econ test 2 study guide

question

if price elasticity equals 4.6 demand is,

answer

relatively elastic

question

if the price elasticity of demand for sneakers is 1.6, then 2% increase in price will cause quantity demanded to

answer

decrease by 3.2 units

question

price elasticity of demand for a horizontal demand curve is equal to

answer

infinity

question

the price elasticity of demand for fresh fish is 2.20. an increase in the price of fresh fish would cause:

answer

quantity demanded to fall and total revenue to fall

question

a decrease in the price of widgets from $10 to $8 caused the quantity demanded for widgets to increase from 100 to 140 widgets per week. the price elasticity of demand is closest to

answer

1.50

question

in general demand is more elastic:

answer

when good substitutes are available

question

for a linear demand curve

answer

demand become less elastic as price falls

question

if a 2% increase in the price of potatoes causes a 4.6% decrease in the demand for sour cream, cross elasticity is

answer

-2.3

question

for an inferior good

answer

income elasticity is negative

question

suppose that the demand for rice was 600 pounds per year when consumer income was $20,000 per year. when consumer income rose to $22,000 per year, the demand for rice fell to 400 pounds per year. income elasticity of demand is closest to:

answer

-4.20

question

L Q
1 10
2 22
3 36
4 47
5 57
6 64
7 69
8 72
9 70

marginal physical product for the third worker is:

answer

question

the law of diminishing returns sets in with the ________ worker

answer

fourth

question

for a typical short-run production process, marginal physical product initially increases due to:

answer

input specialization

question

FC: stays the same
VC: TC-FC
MC: VC-VC (change)
ATC: TC/Q
AFC: FC/Q

answer

...

question

Q TC FC VC ATC AFC AVC MC
4 85 60 10
5 40

answer

...

question

FC at 5 units of output equals ________ dollars

answer

question

MC for the fifth unit of output equals __________ dollars

answer

question

VC at 4 units of output equals ____________ dollars

answer

question

A typical MC curve is

answer

U shaped

question

Which of the following costs always declines as output increases?

answer

AFC

question

In the long run

answer

all inputs are variable

question

In the short run, if a firm produces no output:

answer

TC=FC

question

IF marginal cost is above average total cost, then:

answer

ATC is increasing

question

Economies of scale are present if an increase in the firm's output causes:

answer

long run average cost to decrease

question

a perfectly competitive market is characterized by:

answer

a homogeneous product

question

to say that a firm is a price taker means that

answer

the firm can alter its output without influencing price

question

for a perfectly competitive firm, market price is equal to

answer

average revenue, marginal revenue, the demand curve facing the firm (all of the above)

question

at the break-even output

answer

ATC=AR

question

The total revenue for a perfectly competitive firm is

answer

an upward sloping straight ling from the origin

question

ass that firm z currently produces 100 units of output. at this output, MC equals $16 and MR equals $20. If firm z produces another unit of output:

answer

its profit will increase by $4

question

under perfect competition, if price is below the equilibrium market price:

answer

there is a shortage

question

a competitive firm will shut down in the short run if it is unable to:

answer

cover its fixed costs

question

a competitive firms short run supply curve is

answer

its mc curve above the AVC curve

question

for a perfectly competitive market in long run equilibrium:

answer

a. MR=MC for the typical firm
b. quantity demanded equals quantity supplied in the market
c. economic profit equals zero for the typical firm
d. the typical firm produces at minimum LRAC
(all of the above)

question

for an increasing cost industry, the long run market supply curve is

answer

upward sloping

question

if the price elasticity of demand for fresh fish equals 2.20 then demand is:

answer

relatively elastic

question

if the price elasticity of demand for air travel is 2.4 then a two percent decrease in the price of air travel would:

answer

increase quantity demanded by 4.8%

question

price elasticity of demand for a horizontal demand curve is equal to:

answer

infinity

question

a decrease in the price of widgets from $10 to $9 caused the quantity demanded of widgets to increase from 100 to 160 widgets per week. the price elasticity of demand rounds to:

answer

4.38

question

if demand is relatively inelastic then:

answer

a price increase will decrease quantity demanded but increase total revenue

question

suppose that the demand for rice was 600 pounds per year when consumer income was $20,000 per year. When consumer income rose to $22,000 per year, the demand for rice fell to 400 pounds per year. income elasticity of demand is closest to:

answer

-4.20

question

if 1 3% increase in the price of peanut butter causes a 4.8% decrease in the demand for jelly, cross elasticity is equal to:

answer

-1.6

question

when income elasticity of demand is negative, one can correctly conclude that

answer

the good is a compliment

question

in general , demand is more elastic

answer

when good substitutes are available

question

for a linear demand curve:

answer

as price falls, demand becomes less elastic

question

in the short run

answer

at least one of the firms inputs is fixed

question

L Q
1 10
2 22
3 35
4 47
5 57
6 64
7 69
8 72
9 70

answer

...

