ECON 2305 - Midterm Exam 2 - Custom Scholars
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# ECON 2305 – Midterm Exam 2

question
If the cross-price elasticity of demand between lettuce and salad dressing is negative, then when the price of lettuce rises, the demand for salad dressing will ______.

A) increase
B) become more inelastic
C) decrease
D) remain the same
C) DECREASE

question
An increase in the price a firm receives for its output will lead the firm to:

A) expand output.
B) leave output unchanged and earn smaller losses.
C) leave output unchanged and earn greater profits.
D) reduce output.
A) EXPAND OUTPUT

increase = expand
question
A change in consumers' incomes causes a change in:

A) the cross-price elasticity of demand.
B) demand.
C) the demand for normal goods but not the demand for inferior goods.
'D) supply.
B) DEMAND

income demand affect thing
question
4) Refer to the figure below. The absolute value of the slope of the demand curve D1 is ______, and the absolute value of the slope of demand curve D2 is ______.

A) 2; 1/2 B) 5/4; 4/5 C) 4/5; 5/4 D) 1/2; 2
A) 2; 1/2

D1 champs rank #2 and D2 are only 1/2 has good as D1
question
5) Refer to the figure below. If Laura and Chris are the only two consumers in this market then at a price of \$2.50 per pound, the market demand for hamburger is:

A) 1.5 pounds per week
B) 4 pounds per week
C) 4.5 pounds per week
D) 3 pounds per week
C) 4.5 POUNDS

HAMBURGER weighs 4.5 POUNDS

question
6) If the elasticity of demand for the latest American Idol album is 1.4, this means

A) a 5% increase in the price leads to a 7% decrease in quantity demanded.
B) a 1% increase in the price leads to a 14% decrease in quantity demanded.
C) few substitutes for the American Idol album exist.
D) a 10% decrease in the price leads to a 140% increase in quantity demanded.
A) A 5% INCREASE IN THE PRICE LEADS TO A 7% DECREASE IN QUANTITY DEMANDED.

just remember 5 and 7
question
7) John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays \$7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes \$2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below:

John's benefit from his first hour cleaning windows is:

A) \$7
B) \$14
C) \$18
D) \$2.
B) \$14

7x2=14
question
8) Suppose Sarah owns a small company that makes wedding cakes. The table below shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day.

If the market for wedding cakes is perfectly competitive, and wedding cakes sell for \$125 each, then Sarah should produce ______ cakes per day.

A) 3
B) 6
C) 5
D) 0
C) 5

12(5)

SARAH MAKES FIVE
question
Suppose a perfectly competitive firm is producing 77 units of output, and the marginal cost of the 77 th unit is 11. If the firm can sell each unit of output for \$8 and the firm's revenue is sufficient to cover its variable cost, the firm should:

A) increase production.
B) lower its price.
C) decrease production.
D) raise its price.
C) DECREASE PRODUCTION

it's PERFECTLY COMPETITIVE to DECREASE
question
10) Refer to the figure below. If the price of a latte increases from \$2.00 to \$2.50:

A) total expenditure would stay the same.
B) the change in total expenditure, if any, would depend on the supply curve.
C) total expenditure would decrease.
D) total expenditure would increase.
C) TOTAL EXPENDITURE WOULD DECREASE

if latte price INCREASES, expenditure DECREASES
question
A price-taker faces a demand curve that is:

A) downward sloping.
B) horizontal at the market price.
C) upward sloping.
D) vertical at the market price.
B) HORIZONTAL AT THE MARKET PRICE

a price taker person lies sideways so HORIZONTAL
question
12) If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to:

A) 0.30.
B) 3.
C) 0.333.
D) 30.
B) 3

3/1 = 3
question
13) When Joe's Gas raises its price for regular unleaded gasoline, total revenue from regular unleaded gas falls to zero. It must be the case that

A) there are not many good substitutes for Joe's regular unleaded gasoline.
B) the demand for Joe's regular unleaded gasoline is perfectly elastic.
D) the demand for Joe's regular unleaded is inelastic.
B) THE DEMAND FOR JOE'S REGULAR UNLEADED GASOLINE IS PERFECTLY ELASTIC

JOE has PERFECT(ly elastic) GAS
question
14) Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. If the lemonade market is perfectly competitive and Jenny is charging the equilibrium price, then Jenny can increase her revenue if she:

A) increases the price of her lemonade and doesn't change her output.
B) keeps the price of her lemonade the same and increases the output.
C) increases the price of her lemonade and decreases her output.
D) decreases the price of her lemonade and doesn't change her output.
B) KEEPS THE PRICE OF HER LEMONADE THE SAME AND INCREASES THE OUTPUT
question
15) Shelter for homeless people is an example of

A) a need
B) something hard to find
C) something they can live without D) a want
A) A NEED

u NEED SHELTER to live
question
16) Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for \$2, the hourly wage rate is \$14, and the rent on the office space is \$50 per day.

