ECO 365 Week 2 Apply Market Dynamics and Efficiency Homework For more course tutorials visit
www.tutorialrank.com ECO 365 Week 2 Apply Market Dynamics and Efficiency Homework
Review the Week 2 Market Dynamics and Efficiency Quiz in preparation for this assignment.
Complete the Week 2 Market Dynamics and Efficiency Homework in McGraw-Hill ConnectÂŽ. These are randomized questions.
Note: You have only one attempt available to complete assignments. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after the due date.
The demand and supply schedules for sunscreen at a small beach are shown below.
Market for Sunscreen
Price (dollars per bottle) Quantity of Sunscreen Demanded (bottles) Quantity of Sunscreen Supplied (bottles) $35 1,000 8,500 30 2,000 7,000 25 3,000 5,500 20 4,000 4,000 15 5,000 2,500 10 6,000 1,000
Instructions: Enter your answers as a whole number. If the price is $15 per bottle, how many bottles of sunscreen are demanded and supplied? Qd = bottles Qs = bottles In this case, there would be upward pressure on the price. What is the equilibrium price and quantity in the market for sunscreen? P= Q = bottles The market for ice cream bars on a hot day at the local beach is summarized in the table below. Market for Ice Cream Bars Price (dollars) Quantity of Ice Cream Bars Demanded Quantity of Ice Cream Bars Supplied $1.40 310 100 1.60 280 140
1.80 250 180 2.00 220 220 2.20 190 260 2.40 160 300 2.60 130 340 Instructions: Enter your answer as a whole number. Determine whether there is a surplus or a shortage at a price of $1.80 per ice cream bar, and determine the size of the surplus or shortage. There is a shortage in a market for a product when Multiple Choice the current price is lower than the equilibrium price.
quantity demanded is lower than quantity supplied. demand is less than supply. supply is less than demand. Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market for leather coats when leather coats become more fashionable among young consumers. Multiple Choice graph (1) graph (2) graph (3) graph (4) Use the following graph for the milk market to answer the question below. There would be excess production of milk whenever the price is Multiple Choice greater than $1.50 per gallon. greater but not less than $2.00 per gallon. less but not greater than $2.00 per gallon. less than $1.50 per gallon. There is a surplus in a market for a product when
Multiple Choice quantity demanded is greater than quantity supplied. demand is less than supply. quantity demanded is less than quantity supplied. the current price is lower than the equilibrium price. Use the following graph for the milk market to answer the question below. In this market, the equilibrium price is ____ and equilibrium quantity is ___ Multiple Choice $1.50 per gallon; 30 million gallons. $1.50 per gallon; 28 million gallons. $1.00 per gallon; 35 million gallons. $28 per gallon; 150 million gallons. In competitive markets, a surplus or shortage will Multiple Choice cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage. cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage. cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage.
never exist because the markets are always at equilibrium. Use the following table to answer the question below. Price per Unit Quantity Demanded per Year Quantity Supplied per Year $5 2,000 0 10 1,800 300 15 1,600 600 20 1,400 900 25 1,200 1,200 30
1,000 1,500 In this competitive market, the price and quantity will settle at Multiple Choice $25 and 1,200 units. $15 and 1,600 units. $10 and 1,800 units. $20 and 900 units. There is an excess demand in a market for a product when Multiple Choice quantity demanded is greater than quantity supplied. quantity demanded is less than quantity supplied. the current price is higher than the equilibrium price. supply is less than demand. The marginal benefit of an additional beach towel is $12. The marginal cost of producing an additional beach towel is $8. If producers are minimizing the average costs of production, then we can conclude: beach towel production is allocatively efficient but not productively efficient. beach towel production is neither allocatively nor productively efficient. beach towel production is both allocatively and productively efficient.
beach towel production is not allocatively efficient but is productively efficient. The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is called Multiple Choice utility. consumer demand. consumer surplus. market failure. Consumer surplus arises in a market because Multiple Choice at the current market price, quantity supplied is greater than quantity demanded. at the current market price, quantity demanded is greater than quantity supplied. the market price is below what some consumers are willing to pay for the product. the market price is higher than what some consumers are willing to pay for the product. If the equilibrium wage for fast-food restaurants is $8 and the government enforces a minimum wage of $15 Multiple Choice overall, society will be better off.
workers will get paid less. fast-food restaurants will hire fewer workers. workers will be able to find more jobs. In the market for a particular pair of shoes, Jena is willing to pay $75 for a pair while Jane is willing to pay $85 for a pair. The actual price that each has to pay for a pair of shoes is $65. What is the combined amount of consumer surplus for Jena and Jane? Multiple Choice $215. $10. $130. $30. A producer’s minimum acceptable price for a particular unit of a good Multiple Choice will, for most units produced, equal the maximum that consumers are willing to pay for the good. must cover the wages, rent, and interest payments necessary to produce the good but need not include profit. is the same for all units of the good. equals the marginal cost of producing that particular unit. Charlie is willing to pay $10 for a T-shirt that is priced at $9. If Charlie buys the T-shirt, then his consumer surplus is
Multiple Choice $19. $0.90. $90. $1. Graphically, producer surplus is measured as the area Multiple Choice above the supply curve and above the actual price. above the supply curve and below the actual price. under the demand curve and below the actual price. under the demand curve and above the actual price. Productive efficiency occurs at the point where Multiple Choice marginal benefit exceeds marginal cost by the greatest amount. the production technique minimizes economic surplus. the production technique minimizes cost. consumer surplus exceeds producer surplus by the greatest amount. The market supply curve indicates the Multiple Choice total revenues that sellers would receive from selling various quantities of the product.
total amount that buyers will pay in buying a given quantity of the product. maximum prices that buyers are willing and able to pay for the product. minimum acceptable prices that sellers are willing to accept for the product. Which of the following goods is both nonrival and nonexcludable? A hot dog at a hot dog stand A tuna in the ocean A soccer match in a stadium The light from a lighthouse at a harbor entrance Which of the following goods is nonrival? A soccer match in a stadium A visit to the doctor at her office A pizza at a pizza parlor A tuna in the ocean The production of paper often creates a waste product that pollutes waterways. Assume the producer of paper does not directly pay to dispose of the waste in the water.
In this case, the price of paper will be the amount of paper produced will be
the socially efficient price and the socially efficient amount.
If one person’s consumption of a good does not preclude another’s consumption, the good is said to be
Multiple Choice nonexcludable. rival in consumption. nonrival in consumption. excludable. If there are external benefits associated with the consumption of a good or service Multiple Choice the private demand curve will overestimate the true demand curve. consumers will be willing to pay for all these benefits in private markets. the market demand curve will be the vertical summation of the individual demand costs. the private demand curve will underestimate the true demand curve. If a good that generates negative externalities were priced to take these negative externalities into account, its Multiple Choice price would decrease, and its output would increase. price would remain constant and output would increase. price would increase but its output would remain constant. price would increase, and its output would decrease. What are the two characteristics that differentiate private goods from public goods?
Multiple Choice ownership and usage negative externality and positive externality rivalry and excludability marginal cost and marginal benefit A negative externality or spillover cost (additional social cost) occurs when Multiple Choice the price of the good exceeds the marginal cost of producing it. firms fail to achieve allocative efficiency. the total cost of producing a good exceeds the costs borne by the producer. firms fail to achieve productive efficiency. Where there are spillover (or external) benefits from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the following except Multiple Choice providing the product itself. taxing the sellers of the product. subsidizing the buyers of the product. subsidizing the sellers of the product.
If some activity creates external benefits as well as private benefits, then economic theory suggests that the activity ought to be Multiple Choice subsidized. prohibited. taxed. left alone. ==============================================
ECO 365 Week 2 Practice: Market Dynamics and Efficiency Quiz For more course tutorials visit
www.tutorialrank.com ECO 365 Week 2 Practice: Market Dynamics and Efficiency Quiz
Complete the Week 2 Market Dynamics and Efficiency Quiz in McGraw-Hill ConnectÂŽ. These are randomized questions.
