ECON 315 Final Review

question

In a competitive market, the market demand is Q^4=60-6p, and Supply is Q^5=4P. With a price ceiling of $3...

answer

Shortage of 30 units: 60-18=42 --> 42-12=30

question

In a competitive market , the market demand is Q4=60-6P and the market supply is Q^4=4P, the full economic price under the price ceiling of $3 is ...

answer

question

When Marginal benefit = 300-12Q, and Total Cost = 12Q+108, optimal level of Q is:

answer

24 MB=MC

question

Which of the following is NOT a source of rivalry in economic transactions

answer

Government-Producer Rivalry

question

Given the benefit functions B(Y)=200Y-3Y^2, the Marginal Benefit is

answer

200-6Y (take derivative)

question

Compute the present value of a perpetual bond that pays a monthly cash flow of $1000 of an annual interest rate of 12 percent

answer

=$100,000 (1000/0.1 since 12 months/percent =0.1 percent per month )

question

The law of Demand states that, holding all else constant

answer

As price falls, Quantity Demanded rises

question

If the interest rate is 5 percent, $100 received at the end of seven years is worth how much today?

answer

100/(1+0.05)^7

question

As the interest rate increases, the opportunity cost of writing to receive future amount

answer

Increases

question

The optimal amount of studying is determined by comparing

answer

Marginal benefit and marginal cost of studying

question

If Marginal Benefit excused Marginal Cost, it is more profitable to

answer

Increase Q

question

In order to maximize net benefits, the marginal control variable should be used to the point where

answer

Net Marginal Benefits equals Zero

question

If the annual interest rate is 0 percent, the percent value of receiving $1.10 in the next year is

answer

$1.10

question

Which of the following is (are) true?

answer

All of the statements associated with the question are correct.

question

If the interest rate is 10 percent, and cash flows are $1000 at the end of the year one, and $2000 at the end of year two, then the present value of the cash flows is

answer

$2,562 ( 1000/[1.10] + 2000/[1.10^2] =2561.78)

question

If good A is an inferior good, an increase in income leads to:

answer

A decrease in demand for good A

question

Suppose the demand for good x is given by Q^4=10+axPt + ayPy + amM. If ay is Positive, then

answer

Goods are substitutes, y and x

question

Which of the following are signals to the owners of scarce resources about the best uses of those resources ?

answer

Profits of business

question

Technological advances will cause the supply curve to

answer

Shift to the right

question

Suppose the demand for good x is in lnQx^2=21-0.8lnPx-1.6lnPy+6.2lnM+0.4A. Then we know that the own price elasticity for good X is

answer

Inelastic

question

Suppose the Marginal Product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4, and the price of capital is $2, then in order to minimize costs, the firm should use:

answer

More labor and less capital (Down MPL = 8=27, UpL W=4 )

question

Suppose the production function is Q=min {K,2L}. How Much output is produced when 4 units of labor and 9 units of capital are employed ?

answer

=8 (Q=min {9,2(4)} =8)

question

Suppose the production function is given Q=3K +4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed?

answer

=7 ( Q=3(10)+4(10)=70 APK=Q/k= 70/10=7)

question

You are the manager at a firm that sells its product in a competative market at a price of $50. Your cost function is C=40+5Q^2. The profit maximizing output is ...

answer

Q=5 (P=MC 50/10=10Q/10)

question

If the last unit of input increase total product, we know the marginal product is

answer

Postitive

question

The absolute value of the slope of the Isoquant is the

answer

-Marginal rate of the technical substitution

question

The combinations of inputs that produce a given level of outputs are depicted by

answer

-Isoquants

question

Which of the following forms of payment is NOT an incentive plan?

answer

Flat Salary, for a plant manager

question

The Leontief production function implies

answer

L-Shaped isoquants

question

Suppose the long-run average cost curve is U-Shaped when LRAC is in increasing stage, there exists

answer

Diseconomies of scale

question

For given input prices, isocosts farther from the origin are associated with:

answer

Hiigher costs

question

Refer to the figure above, the firm should shut down in the short-run if the market price is

answer

less than $4.50 (Below AVC)

question

The industry elasticity of demand for telephone service is -2 while the elasticity of demand for a specific phone company is -5. What is the Rothchild index?

answer

=0.4 (R=ET/EF= -2/-5=0.4)

question

Long-term contracts become longer:

answer

When specialized investments becomes more important

question

The disadvantage of vertical integration is that:

answer

Firms no longer specialize in what they do best

question

In the long-run, monopolistically competitive firms produce a level of output such that:

answer

All of the statements are correct: (P>MC, P=ATC, ATC>minimum of average costs)

question

A negative side of a revenue-sharing plan is that it

answer

Gives no incentive for workers to minimize costs

question

A Herfindal-Hirschman index of 10,000 suggests

answer

A monopoly

question

Suppose each of the 50 states had only one gas station -- each of the same size. The four-firm concentration ratio would be :

answer

=0.08 (4/50=0.08)

question

A Lerner index of 0 suggests

answer

Perfect Competition

question

Price Value of the Firm

answer

PVFirm= π[1+i/i-g]

question

Which of the following is true for perfect competition but not true for monopolistic competition and monopoly?

answer

P = MC

question

You are the manager of a Mom and Pop store that can buy milk from a supplier at $3.00 per gallon. If you believe the elasticity of demand for milk by customers at your store is −4, then your profit-maximizing price is:

answer

$4.00.

