loss to theft per week?

answer

$4,375 per week

question

In the regression model Y = a + bX + cZ , a test of the hypothesis that parameter c equals zero is

answer

at-test.

question

In a linear regression equation Y = a + bX, the fitted or predicted value of Y is

answer

the value of Y obtained by substituting specific values of X into the sample regression equation.

question

Refer to the following computer output from estimating the parameters of the nonlinear model

Y = aRbScTd

The computer output from the regression analysis is:

Picture

Based on the info above, if R = 1, S = 2, and T = 3, what value do you expect Y will have?

Y = aRbScTd

The computer output from the regression analysis is:

Picture

Based on the info above, if R = 1, S = 2, and T = 3, what value do you expect Y will have?

answer

3,289

question

An estimator is unbiased if it produces

answer

estimates of a parameter that are on average equal to the true parameter.

question

Refer to the following computer output from estimating the parameters of the nonlinear model

Y = aRbScTd

The computer output from the regression analysis is:

Picture

Based on the info above, if R decreases by 10% (all other things constant), Y will

Y = aRbScTd

The computer output from the regression analysis is:

Picture

Based on the info above, if R decreases by 10% (all other things constant), Y will

answer

decrease by 46.6%.

question

The price of X is $20 and the price of Y is $40.

Picture

Based on the above graph, at point B,

Picture

Based on the above graph, at point B,

answer

the marginal rate of substitution is ½.

question

5 Lord Greystroke uses his limited income to purchase fruits and nuts; he is currently buying 10 pounds of fruits at a price of $2 per pound and 5 pounds of nuts at a price of $6 per pound. The last pound of fruits added 10 units to Lord Greystroke's total utility, while the last pound of nuts added 30 units. Lord Greystroke

answer

is making the utility-maximizing choice.

question

According to the following figure, what could have caused a consumer's budget line to shift from ML to MN?

Picture

Picture

answer

a decrease in the price of X

question

A market demand curve

answer

is the horizontal summation of the demand curves of all consumers in the market.

question

A utility function

answer

shows the relation between the amount of goods consumed and a consumer's utility.

question

According to the following graph, if U2 is the maximum attainable utility, the price of X is

answer

$15

question

What is the equation for budget line LM, given the above graph?

answer

Y = 0.667 + 1.5X

question

The price of X is $20 and the price of Y is $40.

Picture

Based on the above graph, if U1 is the highest level of utility the consumer can achieve, what is the consumer's income?

Picture

Based on the above graph, if U1 is the highest level of utility the consumer can achieve, what is the consumer's income?

answer

$800

question

According to the following graph, at point B,

Picture

The consumer's income is $1,200.

Picture

The consumer's income is $1,200.

answer

all of the above

question

According to the following graph, at what price of Y are Y2 units demanded?

Picture

The consumer's income is $1,200.

Picture

The consumer's income is $1,200.

answer

$12

question

The consumer's income is $800.

According to the above figure, why doesn't the consumer choose the combination at point B?

According to the above figure, why doesn't the consumer choose the combination at point B?

answer

both a and c

question

The price of Y is $10.

According to the above figure, if the price of X is $5, what combination of X and Y will a utility-maximizing consumer choose?

According to the above figure, if the price of X is $5, what combination of X and Y will a utility-maximizing consumer choose?

answer

80X, 20Y

question

The price of Y is $10.

According to the above figure, which of the following are points on the consumer's demand curve for X?

According to the above figure, which of the following are points on the consumer's demand curve for X?

answer

$3, 120 units

question

The consumer's income is $800.

According to the above figure, what is the consumer's marginal rate of substitution in equilibrium?

According to the above figure, what is the consumer's marginal rate of substitution in equilibrium?

answer

.8

question

According to the following figure, at point A,

Picture

Picture

answer

all of the above

question

The consumer's income is $800.

According to the above figure, what are the prices of goods X and Y? a.

According to the above figure, what are the prices of goods X and Y? a.

answer

PX = $8, PY = $10

question

According to the following graph, at point A,

Picture

The price of Y is $50.

Picture

The price of Y is $50.

answer

both a and b

question

The price of Y is $10.

According to the above figure, the marginal rate of substitution of X for Y at point C is:

According to the above figure, the marginal rate of substitution of X for Y at point C is:

answer

none of these

question

What is the equation for budget line RS, given the above graph?

answer

Y = 18 - (18/10)X

question

A typical indifference curve

answer

shows all combinations of goods that give a consumer the same level of utility.

question

Suppose that 2 units of X and 8 units of Y give a consumer the same satisfaction as 4 units of X and 2 units of Y. Then

answer

both a and c

question

the rate at which a consumer is ABLE to substitute one good for another is determined by

answer

the budget line

question

According to the Rolling Stones, "You can't always get what you want." Which does this mean in the context of utility maximization?

answer

A bundle of goods above the budget line

question

The consumer's income is $800.

According to the above figure, why doesn't the consumer choose the combination of 30X and 56Y at point A? a. MRS is less than

According to the above figure, why doesn't the consumer choose the combination of 30X and 56Y at point A? a. MRS is less than

answer

MRS is greater than PX / PY .

question

According to the following graph, what is Y1?

Picture

The consumer's income is $1,200.