Note: You have unlimited attempts available to complete practice assignments. The highest scored attempt will be recorded. These
assignments have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after the due date.
The monthly demand and supply schedules for new cars at a large California dealership are shown in the table below. Market for New Cars Price (dollars) Quantity of Cars Demanded Quantity of Cars Supplied $30,000 0 250 25,000 100 225 20,000 200 200 15,000 300 175
10,000 400 150 If the dealership is currently charging $25,000 for a new car, at the end of the month there will be: a shortage of 125 cars. a surplus of 5,000 cars. a surplus of 125 cars. a shortage of 5,000 cars. neither a surplus nor a shortage; the market will be in equilibrium. The demand and supply schedules for sunscreen at a small beach are shown below. Market for Sunscreen Price (dollars per bottle) Quantity of Sunscreen Demanded (bottles) Quantity of Sunscreen Supplied (bottles) $35 1,000 8,500 30 2,000
7,000 25 3,000 5,500 20 4,000 4,000 15 5,000 2,500 10 6,000 1,000 Instructions: Enter your answers as a whole number. If the price is $15 per bottle, how many bottles of sunscreen are demanded and supplied? Qd = Qs = In this case, there would be upward pressure on the price. What is the equilibrium price and quantity in the market for sunscreen? P=
Q=
Use the following graph for the milk market to answer the question below. There would be excess production of milk whenever the price is Multiple Choice greater than $1.50 per gallon. greater but not less than $2.00 per gallon. less than $1.50 per gallon. less but not greater than $2.00 per gallon. There is a surplus in a market for a product when Multiple Choice quantity demanded is less than quantity supplied. demand is less than supply. the current price is lower than the equilibrium price. quantity demanded is greater than quantity supplied. Use the following table to answer the question below.
Price per Unit Quantity Demanded per Year Quantity Supplied per Year
$5 2,000 0 10 1,800 300 15 1,600 600 20 1,400 900 25 1,200 1,200 30 1,000 1,500 There will be a shortage whenever the price is Multiple Choice equals $25.
higher than $25. higher than $30. lower than $25. A decrease in demand and an increase in supply will Multiple Choice decrease price and affect the equilibrium quantity in an indeterminate way. decrease price and increase the equilibrium quantity. increase price and affect the equilibrium quantity in an indeterminate way. affect price in an indeterminate way and decrease the equilibrium quantity. There is an excess demand in a market for a product when
Multiple Choice quantity demanded is greater than quantity supplied.
supply is less than demand.
the current price is higher than the equilibrium price.
quantity demanded is less than quantity supplied.
In competitive markets, surpluses or shortages will Multiple Choice cause shifts in the demand and supply curves that tend to eliminate the excess production or excess demand. cause changes in the quantities demanded and supplied that tend to intensify the excess production or excess demand. never exist because the markets are always at equilibrium. cause changes in the quantities demanded and supplied that tend to eliminate the excess production or excess demand. There is a shortage in a market for a product when Multiple Choice quantity demanded is lower than quantity supplied. supply is less than demand. demand is less than supply. the current price is lower than the equilibrium price. Which of the following is an example of a price ceiling? Multiple Choice Price supports for agricultural products. Subsidies for apartment rent in major cities. Limits on interest rates charged by credit card companies. Minimum-wage laws for unskilled workers.
Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market for leather coats when leather coats become more fashionable among young consumers. Multiple Choice graph (1) graph (4) graph (3) graph (2) In competitive markets, a surplus or shortage will Multiple Choice never exist because the markets are always at equilibrium.
cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage.
cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage.
cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage.
Use the following graph for the milk market to answer the question below.
In this market, the equilibrium price is ____ and equilibrium quantity is ___
Multiple Choice
$1.50 per gallon; 28 million gallons.
$1.50 per gallon; 30 million gallons.
$1.00 per gallon; 35 million gallons.
$28 per gallon; 150 million gallons.
Use the following table to answer the question below.
Price per Unit
Quantity Demanded per Year
Quantity Supplied per Year
$5
2,000
0
10
1,800
300
15
1,600
600
20
1,400
900
25
1,200
1,200
30
1,000
1,500
In this competitive market, the price and quantity will settle at
Multiple Choice
$20 and 900 units.
$25 and 1,200 units.
$15 and 1,600 units.
$10 and 1,800 units.
The additional benefit of producing one more roast beef sandwich at a local deli is $2. The additional cost of producing one more roast beef sandwich is $3. To improve allocative efficiency:
producers should produce at least one more roast beef sandwich because MB > MC.
producers should produce at least one more roast beef sandwich because MC > MB.
producers should not produce one more roast beef sandwich because MB > MC.
producers should not produce one more roast beef sandwich because MC > MB.
The value that consumers get (from consuming a product) over and above what they actually paid for the product is called
Multiple Choice
consumer surplus.
consumer utility.
consumption expenditures.
consumer demand.
Consumer surplus
Multiple Choice
is the difference between the maximum price consumers are willing to pay for a product and the lower equilibrium price.
is the difference between the minimum price producers are willing to accept for a product and the higher equilibrium price.
is the difference between the maximum price consumers are willing to pay for a product and the minimum price producers are willing to accept.
rises as equilibrium price rises.
Charlie is willing to pay $10 for a T-shirt that is priced at $9. If Charlie buys the T-shirt, then his consumer surplus is
Multiple Choice
$19.
$1.
$90.
$0.90.
If the equilibrium wage for fast-food restaurants is $8 and the government enforces a minimum wage of $15
Multiple Choice
workers will be able to find more jobs.
overall, society will be better off.
workers will get paid less.
fast-food restaurants will hire fewer workers.
The market supply curve indicates the
Multiple Choice
total revenues that sellers would receive from selling various quantities of the product.
minimum acceptable prices that sellers are willing to accept for the product.
maximum prices that buyers are willing and able to pay for the product.
total amount that buyers will pay in buying a given quantity of the product.
Charlie is willing to pay $10 for a T-shirt that is priced at $9. If Charlie buys the T-shirt, then his consumer surplus is
Multiple Choice
$90.
$1.
$19.
$0.90.
Graphically, producer surplus is measured as the area Multiple Choice
under the demand curve and below the actual price.
above the supply curve and below the actual price.
under the demand curve and above the actual price.
above the supply curve and above the actual price.
Allocative efficiency occurs only at that output where
Multiple Choice
the combined amounts of consumer surplus and producer surplus are maximized.
consumer surplus exceeds producer surplus by the greatest amount.
marginal benefit exceeds marginal cost by the greatest amount.
the areas of consumer and producer surplus are equal.
A producer’s minimum acceptable price for a particular unit of a good
Multiple Choice
must cover the wages, rent, and interest payments necessary to produce the good but need not include profit.
equals the marginal cost of producing that particular unit.
is the same for all units of the good.
will, for most units produced, equal the maximum that consumers are willing to pay for the good.
Productive efficiency occurs at the point where
Multiple Choice
the production technique minimizes economic surplus.
the production technique minimizes cost.
marginal benefit exceeds marginal cost by the greatest amount.
consumer surplus exceeds producer surplus by the greatest amount.
The minimum acceptable price for a product that producer Sam is willing to receive is $15. The price he could get for the product in the market is $18. How much is Sam’s producer surplus?
Multiple Choice
$45
$3
$270
$33
The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is called
Multiple Choice
market failure.
consumer surplus.
consumer demand.
utility.
Consumer surplus arises in a market because
Multiple Choice
the market price is higher than what some consumers are willing to pay for the product.
at the current market price, quantity supplied is greater than quantity demanded.
at the current market price, quantity demanded is greater than quantity supplied.
the market price is below what some consumers are willing to pay for the product.
The difference between the actual price that a producer receives and the minimum acceptable price the producer is willing to accept is called the producer
Multiple Choice
revenues.
surplus.
costs.
utility.
In the market for a particular pair of shoes, Jena is willing to pay $75 for a pair while Jane is willing to pay $85 for a pair. The actual price that each has to pay for a pair of shoes is $65. What is the combined amount of consumer surplus for Jena and Jane?