When the firm uses 9 employee-hours, its total cost each day is:

A) \$176
B) \$126
C) \$56
D) \$64
A) \$176

9X14=126 + 50= 176

ignore the \$2
question
17) Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is \$1.50, then, in the short run, it's clear that this firm:

A) should shut down.
B) should not shut down if its total variable cost is less than \$750.
C) should produce more than 500 units a day.
D) is not maximizing its profit.
B) SHOULD NOT SUT DOWN IF ITS TOTAL VARIABLE COST IS LESS THAN \$750

(500 x 1.5 = 750) literally only one answer w 750
question
18) In general, perfectly competitive firms maximize their profit by producing the level of output at which:

A) marginal cost equals price.
B) marginal cost is minimized.
C) total cost is minimized.
D) total cost equals total revenue.
A) MARGINAL COST EQUALS PRICE

P(erfectly competitive) = P(rice)

question
19) The long run is best defined as:

A) the period of time between annual accounting reports.
B) one year or more.
C) a period of time sufficiently long that at least one factor of production is fixed.
D) a period of time sufficiently long that all factors of production are variable.
D) A PERIOD OF TIME SUFFICIENTLY LONG THAT ALL FACTORS OF PRODUCTION ARE VARIABLE
question
20) One reason that variable factors of production tend to show diminishing returns in the short run is that:

A) the cost of employing additional resources increases as firms employ more of those resources.
B) large firms cannot effectively manage their resources.
C) there is only so much that can be produced using additional variable inputs when some factors of production are fixed.
D) capital equipment is often idle in the short run.
C) THERE IS ONLY SO MUCH THAT CAN BE PRODUCED USING ADDITIONAL VARIABLE INPUTS WHEN SOME FACTORS OF PRODUCTION ARE FIXED
question
21) Demand tends to be ______ in the short run than in the long run.

A) more variable
B) less elastic
C) less important
D) more elastic
B) LESS ELASTIC

bc they're more fixed in the short run

more fixed = less elastic
question
22) The primary objective of most private firms is to:

A) minimize cost.
B) maximize profit.
C) maximize output.
D) maximize revenue.
B) MAXIMIZE PROFIT

(P)rimary = (P)rofit
question
23) Which of the following is NOT a characteristic of a perfectly competitive market?

A) Buyers and sellers are well-informed.
B) There are many sellers, each of which sells only a small fraction of the total quantity exchanged.
C) Sellers can easily buy and sell the productive resources needed to enter the market.
D) Each firm in the market sells a somewhat different variant of the good.
D) EACH FIRM IN THE MARKET SELLS A SOMEWHAT DIFFERENT VARIANT OF THE GOOD
question
24) If a 10% decrease in the price of a good leads to a 20% increase in the quantity demanded, then what is the price elasticity of demand?

A) 2.
B) 20.
C) ½.
D) 10.
A) 2

20/10 = 2

d/p

thank u dp
question
25) The following graph depicts demand.

The price elasticity of demand at point A is:

A) 2/5.
B) 8/5.
C) 5/8.
D) 5/2.
D) 5/2

work DEMANDS I work 5-2
question
26) The championship game will be held next weekend in your college's 40,000-seat stadium. The supply of tickets to the game:

A) depends on which teams make it to the championship game.
B) will increase because the price charged will be higher.
C) is elastic.
D) is perfectly inelastic.
D) IS PERFECTLY INELASTIC
question
27) Refer to the figure below. If the price rises from \$10 to \$14, what will happen to the price elasticity of supply?

A) This cannot be determined from the information provided.
B) It decreases.
C) It increases.
D) It stays the same.
B) IT DECREASES

10-14 price increase, but elasticity of supply decreases
question
28) Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the table below.

The marginal cost if the 4th mug per day is ______.

A) \$5
B) \$7
C) \$32
D) \$8
B) \$7

day 3 is 25, day 4 is 32 so:
32-25=7
question
29) John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays \$7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes \$2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below:

How many hours a day should John spend cleaning windows?