Picture

The consumer's income is $1,200.

answer

120

question

According to the following figure, marginal revenue is zero at Q = ________.

answer

2000 units

question

Consider the statement: "When the British government tripled university fees for foreign students in Great Britain, about one-half of them left to study in other countries." The implied price elasticity of demand by foreigners for a British education is (in absolute value)

answer

less than 1

question

In the figure above, if price DECREASES from $60 to $40, an arrow representing the QUANTITY effect

answer

will be shorter than (and in opposite direction of) the arrow representing the price effect.

question

In the figure above, if price INCREASES from $60 to $80, an arrow representing the PRICE effect

answer

both a and d

question

If the price elasticity of DVD recorders is -0.3 and price increases 20%, what happens to the quantity of DVD recorders demanded?

answer

quantity decreases by 6%

question

f the price elasticity of demand for Harley-Davidson motorcycles is -1.2 and quantity demanded increases by 24%, price must have

answer

decreased by 20%.

question

In the figure above, what is the interval elasticity of demand over the price range $60 to $80?

answer

-1.4

question

Consider the statement: "When the British government tripled university fees for foreign students in Great Britain, about one-half of them left to study in other countries." This move will ___________ university revenues from foreign students in Great Britain.

answer

increase

question

If E1 is the demand elasticity for a product after a price change has been in effect one day, E2 is the demand elasticity for that product after one week, and E3 is demand elasticity for that product after one month,

answer

|E3|> |E2| > |E1|

question

According to the following figure, the equation for demand is

answer

none of the above

question

In the figure above, what is demand elasticity over the price range $40 to $60?

answer

-.71

question

E1 is demand elasticity for Minute Maid orange juice, E2 is demand elasticity for all orange juice, and E3 is demand elasticity for all fruit drinks. Then

answer

|E1| > |E2| > |E3|

question

n the figure above, if price INCREASES from $40 to $60, an arrow representing the PRICE effect

answer

both a and c

question

If the quantity of Harley-Davidson motorcycles demanded decreases by 10% when the price increases by 20%, the price elasticity of demand for Harley-Davidson motorcycles is:

answer

-.5

question

According to the following figure, demand is unitary elastic at P = $________.

answer

25

question

If the demand for plastic surgery is price inelastic,

answer

then when more plastic surgery is performed, total expenditures on plastic surgery will decrease.

question

Demand is (more elastic / less elastic) in the short run than in the long run

answer

(less elastic) because consumers have less time to adapt to a price change in the short run than in the long run.

question

In the figure above, what is the point price elasticity of demand when price is $60?

answer

-1

question

If the demand for umbrellas is price inelastic,

answer

if more umbrellas are sold as the result of a price decrease, total expenditures by consumers on umbrellas will decrease.

question

In the figure above, what is the point price elasticity of demand when price is $40?

answer

-.5

question

If the price elasticity of demand for a good is -0.8 and quantity demanded decreases by 40%, price must have

answer

none of the above

question

According to the following figure, the equation for marginal revenue is

answer

MR = 50 - 0.025Q.

question

In the figure above, what is the point price elasticity of demand when price is $80?

answer

-2.00

question

If a drought increases the price of corn by 10% and decreases the quantity of corn demanded by 5%, then demand for corn is

answer

inelastic and total revenue to corn farmers will increase.

question

n the figure above, if price DECREASES from $80 to $60, an arrow representing the QUANTITY effect

answer

will point upward.

question

A consulting firm estimates the following quarterly sales forecasting model:

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Using the estimated trend line above, what is the predicted level of sales in 2016I ?

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Using the estimated trend line above, what is the predicted level of sales in 2016I ?

answer

106.20

question

A representative sample

answer

both b and c

question

A consulting firm estimates the following quarterly sales forecasting model:

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Given the above, at the 1 percent level of significance, is there a statistically significant trend in sales?

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Given the above, at the 1 percent level of significance, is there a statistically significant trend in sales?

answer

Yes, because 0.0016 < 0.01.

question

Build-Right Concrete Products produces specialty cement used in construction of highways. Build-Right is a price-setting firm and estimates the demand for its cement by the State Highway Department using a demand function in the nonlinear form:

Q = aPbMcPRd

whereQ = yards of cement demanded monthly, P = the price of Build-Right's cement per yard, M = state tax revenues per capita, and

PR = the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:

Picture

Given the above, the estimated cross-price elasticity of demand for cement relative to the price of asphalt is

Q = aPbMcPRd

whereQ = yards of cement demanded monthly, P = the price of Build-Right's cement per yard, M = state tax revenues per capita, and

PR = the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:

Picture

Given the above, the estimated cross-price elasticity of demand for cement relative to the price of asphalt is

answer

0.6

question

A consulting firm estimates the following quarterly sales forecasting model:

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Give the above, at the 1 percent level of significance, is there a statistically significant trend in sales?

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Give the above, at the 1 percent level of significance, is there a statistically significant trend in sales?

answer

Yes, since 3.38 > 2.704

question

A forecaster used the regression equation

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

Using the estimation results given above, the predicted level of sales in 2014I is _______ units.

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

Using the estimation results given above, the predicted level of sales in 2014I is _______ units.

answer

137.5

question

A forecaster used the regression equation

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

What is the estimated intercept of the trend line in the second quarter?

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

What is the estimated intercept of the trend line in the second quarter?

answer

55

question

Build-Right Concrete Products produces specialty cement used in construction of highways. Build-Right is a price-setting firm and estimates the demand for its cement by the State Highway Department using a demand function in the nonlinear form:

Q = aPbMcPRd

whereQ = yards of cement demanded monthly, P = the price of Build-Right's cement per yard, M = state tax revenues per capita, and

PR= the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:

Picture

Given the above, at the 1 percent level of significance, the number of degrees of freedom for a t-test is _____, and the critical value of the t-statistic is ________. 0Only parameter estimate(s) ________ is (are) NOT statistically significant at the 1 percent level of significance.

Q = aPbMcPRd

whereQ = yards of cement demanded monthly, P = the price of Build-Right's cement per yard, M = state tax revenues per capita, and

PR= the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:

Picture

Given the above, at the 1 percent level of significance, the number of degrees of freedom for a t-test is _____, and the critical value of the t-statistic is ________. 0Only parameter estimate(s) ________ is (are) NOT statistically significant at the 1 percent level of significance.

answer

30; 2.750;â

question

A consulting firm estimates the following quarterly sales forecasting model:

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Using the estimated trend line above, what is the predicted level of sales in 2015IV ?