Multiple Choice
$130.
$215.
$30.
$10.
Producer surplus
Multiple Choice
is the difference between the maximum price consumers are willing to pay for a product and the lower equilibrium price.
rises as equilibrium price falls.
is the difference between the maximum price consumers are willing to pay for a product and the minimum price producers are willing to accept.
is the difference between the minimum price producers are willing to accept for a product and the higher equilibrium price.
The production of paper often creates a waste product that pollutes waterways. Assume the producer of paper does not directly pay to dispose of the waste in the water.
In this case, the price of paper will be below the socially efficient price and the amount of paper produced will be above the socially efficient amount.
Which of the following goods is nonrival?
A visit to the doctor at her office
A soccer match in a stadium
A pizza at a pizza parlor
A tuna in the ocean
Which of the following goods is both nonrival and nonexcludable?
A hot dog at a hot dog stand
A soccer match in a stadium
The light from a lighthouse at a harbor entrance
A tuna in the ocean
Texarkana Electric Company burns coal to heat the water that drives its electricity-producing turbines. The table below shows the marginal benefit of annual electricity consumption and the private marginal cost of annual electricity production.
Marginal Cost and Marginal Benefit
Quantity (millions of megawatts)
MBprivate
MCprivate
MCexternal
MCsocial
1.0
$145
$85
$ 20
$ 105
2.0
130
90
20
110
3.0
115
95
20
115
4.0
100
100
20
120
5.0
85
105
20
125
6.0
60
110
20
130
Instructions: Enter your answers as a whole number.
What is the (apparent) optimal amount of electricity for Texarkana Electric Company to produce each year?
4 million megawatts per year
Now assume the production of each million megawatts of electricity also produces sulfur dioxide (a precursor to acid rain). The external cost of the sulfur dioxide is $20 per million megawatts of electricity production.
Fill in the external marginal cost (MCexternal) and the social marginal cost (MCsocial) columns in the table above.
What is the socially optimal amount of electricity for Texarkana to produce if all costs and benefits are considered?
3 million megawatts per year
If electricity production triggers an external cost of sulfur dioxide of $20 per million megawatts, these external costs need to be added to private marginal cost in order to measure social marginal cost.
When Texarkana Electric Company produces 3.0 million megawatts per year, an optimum for society is reached because social marginal benefit equals social marginal cost.
If some activity creates external benefits as well as private benefits, then economic theory suggests that the activity ought to be
Multiple Choice
left alone.
taxed.
prohibited.
subsidized.
Where there are spillover (or external) benefits from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the following except
Multiple Choice
subsidizing the sellers of the product.
providing the product itself.
taxing the sellers of the product.
subsidizing the buyers of the product.
External benefits in consumption refer to benefits accruing to those
Multiple Choice
who are consuming the product abroad.
who bought and consumed the product.
who are selling the product to the consumers.
other than the ones who consumed the product.
When the production of a good generates external costs, a firm’s private supply curve will be
Multiple Choice
vertical.
horizontal.
to the left of the social supply curve.
to the right of the social supply curve.
A negative externality or spillover cost (additional social cost) occurs when
Multiple Choice
the price of the good exceeds the marginal cost of producing it.
firms fail to achieve allocative efficiency.
firms fail to achieve productive efficiency.
the total cost of producing a good exceeds the costs borne by the producer.
If there are external benefits associated with the consumption of a good or service
Multiple Choice
the private demand curve will overestimate the true demand curve.
consumers will be willing to pay for all these benefits in private markets.
the market demand curve will be the vertical summation of the individual demand costs.
the private demand curve will underestimate the true demand curve.
A public good
Multiple Choice
is available to all and cannot be denied to anyone.
produces no positive or negative externalities.
can be profitably produced by private firms.
is characterized by rivalry and excludability.
If a good that generates negative externalities were priced to take these negative externalities into account, its
Multiple Choice
price would remain constant and output would increase.
price would increase, and its output would decrease.
price would decrease, and its output would increase.
price would increase but its output would remain constant.
Use the following supply and demand graph for product X to answer the question below.
What would happen if the government taxed the producers of this product because it has negative externalities in production?
Multiple Choice
supply would decrease
demand would decrease
supply would increase
price would decrease
A positive externality or spillover benefit (additional social benefit) occurs when
Multiple Choice
a firm does not bear all of the costs of producing a good or service.
product differentiation increases the variety of products available to consumers.
firms earn positive economic profits.
the benefits associated with a product exceed those that accrue for consumers.
What are the two characteristics that differentiate private goods from public goods?
Multiple Choice
marginal cost and marginal benefit
rivalry and excludability
ownership and usage
negative externality and positive externality
A public good
Multiple Choice
can never be provided by a nongovernmental organization.
generally results in substantial negative externalities.
costs essentially nothing to produce and is thus provided by the government at a zero price.
cannot be provided to one person without making it available to others as well.
The two main characteristics of a public good are
Multiple Choice
production at constant marginal cost and rising demand.
nonrivalry and large negative externalities.
nonexcludability and production at rising marginal cost.
nonrivalry and nonexcludability.
If the consumption of a product or service involves external benefits, then the government can improve efficiency in the market by
Multiple Choice
imposing a ive tax to for an overallocation of resources.
providing a subsidy to for an overallocation of resources.
imposing a ive tax to for an underallocation of resources.
providing a subsidy to for an underallocation of resources.
If one person’s consumption of a good does not preclude another’s consumption, the good is said to be
Multiple Choice
excludable.
nonrival in consumption.
rival in consumption.
nonexcludable. ==============================================
ECO 365 Week 3 Apply: Elasticity and Consumer Choice Homework For more course tutorials visit
www.tutorialrank.com ECO 365 Week 3 Apply: Elasticity and Consumer Choice Homework
Review the Week 3 Elasticity and Consumer Choice Quiz in preparation for this assignment.
Complete the Week 3 Elasticity and Consumer Choice Homework in McGraw-Hill Connect®. These are randomized questions.
Note: You have only one attempt available to complete assignments. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after the due date.
Which of the following scenarios would lead to a decrease in the demand for labor at Stephanie’s earring shop?
Labor productivity increases.
§ The cost of capital (a substitute for labor) decreases.
§ The price of earrings increases.
§ The wage rate increases.
Which of the following scenarios would lead to an increase in the demand for mixers at Henry’s bread bakery?
The market price of mixers decreases.
§ The productivity of mixers decreases.
§ The wage rate of labor (a substitute for capital) decreases.
§ The market price of bread increases.
Henry bakes loaves of bread, which he sells for $4 each. He is considering purchasing additional mixers (capital) for his bakery. Each additional mixer has the productivity described below. Fill in the
―Marginal Product,‖ ―Total Revenue,‖ and ―Marginal Revenue Product‖ columns. Assume this is a perfectly competitive market.
Instructions: Enter your answers as a whole number.
Henry’s Bakery and Revenues
Capital (mixers) Total Product (loaves of bread) Marginal Product (loaves of bread) Price (dollars) Total Revenue (dollars) Marginal Revenue Product (dollars)
0
0
—
$4
1
8
8
4
2
20
12
4
80 48
3
28
8
4
112 32
4
34
6
4
136 24
5
38
4
4
152 16
$0
32
—
$ 32
6
40
2
4
160 8
7
41
1
4
164 4
The marginal revenue product schedule is
rev: 06_21_2018
Multiple Choice
§ upsloping.
§ the same whether the firm is selling in a purely competitive or imperfectly competitive market.
§ the firm’s resource demand schedule.
§ the firm’s resource supply schedule.
Marginal product is
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Multiple Choice
§ the output of the least skilled worker.
§ the amount an additional worker adds to the firm’s total output.
§ the amount any given worker contributes to the firm’s total revenue.
§ a worker’s output multiplied by the price at which each unit can be sold.
The change in a firm’s total revenue that results from hiring an additional worker is measured by the
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Multiple Choice
§ marginal product.
average revenue product.
§ marginal revenue.
§ marginal revenue product.