A) 1
B) 2
C) 4
D) 3
B) 2

2 hours bc he'll earn \$11 dollars then which is more than the \$7 he'd be paid at the store
question
30) Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is

A) inelastic.
B) unit elastic.
C) elastic.
D) perfectly inelastic
A) INELASTIC

not PERFECT JUST inelastic

ASPIRIN is not always a PERFECT solution
question
31) Suppose the price of a Snickers candy bar is \$2.00 at both the airport and the grocery store. The price elasticity of demand for a Snickers candy bar at an airport is likely to be ______ the price elasticity of demand for a Snickers candy bar at the grocery store.

A) greater than
B) equal to
C) the reciprocal of
D) less than
D) LESS THAN

(S)nickers = le(SS)
question
32) Which of the following will cause an increase market supply?

A) An increase in the price of the good.
B) A technological innovation that lowers the marginal cost of producing the good.
C) A decrease in the number of firms in the market.
D) An increase in demand for the good.
B) A TECHNOLOGICAL INNOVATION THAT LOWERS THE MARGINAL COST OF PRODUCING THE GOOD

(T)echonology = marke(T)
question
33) Refer to the table below. To increase output from 99 to 132 units requires ______ extra employee-hours; to increase output from 132 to 165 units requires ______ extra employee-hours.

A) 7; 11
B) 11; 18
C) 3; 4
D) 4; 3
C) 3; 4
question
34) The figure below shows a single consumer's demand for ice cream at the student union. During the summer, there are 300 students on campus. Each student's weekly demand for ice cream is shown above. When the price of ice cream is \$2.00 per scoop, those 300 students purchase a total of ______ scoops per week from the student union.

A) 1,800
B) 1,500
C) 3,000
D) 1,200
A) 1,800

6 x 300
question
35) Suppose an increase in the price of hamburger from \$3 to \$4 leads to an increase in quantity supplied from 100 units to 150 units. At the original price, the price elasticity of supply for hamburgers is ______ so supply is ______.

A) 3/2; elastic
B) 2/3; inelastic
C) 3/2; inelastic
D) 2/3; elastic
A) 3/2 ELASTIC

hamburgers are elastic and stretchy so 3/2
1 of 35
question
If the cross-price elasticity of demand between lettuce and salad dressing is negative, then when the price of lettuce rises, the demand for salad dressing will ______.

A) increase
B) become more inelastic
C) decrease
D) remain the same
C) DECREASE

question
An increase in the price a firm receives for its output will lead the firm to:

A) expand output.
B) leave output unchanged and earn smaller losses.
C) leave output unchanged and earn greater profits.
D) reduce output.
A) EXPAND OUTPUT

increase = expand
question
A change in consumers' incomes causes a change in:

A) the cross-price elasticity of demand.
B) demand.
C) the demand for normal goods but not the demand for inferior goods.
'D) supply.
B) DEMAND

income demand affect thing
question
4) Refer to the figure below. The absolute value of the slope of the demand curve D1 is ______, and the absolute value of the slope of demand curve D2 is ______.

A) 2; 1/2 B) 5/4; 4/5 C) 4/5; 5/4 D) 1/2; 2
A) 2; 1/2

D1 champs rank #2 and D2 are only 1/2 has good as D1
question
5) Refer to the figure below. If Laura and Chris are the only two consumers in this market then at a price of \$2.50 per pound, the market demand for hamburger is:

A) 1.5 pounds per week
B) 4 pounds per week
C) 4.5 pounds per week
D) 3 pounds per week
C) 4.5 POUNDS

HAMBURGER weighs 4.5 POUNDS

question
6) If the elasticity of demand for the latest American Idol album is 1.4, this means

A) a 5% increase in the price leads to a 7% decrease in quantity demanded.
B) a 1% increase in the price leads to a 14% decrease in quantity demanded.
C) few substitutes for the American Idol album exist.
D) a 10% decrease in the price leads to a 140% increase in quantity demanded.
A) A 5% INCREASE IN THE PRICE LEADS TO A 7% DECREASE IN QUANTITY DEMANDED.

just remember 5 and 7
question
7) John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays \$7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes \$2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below:

John's benefit from his first hour cleaning windows is:

A) \$7
B) \$14
C) \$18
D) \$2.
B) \$14

7x2=14
question
8) Suppose Sarah owns a small company that makes wedding cakes. The table below shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day.