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Using the estimated trend line above, what is the predicted level of sales in 2015IV ?

answer

104.34

question

A consulting firm estimates the following quarterly sales forecasting model:

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Given the above, these estimates indicate that the second quarter change in sales is

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Given the above, these estimates indicate that the second quarter change in sales is

answer

2.00 units higher in the second quarter than in the other three quarters.

question

A forecaster used the regression equation

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

In any given year, quarterly sales tend to vary as follows:

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

In any given year, quarterly sales tend to vary as follows:

answer

QIII > QII > QI > QIV

question

Build-Right Concrete Products produces specialty cement used in construction of highways. Build-Right is a price-setting firm and estimates the demand for its cement by the State Highway Department using a demand function in the nonlinear form:

Q = aPbMcPRd

whereQ = yards of cement demanded monthly, P = the price of Build-Right's cement per yard, M = state tax revenues per capita, and

PR = the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:

Picture

Given the above, if the price of asphalt (PR) decreases 20%, the estimated quantity of cement demanded will:

Q = aPbMcPRd

whereQ = yards of cement demanded monthly, P = the price of Build-Right's cement per yard, M = state tax revenues per capita, and

PR = the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:

Picture

Given the above, if the price of asphalt (PR) decreases 20%, the estimated quantity of cement demanded will:

answer

decrease 12%.

question

A forecaster used the regression equation

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

Using the estimation results given above, the predicted level of sales in 2014III is _______ units.

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

Using the estimation results given above, the predicted level of sales in 2014III is _______ units.

answer

none of the above

question

Build-Right Concrete Products produces specialty cement used in construction of highways. Build-Right is a price-setting firm and estimates the demand for its cement by the State Highway Department using a demand function in the nonlinear form:

Q = aPbMcPdR

whereQ = yards of cement demanded monthly, P = the price of Build-Right's cement per yard, M = state tax revenues per capita, and= the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:

Picture

Given the above, the estimated demand for cement is

Q = aPbMcPdR

whereQ = yards of cement demanded monthly, P = the price of Build-Right's cement per yard, M = state tax revenues per capita, and= the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:

Picture

Given the above, the estimated demand for cement is

answer

inelastic because E = -0.8.

question

forecaster used the regression equation

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

At the 5 percent level of significance, is there a statistically significant trend in sales?

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

At the 5 percent level of significance, is there a statistically significant trend in sales?

answer

Yes, because 2.14 > 2.00.

question

A consulting firm estimates the following quarterly sales forecasting model:

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Given the above, what is the estimated intercept of the trend line in the second quarter?

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Given the above, what is the estimated intercept of the trend line in the second quarter?

answer

24.50

question

A forecaster used the regression equation

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

Using the estimation results given above, the predicted level of sales in 2014II is _______ units.

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

Using the estimation results given above, the predicted level of sales in 2014II is _______ units.

answer

154

question

Build-Right Concrete Products produces specialty cement used in construction of highways. Build-Right is a price-setting firm and estimates the demand for its cement by the State Highway Department using a demand function in the nonlinear form:

Q = aPbMcPdR

whereQ = yards of cement demanded monthly, P = the price of Build-Right's cement per yard, M = state tax revenues per capita, and

PR = the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:

Picture

Given the above, if tax revenue per capita (M) increases 5%, the estimated quantity of cement demanded

Q = aPbMcPdR

whereQ = yards of cement demanded monthly, P = the price of Build-Right's cement per yard, M = state tax revenues per capita, and

PR = the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:

Picture

Given the above, if tax revenue per capita (M) increases 5%, the estimated quantity of cement demanded

answer

increase more than 1% but less than 5%.

question

A forecaster used the regression equation

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III. D

Picture

Using a 5 percent significance level, these estimation results indicate that sales in

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III. D

Picture

Using a 5 percent significance level, these estimation results indicate that sales in

answer

the third quarter are greater than sales in any other quarter.

question

A forecaster used the regression equation

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

What is the estimated intercept of the trend line in the fourth quarter?

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

What is the estimated intercept of the trend line in the fourth quarter?

answer

none of the above

question

A forecaster used the regression equation

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

At the 5 percent level of significance, is there a statistically significant trend in sales?

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

At the 5 percent level of significance, is there a statistically significant trend in sales?

answer

Yes, because 0.0362 < 0.05

question

A consulting firm estimates the following quarterly sales forecasting model:

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Given the above, what is the estimated intercept of the trend line in the third quarter?

Q = a + bt +cD

The equation is estimated using quarterly data from 2005I-2015III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:

D = 1 in the second quarter, and 0 otherwise.

The results of the estimation are:

Picture

Given the above, what is the estimated intercept of the trend line in the third quarter?

answer

22.50

question

A market-determinedprice

answer

both b and c

question

A forecaster used the regression equation

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

The estimated QUARTERLY increase in sales is ______ units, and the estimated ANNUAL increase in sales is ______ units.

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

The estimated QUARTERLY increase in sales is ______ units, and the estimated ANNUAL increase in sales is ______ units.

answer

1.5; 6

question

A forecaster used the regression equation

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

Using the estimation results given above, the predicted level of sales in 2014IV is _______ units.

Qt = a + bt +c1D1 +c2D2 + c3D3

and quarterly sales data for 1996I-2013IV (t = 1, ..., 64) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1,D2 and D3 are dummy variables for quarters I, II, and III.

Picture

Using the estimation results given above, the predicted level of sales in 2014IV is _______ units.

answer

132

question

A production function measures the relation between

answer

the quantity of inputs and the quantity of output

question

in the table above, what is the maximum amount of output that can be produced with two workers?

answer

250

question

In the table above, what is the average product of four units of labor?

answer

80

question

A short-run production function assumes that

answer

at least one input is a fixed input.

question

A firm is currently producing 10 units of output; marginal cost is $24 and average total cost is $6 at this level of output. The average total cost at 9 units of output is:

answer

$4

question

In the figure above, the wage rate is $600 and total fixed cost is $15,000. What is average variable cost at its minimum?

answer

$3.75

question

A firm produces 4,000 units of output using 500 workers. Marginal cost is $10, the wage rate is $160, and total fixed cost is $100,000.When output is 4,000 units,

answer

both a and c

question

A firm produces 4,000 units of output using 500 workers. Marginal cost is $10, the wage rate is $160, and total fixed cost is $100,000. What is average variable cost?