Marginal revenue product measures the
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Multiple Choice
increase in total revenue resulting from the production of one more unit of a product.
increase in total resource cost resulting from the hire of one extra unit of a resource.
§ amount by which the extra production of one more worker increases a firm’s total revenue.
ยง decline in product price that a firm must accept to sell the extra output of one more worker.
If the marginal revenue product (MRP) of labor is less than the wage rate
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Multiple Choice
ยง more labor should be employed.
the firm is making profits.
ยง the firm is incurring losses.
ยง less labor should be employed
A profit-maximizing firm employs resources to the point where
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Multiple Choice
ยง
MRP = MRC.
ยง resource price equals product price.
ยง
MRC = MP.
ยง MP = product price.
The following is a total-product schedule for a resource. Assume that the quantities of other resources the firm employs remain constant.
Units of Resource Total Product
1
24
2
42
3
54
4
64
5
72
If the firm’s product sells for a constant $2 and the price of the resource is a constant $16, the firm will employ how many units of the resource?
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Multiple Choice
§ 2
§ 3
ยง 4
ยง 5
Marginal resource cost is
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Multiple Choice
the increase in total resource cost associated with the production of one more unit of output.
ยง total resource cost divided by the number of inputs employed.
ยง the change in total revenue associated with the employment of one more unit of the resource.
ยง the increase in total resource cost associated with the hire of one more unit of the resource.
Daphne has received job offers in six different cities across the United States. The table below shows the nominal wage she is being offered in each city and the average monthly rent for an apartment in each city.
Calculate Daphne’s real wage in terms of how many months of rent her wage could purchase in each city and complete the ―Real Wage‖ column in the table below.
Instructions: Enter your answers rounded to the nearest whole number.
Daphne’s Nominal and Real Wages
City Nominal Salary (dollars) (months of rent)
Monthly Rent (dollars) Real Wage
Atlanta
$50,000 $1,200 42 ± 1%
Austin
50,500
1,368
37 ± 1%
Chicago 65,000 1,920
34 ± 1%
Lincoln 45,000
840 54 ± 1%
Madison 48,000 1,164
New York
41 ± 1%
95,000 3,204
30 ± 1%
In which city is the nominal wage highest? New York
In which city is the real wage highest? Lincoln
Which of the following scenarios would result in an increase in the wage rate of solar panel installers and a decrease in the quantity of solar panel installers employed in Billy’s town?
A decrease in people’s income decreases the demand for solar panels.
A solar panel company shuts down in another town and solar panel installers try to find jobs in Billy’s town.
Wages of solar panel installers increase in another town and attract workers away from Billy’s town.
An increase in the demand for solar panels raises the price of each installation.
The marginal revenue product of an input tends to decrease as
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Multiple Choice
more of the input is used.
productivity increases.
the price of the input decreases.
the price of output increases.
Rising wages can be explained by which of the following?
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Multiple Choice
ยง Labor demand increases more rapidly than labor supply.
ยง Labor supply is highly sensitive to changes in labor productivity.
ยง
Labor supply increases more rapidly than labor demand.
ยง Labor demand is stable and predictable.
Suppose two workers can harvest $46 and three workers can harvest $60 worth of apples per day. On the basis of this information we can say that the
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Multiple Choice
marginal revenue product of each of the first two workers is $23.
marginal revenue product of the third worker is $14.
marginal product of each of the first two workers is 23.
third worker should not be hired.
A characteristic of a competitive labor market is
rev: 06_13_2018
Multiple Choice
an overall reduction in employment due to firms having market power.
an equilibrium wage and quantity supplied.
high levels of unemployment.
labor supply changing as the wage changes.
Labor productivity and the price of the good being produced are two variables that contribute to
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Multiple Choice
ยง the demand for the product.
the wage rate.
the marginal product.
whether or not a union forms.
As the real wage decreases, the quantity of labor demanded ______ and the quantity of labor supplied _______.
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§ increases; decreases
§ decreases; increases
§ increases; increases
§ decreases; decreases
An inclusive union
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§ organizes a wide range of workers in an industry to gain bargaining power.
§ is most effective in a purely competitive industry.
§ restricts supply of labor through licensing requirements.
ยง is most concerned with increasing the demand for workers in an industry.
The supply curve for labor in a purely competitive market slopes upward because
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Multiple Choice
higher wages must be paid to bid workers away from other opportunities.
ยง marginal resource cost rises as productivity increases.
ยง the marginal product of labor falls as output increases.
ยง the wage rate paid to workers falls as more are hired.
Compared to a competitive labor market, workers participating in an inclusive union will enjoy
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§ higher wages and more workers employed.
§ higher wages and fewer workers employed.
§ similar outcomes with respect to pay and employment.
§ lower pay and more workers employed.
The concept of ―wages‖ does not include which of the following items?
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§ money spent by workers
ยง direct money payments, like salaries and commissions
ยง bonuses and royalties earned
ยง fringe benefits, like health insurance and paid leave
Use the following graph (where L is the quantity of labor) to answer the next question.
It shows a firm that buys its inputs and sells its output in competitive markets. If the firm develops a new technology that increases labor productivity, the equilibrium level of employment for this firm is expected to be
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Multiple Choice
lower than L0.
ยง L0.
§ zero.
§ higher than L0.
The individual firm that hires labor under competitive conditions faces a labor supply curve that
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§ is horizontal, because individual firms have no control over wages.
§ slopes upward to the right.
§ is vertical, because workers need a job at any wage.
§ slopes downward to the right.
In a purely competitive labor market, a profit-maximizing firm will hire labor up to the point where the marginal revenue product of labor equals the
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ยง marginal cost of one extra unit of output.
ยง price of the product.
ยง average cost of each unit of output.
ยง wage rate, or the price of labor.
For each of the following scenarios, determine which benefit of international trade applies: lower-priced goods, increased variety of products, or access to scarce resources.
1. Today most television sets bought in the United Stated are made in China; however, this was not the case twenty years ago.
In large grocery stores in the United States, consumers can buy noodles from Asia, soups from France, pickled herring from Scandinavia, and beer from Germany.
The United States has become a prime location for producers of semiconductors, whose products are then exported to nations around the world. This choice to produce in the United States is largely due to the access to the high-skilled workforce that is required for this type of production.
While many developed nations have at least one domestic car manufacturer, consumers in these nations also have access to cars produced in other nations.
The United States has long been the world’s largest exporter of wheat. The access to vast, fertile, and highly productive soil combined with high-technology farming practices have made the United States a very cost-efficient producer of agricultural goods.
In economics, goods, services, or resources produced domestically and sold abroad are known as:
imports.
net exports.
ยง
exports.
ยง international trade.
Domestic producers might oppose free trade agreements because
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Multiple Choice
there could be a decrease in consumer surplus.
ยง there could be an increase in consumer surplus.
ยง there could be a decrease in producer surplus.
ยง there could be an increase in producer surplus.
The principal concept behind comparative advantage is that a nation should
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§ concentrate production on those products for which it has the lowest domestic opportunity cost.
§ strive to be self-sufficient in the production of essential goods and services.
maximize its volume of trade with other nations.
§ use tariffs and quotas to protect the production of vital products for the nation.
Use the following table for a certain product’s market in Marketopia to answer the next question.
Quantity Demanded Domestically Price Domestically
Quantity Supplied
1,400
$10 2,200
1,600
9
2,000
1,800
8
1,800
2,000
7
1,600
2,200
6
1,400
2,400
5
1,200
If Marketopia is entirely closed to international trade, the equilibrium price and quantity would be
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Multiple Choice
ยง $6 and 1,400 units.
§ $9 and 2,000 units.
§ $7 and 2,000 units.
§ $8 and 1,800 units.
Benefits from international trade are not based on differences in
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§ resource availability.
§ technological capabilities.
§ product quality and other attributes.
§ income levels.
Limits on the quantity or total value of specific products imported to a nation are
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Multiple Choice
ยง import quotas.
ยง nontariff barriers.
ยง protective tariffs.
ยง export subsidies.
Governments often intervene in international trade and impose quotas to
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improve the performance of multinational corporations.
shift a nation’s production possibilities frontier.
increase revenues from export subsidies.
protect domestic industries from foreign competition.