question

marginal physical product for the second worker is

answer

12 units of output per day

question

the law of diminishing returns sets in with the addition of the ____________ worker.

answer

fourth

question

marginal physical product initially increase due to:

answer

input specialization

question

in the short run, if the firm produces no output then:

answer

TC=FC

question

the addition to total cost when one more unit of output is produced is

answer

marginal cost

question

Q TC FC VC ATC AFC AVC MC
4 70 60 15
5 40

answer

...

question

VC at 4 units of output equals:

answer

$10

question

MC for the fifth unit of output equals:

answer

$30

question

AFC for 4 units of output equals:

answer

$15

question

which of the short run cost curves is horizontal?

answer

question

which of the following costs always decreases as output increases?

answer

AFC

question

a typical MC curve is:

answer

U shaped

question

if marginal cost is above average cost, then

answer

ATC is increasing

question

Economies of scale are present if an increase in the firms output causes

answer

long run average cost to decrease

question

which of the following is characteristics of a perfectly competitive market?

answer

a. good info
b. a homogeneous product
c. many sellers
d. no barriers
(all of the above)

question

to say that a firm is a price taker means that

answer

the firm cannot influence market price by adjusting its output

question

for a perfectly competitive firm, market price is equal to:

answer

a. average revenue
b. marginal revenue
c. the firms demand
(all of the above)

question

at a break-even output

answer

a. TR=TC
b. AR=ATC
c. profit=zero
d. AR=AFC+AVC
(all of the above)

question

if at its current output, price is less than MC, a competitive firm can improve by:

answer

decreasing output

question

Assume that marginal revenue equals a rising marginal cost at 50 units of output. At this output, average total costs is $10 and average variable cost is $7. The product in a perfectly competitive market at a price of $8.

answer

...

question

this firm will maximize profit by producing

answer

exactly 50 units of output

question

the firms profit or loss would be

answer

loss of $100

question

if the firm shut down, its loss would be

answer

$150

1 of 70

question

if price elasticity equals 4.6 demand is,

answer

relatively elastic

question

if the price elasticity of demand for sneakers is 1.6, then 2% increase in price will cause quantity demanded to

answer

decrease by 3.2 units

question

price elasticity of demand for a horizontal demand curve is equal to

answer

infinity

question

the price elasticity of demand for fresh fish is 2.20. an increase in the price of fresh fish would cause:

answer

quantity demanded to fall and total revenue to fall

question

a decrease in the price of widgets from $10 to $8 caused the quantity demanded for widgets to increase from 100 to 140 widgets per week. the price elasticity of demand is closest to

answer

1.50

question

in general demand is more elastic:

answer

when good substitutes are available

question

for a linear demand curve

answer

demand become less elastic as price falls

question

if a 2% increase in the price of potatoes causes a 4.6% decrease in the demand for sour cream, cross elasticity is

answer

-2.3

question

for an inferior good

answer

income elasticity is negative

question

answer

-4.20

question

L Q
1 10
2 22
3 36
4 47
5 57
6 64
7 69
8 72
9 70

marginal physical product for the third worker is:

answer

question

the law of diminishing returns sets in with the ________ worker

answer

fourth

question

for a typical short-run production process, marginal physical product initially increases due to:

answer

input specialization

question

FC: stays the same
VC: TC-FC
MC: VC-VC (change)
ATC: TC/Q
AFC: FC/Q

answer

...

question

Q TC FC VC ATC AFC AVC MC
4 85 60 10
5 40

answer

...

question

FC at 5 units of output equals ________ dollars

answer

question

MC for the fifth unit of output equals __________ dollars

answer

question

VC at 4 units of output equals ____________ dollars

answer

question

A typical MC curve is

answer

U shaped

question

Which of the following costs always declines as output increases?