answer

$20

question

2 A fixed cost is

answer

a cost the firm must pay even if output is zero.

question

In the table above, how much does the third unit of labor ADD to total output?

answer

none of the above

question

A firm's cost of production is affected by changes in

answer

both a and b

question

In the above figure, what is the AVERAGE variable cost of producing 5 units of output?

answer

$12

question

Above is a firm's average product of labor and marginal product of labor curves. The price of labor is $60 per unit. When the firm uses 6 units of labor, what is marginal cost?

answer

$5

question

In the above figure, what is the TOTAL cost of producing 5 units of output?

answer

$100

question

In the figure above, the wage rate is $600 and total fixed cost is $15,000. When there are 40 workers, what is average variable cost?

answer

$5

question

Above is a firm's average product of labor and marginal product of labor curves. The price of labor is $60 per unit.When the firm uses 4 units of labor, what is AVERAGE variable cost?

answer

$10

question

Above is a firm's average product of labor and marginal product of labor curves. The price of labor is $60 per unit. Given this, diminishing returns set in with the

answer

6th unit of labor

question

average fixed cost

answer

decreases as output increases.

question

In the table above, diminishing returns

answer

begin with the third unit of labor.

question

In the table above, what is the marginal product of the fifth unit of labor?

answer

-30

question

A firm is using a single variable input, labor, with a given amount of a fixed input, capital. If the level of capital is decreased,

answer

all of the above

question

In the figure above, the wage rate is $600 and total fixed cost is $15,000. How much output does the firm produce when average variable cost is at its minimum?

answer

4800

question

A firm produces 4,000 units of output using 500 workers. Marginal cost is $10, the wage rate is $160, and total fixed cost is $100,000.What is the marginal product of labor?

answer

16 units of output per worker

question

n the above figure, what is the AVERAGE total cost of producing 10 units of output?

answer

$12

question

A short-run cost function assumes that

answer

at least one input is fixed in supply.

question

The graph above shows cost curves for a perfectly competitive firm. If market price is $5, how much output will the firm produce?

answer

600 units

question

For a price-taking firm, marginal revenue

answer

both a and c

question

The figure above shows cost curves for a perfectly competitive firm. A profit-maximizing firm will break even when market price is:

answer

$1.50

question

An industry is in long-run competitive equilibrium. The price of a substitute good increases.

answer

all of the above

question

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results:

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1= $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose that income for next year is forecasted to be $9,000 instead. What is the profit-maximizing output choice for the firm?

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1= $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose that income for next year is forecasted to be $9,000 instead. What is the profit-maximizing output choice for the firm?

answer

none of the above

question

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results:

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P1̂= $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose that income for next year is forecasted to be $9,000 instead. What will the firm's profit (loss) be?

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P1̂= $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose that income for next year is forecasted to be $9,000 instead. What will the firm's profit (loss) be?

answer

-$6000

question

A firm in a competitive industry faces a market price for output of $25 and a wage rate of $750. At the current level of employment (50 units of labor), the marginal product of labor is 20. In order to maximize profit, the firm should

answer

hire less labor because hiring the last unit of labor decreased profit by 250.

question

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results:

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P! is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P1̂= $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. What is the firm's minimum average variable cost?

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P! is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P1̂= $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. What is the firm's minimum average variable cost?

answer

$6

question

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results:

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose income next year is forecasted to be $10,000 instead. What is the profit-maximizing output choice for the firm?

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose income next year is forecasted to be $10,000 instead. What is the profit-maximizing output choice for the firm?

answer

2167

question

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results:

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P! is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. What will the firm's profit (loss) be?

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P! is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. What will the firm's profit (loss) be?

answer

$30,000

question

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results:

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1= $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. What is the price forecast for next year?

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1= $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. What is the price forecast for next year?

answer

$20

question

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results:

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose that income next year is forecasted to be $10,000 instead. What will the firm's profit (loss) be?

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose that income next year is forecasted to be $10,000 instead. What will the firm's profit (loss) be?

answer

-$2856

question

The graph above shows cost curves for a perfectly competitive firm. If market price is $3, how much profit will the firm earn?

answer

-$400

question

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results:

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose that income for next year is forecasted to be $9,000 instead. What is the revised price forecast for next year?

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose that income for next year is forecasted to be $9,000 instead. What is the revised price forecast for next year?

answer

$5

question

The graph above shows cost curves for a perfectly competitive firm. The firm will break even if price is:

answer

$3.90

question

The figure above shows cost curves for a perfectly competitive firm. If market price is $0.70, a profit-maximizing firm will produce _____ units of output and earn profits of _____.

answer

zero,-$400

question

Bartech, Inc. is a firm operating in a competitive market. The manager of Bartech forecasts product price to be $28 in 2015. Bartech's average variable cost function is estimated to be

AVC = 10 - 0.003Q + 0.0000005Q2

Bartech expects to face fixed costs of $12,000 in 2015. At what level of output will Bartech's average variable cost reach its minimum value?

AVC = 10 - 0.003Q + 0.0000005Q2

Bartech expects to face fixed costs of $12,000 in 2015. At what level of output will Bartech's average variable cost reach its minimum value?

answer

3,000 units

question

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results:

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose that income next year is forecasted to be $10,000 instead. What is the revised price forecast for next year?

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. Suppose that income next year is forecasted to be $10,000 instead. What is the revised price forecast for next year?

answer

$7.50

question

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results:

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. What is the profit-maximizing output choice for the firm?