An import quota on a product reduces the quantity of the product imported and
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will not affect the price of the product to the consumers.
§ increases the total quantity of the product consumed.
§ decreases the price of the product to the consumers.
ยง increases the price of the product to the consumers.
Tariffs
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are excise taxes on goods exported abroad.
are per-unit subsidies designed to promote exports.
may be imposed either to raise revenue or to shield domestic producers from foreign competition.
are also called import quotas.
The slopes of the production possibilities curves for two nations reflect the
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Multiple Choice
relative prices of the resources in the two nations.
average income levels in the two nations.
amounts of imports and exports of the two nations.
opportunity costs of production in the two nations.
If a nation imposes a tariff on an imported product, then that nation will experience a(n)
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Multiple Choice
decrease in quantity supplied and an increase in the price of the product.
ยง decrease in demand and a decrease in the price of the product.
ยง decrease in the supply of, and an increase in the quantity demanded of, the product.
ยง increase in the quantity supplied of, and a decrease in the price of the product.
A tariff is a
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quantity limit.
ยง tax.
ยง price ceiling.
ยง subsidy.
A tax imposed by the U.S. government on imported Chinese frozen shrimp would be an example of
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a voluntary restriction.
a regulatory trade restriction.
ยง a tariff.
ยง a quota.
A maximum limit set on the amount of a specific good that may be imported into a country over a given period of time is called a
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Multiple Choice
voluntary export restriction.
tariff.
ยง quota.
ยง nontariff barrier.
When a nation removes tariffs on imported products that nation will
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Multiple Choice
ยง experience lower prices and consume lower quantities.
ยง experience higher prices and consume lower quantities.
ยง experience higher prices and consume higher quantities.
ยง experience lower prices and consume higher quantities.
The ratio at which nations will exchange one product for another is known as the
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Multiple Choice
ยง exchange rate.
ยง discount rate.
ยง terms of trade.
ยง balance of trade.
The higher price of imported products due to trade barriers causes some consumers to shift their purchases to a domestically produced product that is now
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Multiple Choice
ยง higher in price because import competition has risen.
ยง higher in price because import competition has declined.
ยง lower in price because import competition has declined.
ยง lower in price because import competition has risen.
The use of tariffs and quotas for trade protection results in
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less rent-seeking activity.
ยง lower prices for domestic consumers.
§ less efficiency in the economy.
§ less revenue for the government.
When a nation removes restrictions on imported products that nation will
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§ experience higher prices and consume lower quantities.
§ experience lower prices and consume lower quantities.
§ experience lower prices and consume higher quantities.
§ experience higher prices and consume higher quantities.
The benefit of saving some American jobs in specific industries protected from foreign competition
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ยง is much greater than the costs to the whole American economy.
ยง has risen in recent years.
ยง is much less than the costs to the whole American economy.
ยง has fallen in recent years.
Assume that a tariff is imposed on an imported product. The difference between the domestic price and the world price is captured by
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ยง the government.
domestic producers.
ยง foreign exporters.
ยง domestic consumers.
Refer to the production possibility curve for Marketopia below.
The graph indicates that with the resources and technology it has available, Marketopia
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Multiple Choice
can produce either 40 units of rye or 20 units of eggs.
ยง cannot produce both 20 units of rye and 5 units of eggs.
ยง cannot produce both 20 units of rye and 10 units of eggs.
ยง can produce both 40 units of rye and 20 units of eggs.
Elasticity differs from the slope as a measure of responsiveness to changes in prices because:
ยง elasticity is only useful for describing demand, but the slope is useful for describing demand and supply.
ยง the slope is always negative, while elasticity is not.
ยง percentage changes do not depend on the units of measurement, whereas the slope does.
ยง elasticity changes depending on the currency prices are measured in, but this does not affect the slope.
For which of the following products is demand likely to be the most elastic?
All shoes
§ Converse All Star sneakers
§ All gym shoes
§ All clothing items
A 10% decrease in the price of gas grills leads to a 15% increase in the demand for flank steaks. The cross-price elasticity of demand between gas grills and flank steaks is:
§ -1.5.
§ 1.5.
§ 15.0.
§ -15.0.
If nicotine in cigarettes is highly addictive, why would it make economic sense for producers of cigarettes to offer free samples of their products to young adults?
The free samples will make demand more elastic in the long run.
§ The free samples will teach young adults there is such a thing as a free lunch.
§ The free samples will help get people addicted to nicotine, which makes demand less elastic.
§ The free samples will make supply less elastic so people know there will be cigarettes.
Generic macaroni and cheese is an inferior good. Demand for generic macaroni and cheese is likely to increase when:
§ income decreases.
§ the price of generic macaroni and cheese decreases.
§ the price of generic macaroni and cheese increases.
§ the price of premium macaroni and cheese decreases.
Use the figure below to answer the following question.
For which graph is the supply perfectly inelastic?
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Multiple Choice
§ graph 2
§ graph 3
§ graph 4
To economists, the main differences between ―the short run‖ and ―the long run‖ are that
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ยง the law of diminishing returns applies in the long run, but not in the short run.
ยง fixed inputs are more important to decision making in the long run than they are in the short run.
ยง in the long run all resources are variable, while in the short run at least one resource is fixed.
ยง in the short run all resources are fixed, while in the long run all resources are variable.
The cross-price elasticity of demand measures how sensitive purchases of a specific product are to changes in
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Multiple Choice
ยง the general price level.
ยง the price of some other product.
ยง income.
ยง the price of that same product.
When interpreting the Ed value as either elastic or inelastic, we look at the
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Multiple Choice
percent change in price.
Ed coefficient with its negative sign.
absolute value of the Ed coefficient (dropping the negative sign).
ยง
percent change in quantity.
Answer the next question based on information in the following table.
Product Percentage Change in Income Quantity Demanded
W −1 −1
X
+6 +3
Y
−1 +1
Z
+4 +8
Which product would be an inferior good?
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Multiple Choice
Percentage Change in
ยง product X
ยง product W
ยง product Z
ยง product Y
Total revenue decreases as the price of a good increases, if the demand for the good is
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Multiple Choice
unitary elastic.
inelastic.
ยง perfectly elastic.
§ elastic.
Which of the following factors will make the demand for a product relatively elastic?
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§ Purchases of the good require a small portion of consumers’ budgets.
§ The good is considered a necessity.
§ The time interval considered is long.
§ There are few substitutes.
The price elasticity of demand increases with the length of the period considered because
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Multiple Choice
§ consumers will be better able to find substitutes.
§ consumers’ incomes will increase over time.
§ all prices will increase over time.
§ the demand curve will shift outward as time passes.
If the absolute value of the price elasticity of demand for a good is .75, the demand for that good is described as
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Multiple Choice
§ normal.
§ inelastic.
§ inferior.
§ elastic.
The formula for the cross-price elasticity of demand is percentage change in
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Multiple Choice
§ price of B/percentage change in quantity demanded of A.
§ quantity demanded of B/percentage change in price of B.
§ quantity demanded of B/percentage change in price of A.
§ quantity demanded of B/percentage change in income.
For a linear demand curve
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Multiple Choice
demand is elastic at high prices.
elasticity is constant along the curve.
elasticity is unity at every point on the curve.
demand is elastic at low prices.
Hector would like to buy a new pair of soccer cleats. Hector prefers Adidas to Puma brand soccer cleats. But Hector chooses to buy the Puma brand cleats instead. Which of the following reasons for Hector’s choice is consistent with rational consumer choice?
The price of Adidas brand soccer cleats was less than the price of Puma brand soccer cleats.
§ Hector could not afford to buy both pairs of soccer cleats.
§ The price of Puma brand soccer cleats was less than the price of Adidas brand soccer cleats.
§ Hector did not know his preferences between the two brands of soccer cleats.
Which of the following defines marginal utility?