1 of 43

question

In a competitive market, the market demand is Q^4=60-6p, and Supply is Q^5=4P. With a price ceiling of $3...

answer

Shortage of 30 units: 60-18=42 --> 42-12=30

question

In a competitive market , the market demand is Q4=60-6P and the market supply is Q^4=4P, the full economic price under the price ceiling of $3 is ...

answer

question

When Marginal benefit = 300-12Q, and Total Cost = 12Q+108, optimal level of Q is:

answer

24 MB=MC

question

Which of the following is NOT a source of rivalry in economic transactions

answer

Government-Producer Rivalry

question

Given the benefit functions B(Y)=200Y-3Y^2, the Marginal Benefit is

answer

200-6Y (take derivative)

question

Compute the present value of a perpetual bond that pays a monthly cash flow of $1000 of an annual interest rate of 12 percent

answer

=$100,000 (1000/0.1 since 12 months/percent =0.1 percent per month )

question

The law of Demand states that, holding all else constant

answer

As price falls, Quantity Demanded rises

question

If the interest rate is 5 percent, $100 received at the end of seven years is worth how much today?

answer

100/(1+0.05)^7

question

As the interest rate increases, the opportunity cost of writing to receive future amount

answer

Increases

question

The optimal amount of studying is determined by comparing

answer

Marginal benefit and marginal cost of studying

question

If Marginal Benefit excused Marginal Cost, it is more profitable to

answer

Increase Q

question

In order to maximize net benefits, the marginal control variable should be used to the point where

answer

Net Marginal Benefits equals Zero

question

If the annual interest rate is 0 percent, the percent value of receiving $1.10 in the next year is

answer

$1.10

question

Which of the following is (are) true?

answer

All of the statements associated with the question are correct.

question

If the interest rate is 10 percent, and cash flows are $1000 at the end of the year one, and $2000 at the end of year two, then the present value of the cash flows is

answer

$2,562 ( 1000/[1.10] + 2000/[1.10^2] =2561.78)

question

If good A is an inferior good, an increase in income leads to:

answer

A decrease in demand for good A

question

Suppose the demand for good x is given by Q^4=10+axPt + ayPy + amM. If ay is Positive, then

answer

Goods are substitutes, y and x

question

Which of the following are signals to the owners of scarce resources about the best uses of those resources ?

answer

Profits of business

question

Technological advances will cause the supply curve to

answer

Shift to the right

question

Suppose the demand for good x is in lnQx^2=21-0.8lnPx-1.6lnPy+6.2lnM+0.4A. Then we know that the own price elasticity for good X is

answer

Inelastic

question

Suppose the Marginal Product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4, and the price of capital is $2, then in order to minimize costs, the firm should use:

answer

More labor and less capital (Down MPL = 8=27, UpL W=4 )

question

Suppose the production function is Q=min {K,2L}. How Much output is produced when 4 units of labor and 9 units of capital are employed ?

answer

=8 (Q=min {9,2(4)} =8)

question

Suppose the production function is given Q=3K +4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed?

answer

=7 ( Q=3(10)+4(10)=70 APK=Q/k= 70/10=7)

question

You are the manager at a firm that sells its product in a competative market at a price of $50. Your cost function is C=40+5Q^2. The profit maximizing output is ...

answer

Q=5 (P=MC 50/10=10Q/10)

question

If the last unit of input increase total product, we know the marginal product is

answer

Postitive

question

The absolute value of the slope of the Isoquant is the

answer

-Marginal rate of the technical substitution

question

The combinations of inputs that produce a given level of outputs are depicted by

answer

-Isoquants

question

Which of the following forms of payment is NOT an incentive plan?

answer

Flat Salary, for a plant manager

question

The Leontief production function implies

answer

L-Shaped isoquants

question

Suppose the long-run average cost curve is U-Shaped when LRAC is in increasing stage, there exists

answer

Diseconomies of scale

question

For given input prices, isocosts farther from the origin are associated with:

answer

Hiigher costs

question

Refer to the figure above, the firm should shut down in the short-run if the market price is

answer

less than $4.50 (Below AVC)

question

The industry elasticity of demand for telephone service is -2 while the elasticity of demand for a specific phone company is -5. What is the Rothchild index?

answer

=0.4 (R=ET/EF= -2/-5=0.4)

question

Long-term contracts become longer:

answer

When specialized investments becomes more important

question

The disadvantage of vertical integration is that:

answer

Firms no longer specialize in what they do best

question

In the long-run, monopolistically competitive firms produce a level of output such that:

answer

All of the statements are correct: (P>MC, P=ATC, ATC>minimum of average costs)

question

A negative side of a revenue-sharing plan is that it

answer

Gives no incentive for workers to minimize costs

question

A Herfindal-Hirschman index of 10,000 suggests

answer

A monopoly

question

Suppose each of the 50 states had only one gas station -- each of the same size. The four-firm concentration ratio would be :

answer

=0.08 (4/50=0.08)

question

A Lerner index of 0 suggests

answer

Perfect Competition

question

Price Value of the Firm

answer

PVFirm= π[1+i/i-g]

question

Which of the following is true for perfect competition but not true for monopolistic competition and monopoly?

answer

P = MC

question

answer

$4.00.

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ECON 315 Final Review

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