Qd = 25,000 - 5,000P + 2.5M

Qs = 240,000 + 5,000P - 2,000P1

where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be

AVC = 14 - 0.008Q + 0.000002Q2

Total fixed cost will be $6,000 next year. What is the profit-maximizing output choice for the firm?

answer

3,000 units

question

The graph above shows cost curves for a perfectly competitive firm. If market price is $2, how much profit will the firm earn?

answer

-$600

question

The graph above shows cost curves for a perfectly competitive firm. If market price is $5, how much profit will the firm earn?

answer

$600

question

A competitive firm will maximize profit by hiring the amount of an input at which

answer

the last unit of the input hired adds the same amount to total revenue as to total cost.

question

A competitive firm will maximize profit by producing the level of output at which

answer

both a and c

question

A typical firm in a perfectly competitive market made positive economic profits last period. This period,

answer

market supply will increase

question

The figure above shows cost curves for a perfectly competitive firm. Suppose that market price is $2.60. A firm producing 800 units of output

answer

should produce 1100 units of output instead, to earn profits of $1,100.

question

The figure above shows the demand and cost conditions for a firm with two plants. In order to maximize profit, how many units of output should the firm produce?

answer

30

question

A firm with market power faces the following estimated demand and average variable cost functions:

Qd = 39,000 - 500P + 0.4M - 8,000PR

AVC = 30 - 0.005Q + 0.0000005Q2

where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What is the estimated marginal revenue function for the firm?

Qd = 39,000 - 500P + 0.4M - 8,000PR

AVC = 30 - 0.005Q + 0.0000005Q2

where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What is the estimated marginal revenue function for the firm?

answer

MR = 78 - 0.004Q

question

The above graph shows the demand and cost conditions facing a price-setting firm. What is the maximum amount of profit the firm can earn? a -$180

answer

$60

question

The demand for dishwashers facing the AllClean Co. is given in the figure above. The firm manufactures dishwashers in two plants. MC1 and MC2 are the marginal cost curves for those two plants. How many dishwashers should the firm produce?

answer

50

question

A firm with market power faces the following estimated demand and average variable cost functions:

Qd = 39,000 - 500P + 0.4M - 8,000PR

AVC = 30 - 0.005Q + 0.0000005Q2

where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What is the profit-maximizing choice of output?

Qd = 39,000 - 500P + 0.4M - 8,000PR

AVC = 30 - 0.005Q + 0.0000005Q2

where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What is the profit-maximizing choice of output?

answer

8,000 units

question

One method of measuring the extent of a firm's market power is

answer

both a and b

question

The demand for dishwashers facing the AllClean Co. is given in the figure above. The firm manufactures dishwashers in two plants. MC1 and MC2 are the marginal cost curves for those two plants. What price should the firm set?

answer

55

question

The figure above shows the demand and cost conditions for a firm with two plants. What is the profit-maximizing price?

answer

$60

question

The figure above shows the demand and cost curves facing a price-setting firm. The maximum profit the firm can earn is $________.

answer

-$1500

question

The graph above shows the demand and cost conditions facing a monopolist. What price will the monopolist set?

answer

$50

question

The figure above shows the demand and cost curves facing a price-setting firm. In profit-maximizing (or loss-minimizing) equilibrium, the Lerner index is _____, and the elasticity of demand is ______.

answer

0.6; -1.667

question

A firm with market power faces the following estimated demand and average variable cost functions:

Qd = 39,000 - 500P + 0.4M - 8,000PR

AVC = 30 - 0.005Q + 0.0000005Q2

where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What price should the firm charge in order to maximize profit?

Qd = 39,000 - 500P + 0.4M - 8,000PR

AVC = 30 - 0.005Q + 0.0000005Q2

where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What price should the firm charge in order to maximize profit?

answer

$62

question

The graph above shows the demand and cost conditions facing a monopolist. What is the maximum profit the monopolist can earn?

answer

$1,800

question

The above graph shows the demand and cost conditions facing a price-setting firm. When output is 50 units, what will happen to total revenue if the firm sells another unit of output?

answer

Total revenue will increase $6.00.

question

A firm is producing 10,000 units of output in two plants, A and B, and each plant is producing 5,000 units of output. The marginal cost in plant A is $10 and the marginal cost in B is $6. To reduce the cost of producing 10,000 units the firm should

answer

produce less in A and more in B.

question

A firm with market power faces the following estimated demand and average variable cost functions:

Qd = 39,000 - 500P + 0.4M - 8,000PR

AVC = 30 - 0.005Q + 0.0000005Q2

where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What is the estimated demand function for the firm?

Qd = 39,000 - 500P + 0.4M - 8,000PR

AVC = 30 - 0.005Q + 0.0000005Q2

where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What is the estimated demand function for the firm?

answer

Qd = 39,000 - 500P

question

The figure above shows the demand and cost curves facing a price-setting firm. What is marginal revenue when output is 100 units?

answer

$30

question

A firm with market power

answer

both a and b

question

The figure above shows the demand and cost curves facing a price-setting firm. The profit-maximizing (or loss-minimizing) level of output is

answer

300

question

A firm facing a downward sloping demand curve is producing a level of output at which price is $7, marginal revenue is $5, and average total cost, which is at its minimum value, is $3. In order to maximize profit, the firm should

answer

decrease price

question

The figure above shows the demand and cost curves facing a price-setting firm. In profit-maximizing (or loss-minimizing) equilibrium, the price-setting firm earns $______ in total revenue, which is ___________ the maximum possible total revenue of $________.

answer

$7,500; less than; $8,000

question

The demand for dishwashers facing the AllClean Co. is given in the figure above. The firm manufactures dishwashers in two plants. MC1 and MC2 are the marginal cost curves for those two plants. How should the firm allocate total output between the two plants in order to maximize profit?

answer

10 to plant 1, 40 to plant 2

question

The figure above shows the demand and cost curves facing a price-setting firm. At what output is marginal revenue $20?

answer

200 units

question

The figure above shows the demand and cost conditions for a firm with two plants. How should the firm allocate total output between the two plants in order to maximize profit?

answer

produce 10 units in plant 1, 20 units in plant 2

question

The above graph shows the demand and cost conditions facing a price-setting firm. The firm will produce _____ units of output and charge a price of _____.

answer

none of the above

question

Interdependence occurs when

answer

firms consider the actions of other firms when making price and output decisions.

question

Burger Doodle, the incumbent firm, wishes to set a limit price of $8 (rather than the profit-maximizing price of $12) to prevent Designer Burger from entering its profitable market. The game tree above shows the payoffs for various decisions. Burger Doodle makes its pricing decision, then Designer Burger decides whether to enter or stay out of the market. If Designer Burger chooses to enter the market, then Burger Doodle may or may not decide to accommodate Designer's entry by changing its initial price to the Nash equilibrium price of $10.