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Multiple Choice
§ the maximum amount of satisfaction or happiness derived from consuming a product
§ the additional satisfaction or happiness received from the consumption of an additional unit of a good or service
§ the total satisfaction or happiness received from the consumption of a good, service, or combination of goods and services
§ the change in total utility divided by the price of a product
The elasticity of demand for a product is likely to be greater
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Multiple Choice
§ the smaller the number of substitute products available.
§ the greater the amount of time over which buyers adjust to a price change.
§ if the product is a necessity, rather than a luxury good.
§ the smaller the proportion of one’s income spent on the product.
The price elasticity of supply measures how
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Multiple Choice
ยง responsive the quantity supplied of X is to changes in the price of X.
ยง easily labor and capital can be substituted for one another in the production process.
ยง responsive the quantity supplied of Y is to changes in the price of X.
ยง responsive quantity supplied is to a change in incomes.
The decision-making process followed by consumers to maximize utility assumes that
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Multiple Choice
consumers are unable to rank their preferences.
ยง consumers have unlimited incomes.
ยง consumers do not know how much marginal utility they obtain from consuming additional units of various products.
ยง consumers behave rationally, attempting to maximize their satisfaction.
Total utility is best defined as the
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Multiple Choice
change in marginal utility multiplied by the price of a product.
additional satisfaction received from consuming an additional unit of a good or service.
maximum amount of satisfaction from consuming a product.
ยง total satisfaction received from consuming a good, service, or combination of goods and services.
Marginal utility is equal to
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Multiple Choice
ยง total utility divided by quantity consumed.
ยง total utility multiplied by quantity consumed.
ยง change in total utility divided by change in quantity consumed.
ยง change in total utility multiplied by change in quantity consumed.
The price elasticity of supply for a product will be 2 if a
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Multiple Choice
ยง 2% decrease in price causes a 1% decrease in quantity supplied.
ยง 1% decrease in price causes a 2% decrease in quantity supplied.
ยง 2% decrease in price causes a 2% decrease in quantity supplied.
ยง 1% decrease in price causes a 0.2% decrease in quantity supplied.
Use the following graph to answer the question below.
If the price is P3, then the total revenue is represented by area
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Multiple Choice
B + C + D.
ยง B + C + D + E + F + G.
ยง
A + B + C + D + E + F + G.
E + F + G.
The diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate period, the short run, and the long run. Supply curves S1, S2, and S3 apply to the
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Multiple Choice
ยง immediate period, long run, and short run respectively.
ยง immediate period, short run, and long run respectively.
ยง long run, short run, and immediate period respectively.
ยง short run, long run, and immediate period respectively.
The demand schedules for such products as eggs, bread, and electricity tend to be
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Multiple Choice
ยง perfectly elastic.
ยง relatively inelastic.
ยง unit-elastic.
ยง relatively elastic.
The total revenue received by sellers of a good is computed by
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Multiple Choice
ยง
dividing the percentage change in quantity by the percentage change in price.
ยง multiplying the percentage change in price times the percentage change in quantity.
ยง adding the price and the quantity sold.
ยง multiplying the price times the quantity sold.
The utility of a good or service
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Multiple Choice
ยง rarely varies from person to person.
§ is the satisfaction or happiness one receives from consuming it.
§ is synonymous with usefulness.
§ is easy to quantify.
The utility from a specific product is
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Multiple Choice
determined by a consumer’s income.
§ determined by the price of the product.
§ constant as one consumes more units of it.
§ a measure of one’s preference or taste for it.
Which of the following is not an assumption of the decision-making process followed by consumers to maximize utility?
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Multiple Choice
ยง The consumer does not consider the prices of the products.
ยง The consumer can rank his preferences.
ยง The consumer behaves rationally.
ยง The consumer has a limited income.
Which of the following is an assumption of the decision-making process followed by consumers to maximize utility?
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Multiple Choice
§ The consumer oftentimes is not sure about her preferences.
§ The consumer considers the prices of the products
§ The consumer’s income increases as prices of goods increase.
§ Marginal utility always increases as more units of a good are consumed.
Which of the following statements is correct?
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Multiple Choice
§ Total utility is the change in marginal utility as quantity consumed increases.
§ Total utility is the product of multiplying price times marginal utility.
ยง Total utility is the sum of marginal utilities.
Marginal utility is the sum of total utility.
The satisfaction or happiness one gets from consuming a good or service is called
rev: 04_09_2018
Multiple Choice
ยง income.
ยง profits.
ยง utility.
ยง price.
In deciding what to buy to maximize utility, the consumer should choose the good with the
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Multiple Choice
lowest price.
§ highest marginal utility per dollar spent.
§ lowest marginal utility per dollar spent.
§ highest marginal utility.
The table below represents how Marco feels about chocolate candy bars.
Fill in the missing values for total utility and marginal utility.
Instructions: Enter your answers as a whole number.
Chocolate Candy Bars and Marco’s Utility
Chocolate Candy Bars
0
0
—
1
25
25
2
42
17
3
54
12
4
62
8
5
66
4
6
65
–1
Total Utility (utils) Marginal Utility (utils)
Suppose Marco currently has two candy bars. You tell Marco you will give him either a soda, which gives him 22 utils of happiness, or two additional candy bars.
1.
Which is he likely to prefer?
If an increase in the price of pineapple juice of 10% results in an increase in the demand for grape juice of 5%, the cross-price elasticity of demand between pineapple juice and grape juice is:
§ -0.5.
§ -5.0.
§ 5.0.
§ 0.5.
Which of the following scenarios is likely to make the supply of Maine lobsters more elastic?
§ The prices of butter, potatoes, and lobster bibs decrease.
§ Time passes to allow lobstermen to adjust to market conditions.
§ The price of lobster increases by $2 per pound.
ยง Lobster locating technologies improve.
An economist recently estimated that for every 1% increase in the price of french fries at fast-food restaurants, 0.44% fewer french fries are sold. This indicates that the demand for fast-food french fries is:
ยง inelastic.
ยง elastic.
ยง perfectly inelastic.
ยง unit-elastic.
Generally, we calculate elasticity as the:
percentage change in quantity demanded/supplied divided by the percentage change in price.
percentage change in quantity demanded/supplied divided by the change in price.
ยง percentage change in price divided by the percentage change in quantity demanded/supplied.
ยง change in quantity demanded/supplied divided by the change in price.
The table below presents four supply curves for the same product at four different time horizons.
Supply in Four Time Horizons
Price (dollars) Quantity Supplied in Horizon A Quantity Supplied in Horizon B Quantity Supplied in Horizon C Quantity Supplied in Horizon D
$100
100 25
46 62.5
80 75 25
39
50.0
60 50 25
32
37.5
40 25 25
25
25.0
20 0
25
0
25 11
0
18
12.5
0.0
Which of the four time horizons is most likely to represent the firm’s long-run supply curve?
§ Horizon A
§ Horizon B
§ Horizon C
§ Horizon D
Use the figure below to answer the following question.
Which graph shows the immediate period for supply?
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Multiple Choice
§ graph 1
§ graph 3
§ graph 2
§ graph 4
Tom likes to collect Batman and Superman comic books. The table below presents his total and marginal utilities for both types of comic books.
Instructions: Enter your answers as a whole number.
Batman Comics, Superman Comics, and Tom’s Utility
Batman Comic Books
Quantity Total Utility Marginal Utility
Superman Comic Books
Marginal Utility
Quantity Total Utility
0
0
—
0
0
—
1
40
40
1
58 58
2
68
28
2
92 34
3
88
20
3
106 14
4
94
6
4
110 4
5
94
0
5
112 2
6
84
–10
6
112 0
7
64
–20
7
104 –8
Assume the price of a Batman comic book is $1, and the price of a Superman comic book is $2. Fill in the values for the marginal utility per dollar for Batman and Superman comic books in the table below.
Batman Comics, Superman Comics, and Tom’s Marginal Utility per Dollar
Batman Comic Books
Superman Comic Books
Quantity Marginal Utility per Dollar Dollar
0
—
0
—
1
40
1
29
2
28
2
17
3
20
3
7
4
6
4
2
5
0
5
1
6
-10
6
0
Quantity Marginal Utility per
7
-20
7
-4
Suppose Tom has $5 to spend on Batman and Superman comic books (nothing else matters to Tom). If Tom wants to maximize his utility, how many of each should he buy?