If the market for wedding cakes is perfectly competitive, and wedding cakes sell for \$125 each, then Sarah should produce ______ cakes per day.

A) 3
B) 6
C) 5
D) 0
C) 5

12(5)

SARAH MAKES FIVE
question
Suppose a perfectly competitive firm is producing 77 units of output, and the marginal cost of the 77 th unit is 11. If the firm can sell each unit of output for \$8 and the firm's revenue is sufficient to cover its variable cost, the firm should:

A) increase production.
B) lower its price.
C) decrease production.
D) raise its price.
C) DECREASE PRODUCTION

it's PERFECTLY COMPETITIVE to DECREASE
question
10) Refer to the figure below. If the price of a latte increases from \$2.00 to \$2.50:

A) total expenditure would stay the same.
B) the change in total expenditure, if any, would depend on the supply curve.
C) total expenditure would decrease.
D) total expenditure would increase.
C) TOTAL EXPENDITURE WOULD DECREASE

if latte price INCREASES, expenditure DECREASES
question
A price-taker faces a demand curve that is:

A) downward sloping.
B) horizontal at the market price.
C) upward sloping.
D) vertical at the market price.
B) HORIZONTAL AT THE MARKET PRICE

a price taker person lies sideways so HORIZONTAL
question
12) If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to:

A) 0.30.
B) 3.
C) 0.333.
D) 30.
B) 3

3/1 = 3
question
13) When Joe's Gas raises its price for regular unleaded gasoline, total revenue from regular unleaded gas falls to zero. It must be the case that

A) there are not many good substitutes for Joe's regular unleaded gasoline.
B) the demand for Joe's regular unleaded gasoline is perfectly elastic.
D) the demand for Joe's regular unleaded is inelastic.
B) THE DEMAND FOR JOE'S REGULAR UNLEADED GASOLINE IS PERFECTLY ELASTIC

JOE has PERFECT(ly elastic) GAS
question
14) Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. If the lemonade market is perfectly competitive and Jenny is charging the equilibrium price, then Jenny can increase her revenue if she:

A) increases the price of her lemonade and doesn't change her output.
B) keeps the price of her lemonade the same and increases the output.
C) increases the price of her lemonade and decreases her output.
D) decreases the price of her lemonade and doesn't change her output.
B) KEEPS THE PRICE OF HER LEMONADE THE SAME AND INCREASES THE OUTPUT
question
15) Shelter for homeless people is an example of

A) a need
B) something hard to find
C) something they can live without D) a want
A) A NEED

u NEED SHELTER to live
question
16) Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for \$2, the hourly wage rate is \$14, and the rent on the office space is \$50 per day.

When the firm uses 9 employee-hours, its total cost each day is:

A) \$176
B) \$126
C) \$56
D) \$64
A) \$176

9X14=126 + 50= 176

ignore the \$2
question
17) Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is \$1.50, then, in the short run, it's clear that this firm:

A) should shut down.
B) should not shut down if its total variable cost is less than \$750.
C) should produce more than 500 units a day.
D) is not maximizing its profit.
B) SHOULD NOT SUT DOWN IF ITS TOTAL VARIABLE COST IS LESS THAN \$750

(500 x 1.5 = 750) literally only one answer w 750
question
18) In general, perfectly competitive firms maximize their profit by producing the level of output at which:

A) marginal cost equals price.
B) marginal cost is minimized.
C) total cost is minimized.
D) total cost equals total revenue.
A) MARGINAL COST EQUALS PRICE

P(erfectly competitive) = P(rice)

question
19) The long run is best defined as:

A) the period of time between annual accounting reports.
B) one year or more.
C) a period of time sufficiently long that at least one factor of production is fixed.
D) a period of time sufficiently long that all factors of production are variable.
D) A PERIOD OF TIME SUFFICIENTLY LONG THAT ALL FACTORS OF PRODUCTION ARE VARIABLE
question
20) One reason that variable factors of production tend to show diminishing returns in the short run is that:

A) the cost of employing additional resources increases as firms employ more of those resources.
B) large firms cannot effectively manage their resources.
C) there is only so much that can be produced using additional variable inputs when some factors of production are fixed.
D) capital equipment is often idle in the short run.
C) THERE IS ONLY SO MUCH THAT CAN BE PRODUCED USING ADDITIONAL VARIABLE INPUTS WHEN SOME FACTORS OF PRODUCTION ARE FIXED
question
21) Demand tends to be ______ in the short run than in the long run.