Picture

If the condition in the question above is NOT met, Burger Doodle will set price equal to $________ at decision node 1 and the outcome _____________(is, is not) a Nash equilibrium.

Picture

If the condition in the question above is NOT met, Burger Doodle will set price equal to $________ at decision node 1 and the outcome _____________(is, is not) a Nash equilibrium.

answer

12; is

question

0 In a duopoly situation with two firms A and B, A's best-response curve

answer

both a and c

question

A form of strategic entry deterrence is

answer

both b and c

question

Which of the following is an example of strategic entry deterrence?

answer

building excess capacity

question

A second-mover advantage

answer

exists when a firm can earn greater profit by reacting to earlier decisions made by rivals.

question

In a prisoners' dilemma decision that is made only one time,

answer

all of the above

question

Credible commitments give committing firms

answer

both a and c

question

A conditional strategic move, such as a threat or promise, can be credible only if

answer

when the time comes to carry out the threat or promise, fulfilling the threat or promise is in the best interest of the firm making the threat or promise.

question

At the point of intersection of two best-response curves, each manager is

answer

both a and b

question

In game theory, a dominant strategy is

answer

a strategy that leads to the best outcome no matter what a rival does.

question

In a repeated decision for which the present value of the benefits of cheating is less than the present value of the costs of cheating,

answer

both a and b

question

Cooperation is achieved in an oligopoly market when

answer

all of the firms in the market decide not to cheat

question

In a repeated prisoners' dilemma decision, both managers can make credible threats to punish cheating because

answer

if either manager cheats, the other manager can increase its profit by also cheating.

question

Firms make credible commitments by taking _________________ , _______________ actions.

answer

irreversible, unconditional

question

Burger Doodle, the incumbent firm, wishes to set a limit price of $8 (rather than the profit-maximizing price of $12) to prevent Designer Burger from entering its profitable market. The game tree above shows the payoffs for various decisions. Burger Doodle makes its pricing decision, then Designer Burger decides whether to enter or stay out of the market. If Designer Burger chooses to enter the market, then Burger Doodle may or may not decide to accommodate Designer's entry by changing its initial price to the Nash equilibrium price of $10.

Picture

If the condition in the question above is met, Burger Doodle will set price equal to $________ and it will earn $__________ of profit while Designer Burger will earn $__________ of profit.

Picture

If the condition in the question above is met, Burger Doodle will set price equal to $________ and it will earn $__________ of profit while Designer Burger will earn $__________ of profit.

answer

8; 125,000; 0

question

In a repeated decision for which the present value of the benefits of cheating is greater than the present value of the costs of cheating,

answer

deciding to cheat is a value-maximizing decision.

question

A credible commitment is

answer

a way of becoming the first-mover in sequential decision situation.

question

Burger Doodle, the incumbent firm, wishes to set a limit price of $8 (rather than the profit-maximizing price of $12) to prevent Designer Burger from entering its profitable market. The game tree above shows the payoffs for various decisions. Burger Doodle makes its pricing decision, then Designer Burger decides whether to enter or stay out of the market. If Designer Burger chooses to enter the market, then Burger Doodle may or may not decide to accommodate Designer's entry by changing its initial price to the Nash equilibrium price of $10.

Picture

If the condition in the question 67 is NOT met, Burger Doodle will set price equal to $________ at decision node 3 and it will earn $__________ of profit while Designer Burger will earn $__________ of profit.

Picture

If the condition in the question 67 is NOT met, Burger Doodle will set price equal to $________ at decision node 3 and it will earn $__________ of profit while Designer Burger will earn $__________ of profit.

answer

10; 101,000; 25,000

question

Burger Doodle, the incumbent firm, wishes to set a limit price of $8 (rather than the profit-maximizing price of $12) to prevent Designer Burger from entering its profitable market. The game tree above shows the payoffs for various decisions. Burger Doodle makes its pricing decision, then Designer Burger decides whether to enter or stay out of the market. If Designer Burger chooses to enter the market, then Burger Doodle may or may not decide to accommodate Designer's entry by changing its initial price to the Nash equilibrium price of $10.

Picture

In order for Burger Doodle to successfully implement a limit pricing strategy for entry deterrence, it must be able to

Picture

In order for Burger Doodle to successfully implement a limit pricing strategy for entry deterrence, it must be able to

answer

make a credible commitment to maintain its initial price should Designer Burger decide to enter the market.

question

In an oligopoly market,

answer

all of the above

question

Actions taken by oligopolists to plan for and react to actions of rival firms represent

answer

strategic behavior

question

If incumbent firm Dell threatens potential new entrant Rising Star with the threat, "If you enter this market, we will lower our price and keep it low until you are driven out of the market," then

answer

both b and c

question

In a one-time prisoners' dilemma decision,

answer

all firms expect the other firms to cheat

question

In every prisoners' dilemma situation, cooperation

answer

is possible

question

A firm is considering the decision of investing in new plants. The following is the profit payoff matrix under three conditions: it does not expand, it builds two new plants, or it builds one new plant. Three possible states of nature can exist--no change in the economy, the economy contracts and the economy grows. The firm has no idea of the probability of each state.

Picture

What decision would be made using the maximax rule?

Picture

What decision would be made using the maximax rule?

answer

two new planets

question

A firm making production plans believes there is a 30% probability the price will be $10, a 50% probability the price will be $15, and a 20% probability the price will be $20. The manager must decide whether to produce 6,000 units of output (A), 8,000 units (B) or 10,000 units (C). The following table shows 9 possible outcomes depending on the output chosen and the actual price.

Picture

For the above payoff matrix, suppose the manager has no idea about the probability of any of the three prices occurring. If the maximax rule is used how much will the firm produce?