Now suppose Tom has $10 to spend on Batman and Superman comic books (nothing else matters to Tom). If Tom wants to maximize his utility, how many of each should he buy? ==============================================
ECO 365 Week 3 Practice: Elasticity and Consumer Choice Quiz
For more course tutorials visit
www.tutorialrank.com ECO 365 Week 3 Practice: Elasticity and Consumer Choice Quiz
Complete the Week 3 Elasticity and Consumer Choice Quiz in McGrawHill Connect®. These are randomized questions.
Note: You have unlimited attempts available to complete practice assignments. The highest scored attempt will be recorded. These assignments have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after the due date.
Which of the following scenarios would lead to a decrease in the demand for labor at Stephanie’s earring shop?
Labor productivity increases.
The cost of capital (a substitute for labor) decreases.
The price of earrings increases.
The wage rate increases.
Which of the following scenarios would lead to an increase in the demand for mixers at Henry’s bread bakery?
The market price of mixers decreases.
The productivity of mixers decreases. The wage rate of labor (a substitute for capital) decreases. The market price of bread increases. Henry bakes loaves of bread, which he sells for $4 each. He is considering purchasing additional mixers (capital) for his bakery. Each additional mixer has the productivity described below. Fill in the ―Marginal Product,‖ ―Total Revenue,‖ and ―Marginal Revenue Product‖ columns. Assume this is a perfectly competitive market.
Instructions: Enter your answers as a whole number.
Henry’s Bakery and Revenues
Capital (mixers) Total Product (loaves of bread) Marginal Product (loaves of bread) Price (dollars) Total Revenue (dollars) Marginal Revenue Product (dollars)
0
0
—
$4
$0
—
1
8
8
4
32 $ 32
2
20
12
4
80 48
3
28
8
4
112 32
4
34
6
4
136 24
5
38
4
4
152 16
6
40
2
4
160 8
7
41
1
4
164 4
The marginal revenue product schedule is
Multiple Choice
upsloping. the same whether the firm is selling in a purely competitive or imperfectly competitive market.
the firm’s resource demand schedule. the firm’s resource supply schedule. Marginal product is
Multiple Choice
the output of the least skilled worker. the amount an additional worker adds to the firm’s total output. the amount any given worker contributes to the firm’s total revenue. a worker’s output multiplied by the price at which each unit can be sold. The change in a firm’s total revenue that results from hiring an additional worker is measured by the
Multiple Choice
marginal product.
average revenue product. marginal revenue.
marginal revenue product. Marginal revenue product measures the
Multiple Choice
increase in total revenue resulting from the production of one more unit of a product. increase in total resource cost resulting from the hire of one extra unit of a resource. amount by which the extra production of one more worker increases a firm’s total revenue. decline in product price that a firm must accept to sell the extra output of one more worker. If the marginal revenue product (MRP) of labor is less than the wage rate
Multiple Choice
more labor should be employed. the firm is making profits.
the firm is incurring losses.
less labor should be employed A profit-maximizing firm employs resources to the point where
Multiple Choice
MRP = MRC. resource price equals product price. MRC = MP. MP = product price. The following is a total-product schedule for a resource. Assume that the quantities of other resources the firm employs remain constant.
Units of Resource Total Product
1
24
2
42
3
54
4
64
5
72
If the firm’s product sells for a constant $2 and the price of the resource is a constant $16, the firm will employ how many units of the resource?
Multiple Choice
2
3 4 5 Marginal resource cost is
Multiple Choice
the increase in total resource cost associated with the production of one more unit of output.
total resource cost divided by the number of inputs employed.
the change in total revenue associated with the employment of one more unit of the resource. the increase in total resource cost associated with the hire of one more unit of the resource. Daphne has received job offers in six different cities across the United States. The table below shows the nominal wage she is being offered in each city and the average monthly rent for an apartment in each city.
Calculate Daphne’s real wage in terms of how many months of rent her wage could purchase in each city and complete the ―Real Wage‖ column in the table below.
Instructions: Enter your answers rounded to the nearest whole number.
Daphne’s Nominal and Real Wages
City Nominal Salary (dollars) (months of rent)
Monthly Rent (dollars) Real Wage
Atlanta
$50,000 $1,200 42 ± 1%
Austin
50,500
1,368
37 ± 1%
Chicago 65,000 1,920
34 ± 1%
Lincoln 45,000
840 54 ± 1%
Madison 48,000 1,164
New York
41 ± 1%
95,000 3,204
30 ± 1%
In which city is the nominal wage highest?
In which city is the real wage highest?
Which of the following scenarios would result in an increase in the wage rate of solar panel installers and a decrease in the quantity of solar panel installers employed in Billy’s town?
A decrease in people’s income decreases the demand for solar panels.
A solar panel company shuts down in another town and solar panel installers try to find jobs in Billy’s town.
Wages of solar panel installers increase in another town and attract workers away from Billy’s town.
An increase in the demand for solar panels raises the price of each installation.
The marginal revenue product of an input tends to decrease as
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more of the input is used.
productivity increases. the price of the input decreases. the price of output increases.
Rising wages can be explained by which of the following?
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Labor demand increases more rapidly than labor supply. Labor supply is highly sensitive to changes in labor productivity.
Labor supply increases more rapidly than labor demand. Labor demand is stable and predictable. Suppose two workers can harvest $46 and three workers can harvest $60 worth of apples per day. On the basis of this information we can say that the
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marginal revenue product of each of the first two workers is $23.
marginal revenue product of the third worker is $14.
marginal product of each of the first two workers is 23. third worker should not be hired.
A characteristic of a competitive labor market is Multiple Choice
an overall reduction in employment due to firms having market power. an equilibrium wage and quantity supplied. high levels of unemployment. labor supply changing as the wage changes. Labor productivity and the price of the good being produced are two variables that contribute to
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the demand for the product.
the wage rate.
the marginal product. whether or not a union forms. As the real wage decreases, the quantity of labor demanded ______ and the quantity of labor supplied _______.
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increases; decreases decreases; increases increases; increases decreases; decreases An inclusive union
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organizes a wide range of workers in an industry to gain bargaining power. is most effective in a purely competitive industry. restricts supply of labor through licensing requirements. is most concerned with increasing the demand for workers in an industry. The supply curve for labor in a purely competitive market slopes upward because
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higher wages must be paid to bid workers away from other opportunities. marginal resource cost rises as productivity increases. the marginal product of labor falls as output increases. the wage rate paid to workers falls as more are hired. Compared to a competitive labor market, workers participating in an inclusive union will enjoy
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higher wages and more workers employed. higher wages and fewer workers employed. similar outcomes with respect to pay and employment. lower pay and more workers employed. The concept of ―wages‖ does not include which of the following items?
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money spent by workers direct money payments, like salaries and commissions bonuses and royalties earned
fringe benefits, like health insurance and paid leave Use the following graph (where L is the quantity of labor) to answer the next question.
It shows a firm that buys its inputs and sells its output in competitive markets. If the firm develops a new technology that increases labor productivity, the equilibrium level of employment for this firm is expected to be
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lower than L0.
L0. zero. higher than L0.
The individual firm that hires labor under competitive conditions faces a labor supply curve that
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is horizontal, because individual firms have no control over wages.
slopes upward to the right. is vertical, because workers need a job at any wage.
slopes downward to the right. In a purely competitive labor market, a profit-maximizing firm will hire labor up to the point where the marginal revenue product of labor equals the
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marginal cost of one extra unit of output. price of the product. average cost of each unit of output. wage rate, or the price of labor. For each of the following scenarios, determine which benefit of international trade applies: lower-priced goods, increased variety of products, or access to scarce resources.
Today most television sets bought in the United Stated are made in China; however, this was not the case twenty years ago.
In large grocery stores in the United States, consumers can buy noodles from Asia, soups from France, pickled herring from Scandinavia, and beer from Germany.