A) more variable
B) less elastic
C) less important
D) more elastic
B) LESS ELASTIC

bc they're more fixed in the short run

more fixed = less elastic
question
22) The primary objective of most private firms is to:

A) minimize cost.
B) maximize profit.
C) maximize output.
D) maximize revenue.
B) MAXIMIZE PROFIT

(P)rimary = (P)rofit
question
23) Which of the following is NOT a characteristic of a perfectly competitive market?

A) Buyers and sellers are well-informed.
B) There are many sellers, each of which sells only a small fraction of the total quantity exchanged.
C) Sellers can easily buy and sell the productive resources needed to enter the market.
D) Each firm in the market sells a somewhat different variant of the good.
D) EACH FIRM IN THE MARKET SELLS A SOMEWHAT DIFFERENT VARIANT OF THE GOOD
question
24) If a 10% decrease in the price of a good leads to a 20% increase in the quantity demanded, then what is the price elasticity of demand?

A) 2.
B) 20.
C) ½.
D) 10.
A) 2

20/10 = 2

d/p

thank u dp
question
25) The following graph depicts demand.

The price elasticity of demand at point A is:

A) 2/5.
B) 8/5.
C) 5/8.
D) 5/2.
D) 5/2

work DEMANDS I work 5-2
question
26) The championship game will be held next weekend in your college's 40,000-seat stadium. The supply of tickets to the game:

A) depends on which teams make it to the championship game.
B) will increase because the price charged will be higher.
C) is elastic.
D) is perfectly inelastic.
D) IS PERFECTLY INELASTIC
question
27) Refer to the figure below. If the price rises from \$10 to \$14, what will happen to the price elasticity of supply?

A) This cannot be determined from the information provided.
B) It decreases.
C) It increases.
D) It stays the same.
B) IT DECREASES

10-14 price increase, but elasticity of supply decreases
question
28) Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the table below.

The marginal cost if the 4th mug per day is ______.

A) \$5
B) \$7
C) \$32
D) \$8
B) \$7

day 3 is 25, day 4 is 32 so:
32-25=7
question
29) John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays \$7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes \$2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below:

How many hours a day should John spend cleaning windows?

A) 1
B) 2
C) 4
D) 3
B) 2

2 hours bc he'll earn \$11 dollars then which is more than the \$7 he'd be paid at the store
question
30) Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is

A) inelastic.
B) unit elastic.
C) elastic.
D) perfectly inelastic
A) INELASTIC

not PERFECT JUST inelastic

ASPIRIN is not always a PERFECT solution
question
31) Suppose the price of a Snickers candy bar is \$2.00 at both the airport and the grocery store. The price elasticity of demand for a Snickers candy bar at an airport is likely to be ______ the price elasticity of demand for a Snickers candy bar at the grocery store.

A) greater than
B) equal to
C) the reciprocal of
D) less than
D) LESS THAN

(S)nickers = le(SS)
question
32) Which of the following will cause an increase market supply?

A) An increase in the price of the good.
B) A technological innovation that lowers the marginal cost of producing the good.
C) A decrease in the number of firms in the market.
D) An increase in demand for the good.
B) A TECHNOLOGICAL INNOVATION THAT LOWERS THE MARGINAL COST OF PRODUCING THE GOOD

(T)echonology = marke(T)
question
33) Refer to the table below. To increase output from 99 to 132 units requires ______ extra employee-hours; to increase output from 132 to 165 units requires ______ extra employee-hours.

A) 7; 11
B) 11; 18
C) 3; 4
D) 4; 3
C) 3; 4
question
34) The figure below shows a single consumer's demand for ice cream at the student union. During the summer, there are 300 students on campus. Each student's weekly demand for ice cream is shown above. When the price of ice cream is \$2.00 per scoop, those 300 students purchase a total of ______ scoops per week from the student union.

A) 1,800
B) 1,500
C) 3,000
D) 1,200
A) 1,800

6 x 300
question
35) Suppose an increase in the price of hamburger from \$3 to \$4 leads to an increase in quantity supplied from 100 units to 150 units. At the original price, the price elasticity of supply for hamburgers is ______ so supply is ______.

A) 3/2; elastic
B) 2/3; inelastic
C) 3/2; inelastic
D) 2/3; elastic
A) 3/2 ELASTIC

hamburgers are elastic and stretchy so 3/2

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