answer

AFC

question

In the long run

answer

all inputs are variable

question

In the short run, if a firm produces no output:

answer

TC=FC

question

IF marginal cost is above average total cost, then:

answer

ATC is increasing

question

Economies of scale are present if an increase in the firm's output causes:

answer

long run average cost to decrease

question

a perfectly competitive market is characterized by:

answer

a homogeneous product

question

to say that a firm is a price taker means that

answer

the firm can alter its output without influencing price

question

for a perfectly competitive firm, market price is equal to

answer

average revenue, marginal revenue, the demand curve facing the firm (all of the above)

question

at the break-even output

answer

ATC=AR

question

The total revenue for a perfectly competitive firm is

answer

an upward sloping straight ling from the origin

question

ass that firm z currently produces 100 units of output. at this output, MC equals $16 and MR equals $20. If firm z produces another unit of output:

answer

its profit will increase by $4

question

under perfect competition, if price is below the equilibrium market price:

answer

there is a shortage

question

a competitive firm will shut down in the short run if it is unable to:

answer

cover its fixed costs

question

a competitive firms short run supply curve is

answer

its mc curve above the AVC curve

question

for a perfectly competitive market in long run equilibrium:

answer

question

for an increasing cost industry, the long run market supply curve is

answer

upward sloping

question

if the price elasticity of demand for fresh fish equals 2.20 then demand is:

answer

relatively elastic

question

if the price elasticity of demand for air travel is 2.4 then a two percent decrease in the price of air travel would:

answer

increase quantity demanded by 4.8%

question

price elasticity of demand for a horizontal demand curve is equal to:

answer

infinity

question

a decrease in the price of widgets from $10 to $9 caused the quantity demanded of widgets to increase from 100 to 160 widgets per week. the price elasticity of demand rounds to:

answer

4.38

question

if demand is relatively inelastic then:

answer

a price increase will decrease quantity demanded but increase total revenue

question

answer

-4.20

question

if 1 3% increase in the price of peanut butter causes a 4.8% decrease in the demand for jelly, cross elasticity is equal to:

answer

-1.6

question

when income elasticity of demand is negative, one can correctly conclude that

answer

the good is a compliment

question

in general , demand is more elastic

answer

when good substitutes are available

question

for a linear demand curve:

answer

as price falls, demand becomes less elastic

question

in the short run

answer

at least one of the firms inputs is fixed

question

L Q
1 10
2 22
3 35
4 47
5 57
6 64
7 69
8 72
9 70

answer

...

question

marginal physical product for the second worker is

answer

12 units of output per day

question

the law of diminishing returns sets in with the addition of the ____________ worker.

answer

fourth

question

marginal physical product initially increase due to:

answer

input specialization

question

in the short run, if the firm produces no output then:

answer

TC=FC

question

the addition to total cost when one more unit of output is produced is

answer

marginal cost

question

Q TC FC VC ATC AFC AVC MC
4 70 60 15
5 40

answer

...

question

VC at 4 units of output equals:

answer

$10

question

MC for the fifth unit of output equals:

answer

$30

question

AFC for 4 units of output equals:

answer

$15

question

which of the short run cost curves is horizontal?

answer

question

which of the following costs always decreases as output increases?

answer

AFC

question

a typical MC curve is:

answer

U shaped

question

if marginal cost is above average cost, then

answer

ATC is increasing

question

Economies of scale are present if an increase in the firms output causes

answer

long run average cost to decrease

question

which of the following is characteristics of a perfectly competitive market?

answer

a. good info
b. a homogeneous product
c. many sellers
d. no barriers
(all of the above)

question

to say that a firm is a price taker means that

answer

the firm cannot influence market price by adjusting its output

question

for a perfectly competitive firm, market price is equal to:

answer

a. average revenue
b. marginal revenue
c. the firms demand
(all of the above)

question

at a break-even output

answer

a. TR=TC
b. AR=ATC
c. profit=zero
d. AR=AFC+AVC
(all of the above)

question

if at its current output, price is less than MC, a competitive firm can improve by:

answer

decreasing output

question

answer

...

question

this firm will maximize profit by producing

answer

exactly 50 units of output

question

the firms profit or loss would be

answer

loss of $100

question

if the firm shut down, its loss would be

answer

$150

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econ test 2 study guide

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