Picture

For the above payoff matrix, suppose the manager has no idea about the probability of any of the three prices occurring. If the maximax rule is used how much will the firm produce?

answer

10,000

question

A firm is making production plans for next quarter, but the manager does not know what the price of the product will be next month. She believes there is a 30 percent chance price will be $500 and a 70 percent chance price will be $750. The four possible profit outcomes are:

Picture

Which option has the higher expected profit?

Picture

Which option has the higher expected profit?

answer

Option B

question

A firm is considering the decision of investing in new plants. It can choose no new plants, one new plant, or two new plants. The following table gives the profits for each choice under three states of the economy. The manager assigns the following probabilities to each state of the economy: the economy expands, 20%, the economy contracts, 40%, or the economy is unchanged 40%.

Picture

Using the mean variance rules, which decision is correct?

Picture

Using the mean variance rules, which decision is correct?

answer

If deciding only between one or two new plants, the firm should build one.

question

A firm is considering two projects, A and B, with the following probability distributions for profit.

Picture

Given the above, the expected value of project A (in $1,000s) is

Picture

Given the above, the expected value of project A (in $1,000s) is

answer

$60

question

A firm is considering the decision of investing in new plants. The following is the profit payoff matrix under three conditions: it does not expand, it builds two new plants, or it builds one new plant. Three possible states of nature can exist--no change in the economy, the economy contracts and the economy grows. The firm has no idea of the probability of each state.

Picture

What decision would be made using the maximin rule?

Picture

What decision would be made using the maximin rule?

answer

no new plants

question

A firm is considering the decision of investing in new plants. The following is the profit payoff matrix under three conditions: it does not expand, it builds two new plants, or it builds one new plant. Three possible states of nature can exist--no change in the economy, the economy contracts and the economy grows. The firm has no idea of the probability of each state.

Picture

What decision would be made using the maximum expected value rule?

Picture

What decision would be made using the maximum expected value rule?

answer

not enough info

question

A firm is considering two projects, A and B, with the following probability distributions for profit.

Picture

Given the above, what is the expected value of project B (in $1,000s)?

Picture

Given the above, what is the expected value of project B (in $1,000s)?

answer

$65

question

A firm is considering the decision of investing in new plants. The following is the profit payoff matrix under three conditions: it does not expand, it builds two new plants, or it builds one new plant. Three possible states of nature can exist--no change in the economy, the economy contracts and the economy grows. The firm has no idea of the probability of each state.

Picture

What decision would be made using the minimax regret rule?

Picture

What decision would be made using the minimax regret rule?

answer

two new plants

question

A firm is making production plans for next quarter, but the manager does not know what the price of the product will be next month. She believes there is a 30 percent chance price will be $500 and a 70 percent chance price will be $750. The four possible profit outcomes are:

Picture

Which option has the highest (absolute) risk?

Picture

Which option has the highest (absolute) risk?

answer

Option B is riskier than Option A.

question

A firm is considering two projects, A and B, with the following probability distributions for profit.

Picture

Given the above, what is the variance of project B?

Picture

Given the above, what is the variance of project B?

answer

515

question

A probability distribution

answer

lists all possible outcomes and the corresponding probabilities of occurrence.

question

A firm is making production plans for next quarter, but the manager does not know what the price of the product will be next month. She believes there is a 30 percent chance price will be $500 and a 70 percent chance price will be $750. The four possible profit outcomes are:

Picture

Which option is chosen using the coefficient of variation rule?

Picture

Which option is chosen using the coefficient of variation rule?

answer

Both options have the same coefficient of variation (to two decimal places).

question

A firm is considering the decision of investing in new plants. It can choose no new plants, one new plant, or two new plants. The following table gives the profits for each choice under three states of the economy. The manager assigns the following probabilities to each state of the economy: the economy expands, 20%, the economy contracts, 40%, or the economy is unchanged 40%.

Picture

Using the expected value rule which is correct? Building

Picture

Using the expected value rule which is correct? Building

answer

c and d

question

A firm is considering the decision of investing in new plants. The following is the profit payoff matrix under three conditions: it does not expand, it builds two new plants, or it builds one new plant. Three possible states of nature can exist--no change in the economy, the economy contracts and the economy grows. The firm has no idea of the probability of each state.

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What decision would be made using the equal probability rule?

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What decision would be made using the equal probability rule?

answer

two new plant

question

A firm making production plans believes there is a 30% probability the price will be $10, a 50% probability the price will be $15, and a 20% probability the price will be $20. The manager must decide whether to produce 6,000 units of output (A), 8,000 units (B) or 10,000 units (C). The following table shows 9 possible outcomes depending on the output chosen and the actual price.

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For the above payoff matrix, suppose the manager has no idea about the probability of any of the three prices occurring. If the maximin rule is used how much will the firm produce?

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For the above payoff matrix, suppose the manager has no idea about the probability of any of the three prices occurring. If the maximin rule is used how much will the firm produce?

answer

6,000

question

A firm making production plans believes there is a 30% probability the price will be $10, a 50% probability the price will be $15, and a 20% probability the price will be $20. The manager must decide whether to produce 6,000 units of output (A), 8,000 units (B) or 10,000 units (C). The following table shows 9 possible outcomes depending on the output chosen and the actual price.

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What is the variance if 6,000 units are produce

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What is the variance if 6,000 units are produce

answer

176,400

question

A firm making production plans believes there is a 30% probability the price will be $10, a 50% probability the price will be $15, and a 20% probability the price will be $20. The manager must decide whether to produce 6,000 units of output (A), 8,000 units (B) or 10,000 units (C). The following table shows 9 possible outcomes depending on the output chosen and the actual price.

Picture

If the mean-variance rule is used, how much should the firm produce?

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If the mean-variance rule is used, how much should the firm produce?

answer

cannot use this rule to make this decision

question

A firm making production plans believes there is a 30% probability the price will be $10, a 50% probability the price will be $15, and a 20% probability the price will be $20. The manager must decide whether to produce 6,000 units of output (A), 8,000 units (B) or 10,000 units (C). The following table shows 9 possible outcomes depending on the output chosen and the actual price.

Picture

What is the expected profit if 10,000 units are produced?

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What is the expected profit if 10,000 units are produced?

answer

$700

question

A firm making production plans believes there is a 30% probability the price will be $10, a 50% probability the price will be $15, and a 20% probability the price will be $20. The manager must decide whether to produce 6,000 units of output (A), 8,000 units (B) or 10,000 units (C). The following table shows 9 possible outcomes depending on the output chosen and the actual price.

Picture

What is the expected profit if 6,000 units are produced?

Picture

What is the expected profit if 6,000 units are produced?

answer

$340

question

A firm is considering two projects, A and B, with the following probability distributions for profit.

Picture

Given the above, the coefficient of variation (to 2 decimal places) is

Picture

Given the above, the coefficient of variation (to 2 decimal places) is

answer

both c and d

question

A firm is considering the decision of investing in new plants. It can choose no new plants, one new plant, or two new plants. The following table gives the profits for each choice under three states of the economy. The manager assigns the following probabilities to each state of the economy: the economy expands, 20%, the economy contracts, 40%, or the economy is unchanged 40%.

Picture

Using the coefficient of variation rule, the firm should build

Picture

Using the coefficient of variation rule, the firm should build

answer

one new plant

question

A firm is considering two projects, A and B, with the following probability distributions for profit.

Picture

Given the above, a decision maker who is risk neutral would

Picture

Given the above, a decision maker who is risk neutral would

answer

choose project b

question

A firm is considering two projects, A and B, with the following probability distributions for profit.

Picture

Given the above, the variance of project A is

Picture

Given the above, the variance of project A is

answer

440

question

A firm is considering two projects, A and B, with the following probability distributions for profit.

Picture

Given the above, a decision maker using the coefficient of variation rule would

Picture

Given the above, a decision maker using the coefficient of variation rule would

answer

not be able to make a decision using that rule.

question

In long-run perfectly competitive equilibrium, economic efficiency is achieved because

answer

both a and c

question

A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P = 24 - 0.0004Qd..

Picture

The value in blank a in the figure is ____.

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The value in blank a in the figure is ____.

answer

50,000

question

"Market power"

answer

both b and c

question

Firms with market power

answer

maximize profit but fail to maximize social surplus.

question

A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P = 24 - 0.0004Qd.

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The value in blank d in the figure is ____.

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The value in blank d in the figure is ____.

answer

none of the above

question

Common property resources lead to market failure because

answer

the resource is overexploited and undersupplied.

question

Private provision of public goods fails to achieve economic efficiency because

answer

both b and c

question

An underallocation of resources in an industry means that for the last unit produced,

answer

the demand price for the last unit exceeds the marginal cost of producing the last unit

question

A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P = 24 - 0.0004Qd.

Picture

Quasi-fixed capital inputs cost per month is $____.

Picture

Quasi-fixed capital inputs cost per month is $____.

answer

250,000

question

A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P = 24 - 0.0004Qd.

Picture

If the Public Service Commission implements an optimal two-part pricing plan, the usage fee is set at $_____ per 1,000-gallon units per month and the fixed monthly access charge must then be $_____ per household.

Picture

If the Public Service Commission implements an optimal two-part pricing plan, the usage fee is set at $_____ per 1,000-gallon units per month and the fixed monthly access charge must then be $_____ per household.

answer

$4.00; $12.50

question

An overallocation of resources in an industry means that for the last unit produced,

answer

society places a higher value on the resources required to produce the last unit than the value society places on consuming the last unit.

question

Market or monopoly power leads to market failure because

answer

price exceeds marginal revenue, which causes the profit-maximizing firm to under-produce the good or service.

question

Natural monopoly arises when

answer

costs are subadditive.

question

As a policy option for regulating natural monopoly, marginal cost pricing is desirable because

answer

allocative efficiency is achieved.

question

A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P = 24 - 0.0004Qd.

Picture

Two-part pricing is a desirable method of pricing water because

Picture

Two-part pricing is a desirable method of pricing water because

answer

deadweight loss is zero

question

Private provision of public goods fails to occur because

answer

the free rider problem prevents collection of sufficient revenue.

question

A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P = 24 - 0.0004Qd.

.Picture

The value in blank b in the figure is ____.

.Picture

The value in blank b in the figure is ____.

answer

25,000

question

An underallocation of resources occurs when

answer

a positive externality in consumption exists.

question

An underallocation of resources in an industry means that for the last unit produced,

answer

the demand price for the last unit exceeds the marginal cost of producing the last unit.

question

A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P = 24 - 0.0004Qd.

Picture

Regulators at the Public Service Commission are unlikely to choose the price in the previous question because

Picture

Regulators at the Public Service Commission are unlikely to choose the price in the previous question because

answer

both a and b

question

A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P = 24 - 0.0004Qd.

Picture

The value in blank c in the figure is ____.

Picture

The value in blank c in the figure is ____.

answer

none of the above

question

Price is $50 and quantity demanded is 2,000 units at point A on a linear demand curve. The linear supply curve intersects the demand curve at point B, which is at a price of $30 and 3,000 units. Which of the following is true?

answer

Moving from point A to point B causes consumer surplus to rise by $50,000.

question

A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P = 24 - 0.0004Qd.

Picture

The price and output of water that maximize social surplus are _____ and _____, respectively.

Picture

The price and output of water that maximize social surplus are _____ and _____, respectively.

answer

none of the above

question

A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P = 24 - 0.0004Qd.

Picture

Second-best pricing does not achieve social economic efficiency because there is a deadweight loss of

Picture

Second-best pricing does not achieve social economic efficiency because there is a deadweight loss of

answer

$125,000

question

A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P = 24 - 0.0004Qd.

Picture

If the Public Service Commission undertakes second-best pricing, the price and output of water are __________ and _________, respectively.

Picture

If the Public Service Commission undertakes second-best pricing, the price and output of water are __________ and _________, respectively.

answer

none of the above

The price is based on these factors:

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