The United States has become a prime location for producers of semiconductors, whose products are then exported to nations around the world. This choice to produce in the United States is largely due to the access to the high-skilled workforce that is required for this type of production.
While many developed nations have at least one domestic car manufacturer, consumers in these nations also have access to cars produced in other nations.
The United States has long been the world’s largest exporter of wheat. The access to vast, fertile, and highly productive soil combined with high-technology farming practices have made the United States a very cost-efficient producer of agricultural goods.
In economics, goods, services, or resources produced domestically and sold abroad are known as:
imports.
net exports. exports. international trade. Domestic producers might oppose free trade agreements because
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there could be a decrease in consumer surplus. there could be an increase in consumer surplus. there could be a decrease in producer surplus. there could be an increase in producer surplus. The principal concept behind comparative advantage is that a nation should
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concentrate production on those products for which it has the lowest domestic opportunity cost. strive to be self-sufficient in the production of essential goods and services. maximize its volume of trade with other nations. use tariffs and quotas to protect the production of vital products for the nation. Use the following table for a certain product’s market in Marketopia to answer the next question.
Quantity Demanded Domestically Price Domestically
1,400
$10 2,200
1,600
9
2,000
1,800
8
1,800
2,000
7
1,600
2,200
6
1,400
Quantity Supplied
2,400
5
1,200
If Marketopia is entirely closed to international trade, the equilibrium price and quantity would be
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$6 and 1,400 units.
$9 and 2,000 units. $7 and 2,000 units. $8 and 1,800 units. Benefits from international trade are not based on differences in
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resource availability. technological capabilities. product quality and other attributes. income levels.
Limits on the quantity or total value of specific products imported to a nation are
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import quotas.
nontariff barriers. protective tariffs. export subsidies. Governments often intervene in international trade and impose quotas to Multiple Choice
improve the performance of multinational corporations.
shift a nation’s production possibilities frontier. increase revenues from export subsidies. protect domestic industries from foreign competition. An import quota on a product reduces the quantity of the product imported and
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will not affect the price of the product to the consumers.
increases the total quantity of the product consumed.
decreases the price of the product to the consumers. increases the price of the product to the consumers. Tariffs
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are excise taxes on goods exported abroad.
are per-unit subsidies designed to promote exports. may be imposed either to raise revenue or to shield domestic producers from foreign competition. are also called import quotas. The slopes of the production possibilities curves for two nations reflect the
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relative prices of the resources in the two nations. average income levels in the two nations. amounts of imports and exports of the two nations. opportunity costs of production in the two nations. If a nation imposes a tariff on an imported product, then that nation will experience a(n)
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decrease in quantity supplied and an increase in the price of the product. decrease in demand and a decrease in the price of the product. decrease in the supply of, and an increase in the quantity demanded of, the product. increase in the quantity supplied of, and a decrease in the price of the product. A tariff is a
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quantity limit.
tax. price ceiling. subsidy. A tax imposed by the U.S. government on imported Chinese frozen shrimp would be an example of
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a voluntary restriction.
a regulatory trade restriction. a tariff. a quota. A maximum limit set on the amount of a specific good that may be imported into a country over a given period of time is called a
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voluntary export restriction.
tariff. quota. nontariff barrier. When a nation removes tariffs on imported products that nation will
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experience lower prices and consume lower quantities. experience higher prices and consume lower quantities. experience higher prices and consume higher quantities. experience lower prices and consume higher quantities. The ratio at which nations will exchange one product for another is known as the
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exchange rate. discount rate. terms of trade. balance of trade.
The higher price of imported products due to trade barriers causes some consumers to shift their purchases to a domestically produced product that is now
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higher in price because import competition has risen. higher in price because import competition has declined. lower in price because import competition has declined. lower in price because import competition has risen. The use of tariffs and quotas for trade protection results in
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less rent-seeking activity. lower prices for domestic consumers. less efficiency in the economy. less revenue for the government. When a nation removes restrictions on imported products that nation will
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experience higher prices and consume lower quantities. experience lower prices and consume lower quantities. experience lower prices and consume higher quantities. experience higher prices and consume higher quantities. The benefit of saving some American jobs in specific industries protected from foreign competition
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is much greater than the costs to the whole American economy.
has risen in recent years. is much less than the costs to the whole American economy. has fallen in recent years.
Assume that a tariff is imposed on an imported product. The difference between the domestic price and the world price is captured by
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the government.
domestic producers.
foreign exporters.
domestic consumers.
Refer to the production possibility curve for Marketopia below.
The graph indicates that with the resources and technology it has available, Marketopia
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can produce either 40 units of rye or 20 units of eggs.
cannot produce both 20 units of rye and 5 units of eggs.
cannot produce both 20 units of rye and 10 units of eggs.
can produce both 40 units of rye and 20 units of eggs.
If an increase in the price of pineapple juice of 10% results in an increase in the demand for grape juice of 5%, the cross-price elasticity of demand between pineapple juice and grape juice is:
-0.5. -5.0.
5.0. 0.5. An economist recently estimated that for every 1% increase in the price of french fries at fast-food restaurants, 0.44% fewer french fries are sold. This indicates that the demand for fast-food french fries is:
inelastic.
elastic.
perfectly inelastic.
unit-elastic.
Generally, we calculate elasticity as the:
percentage change in quantity demanded/supplied divided by the percentage change in price.
percentage change in quantity demanded/supplied divided by the change in price. percentage change in price divided by the percentage change in quantity demanded/supplied. change in quantity demanded/supplied divided by the change in price.
For which of the following products is demand likely to be the most inelastic?
Flat screen TV
Table salt
Sports car
In-ground hot tub
If a state decided to place a tax on home heating oil, over time:
demand would become less elastic and tax revenue would decline. demand would become less elastic and tax revenue would increase. demand would become more elastic and tax revenue would increase. demand would become more elastic and tax revenue would decline.
The price elasticity of demand increases with the length of the period considered because
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Multiple Choice
consumers will be better able to find substitutes.
consumers’ incomes will increase over time. all prices will increase over time. the demand curve will shift outward as time passes. The elasticity of demand for a product is likely to be greater
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Multiple Choice
the smaller the number of substitute products available. the greater the amount of time over which buyers adjust to a price change. if the product is a necessity, rather than a luxury good. the smaller the proportion of one’s income spent on the product. The basic formula for the price elasticity of demand is
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percentage change in quantity demanded/percentage change in price. percentage change in price/percentage change in quantity demanded. absolute decline in quantity demanded/absolute increase in price. absolute decline in price/absolute increase in quantity demanded. The price elasticity of supply measures how
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responsive the quantity supplied of X is to changes in the price of X. easily labor and capital can be substituted for one another in the production process. responsive the quantity supplied of Y is to changes in the price of X. responsive quantity supplied is to a change in incomes. The demand schedules for such products as eggs, bread, and electricity tend to be
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perfectly elastic. relatively inelastic. unit-elastic. relatively elastic. Use the following graph to answer the question below.
If the price is P3, then the total revenue is represented by area
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B + C + D.
B + C + D + E + F + G. A + B + C + D + E + F + G. E + F + G. For which product is the income elasticity of demand most likely to be negative?
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Multiple Choice
apps for iPads used clothing computer software bread
The definition of a normal good suggests that the
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Multiple Choice
income elasticity of demand for the good is greater than 0. cross-price elasticity of demand for the good is positive.
income elasticity of demand for the good is negative. price elasticity of demand for the good is negative.
The law of supply suggests that the price elasticity of supply is Multiple Choice
negative. positive. zero. unknown. The price elasticity of supply for a product will be 2 if a
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Multiple Choice
2% decrease in price causes a 1% decrease in quantity supplied.
1% decrease in price causes a 2% decrease in quantity supplied. 2% decrease in price causes a 2% decrease in quantity supplied. 1% decrease in price causes a 0.2% decrease in quantity supplied. The total revenue received by sellers of a good is computed by
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dividing the percentage change in quantity by the percentage change in price. multiplying the percentage change in price times the percentage change in quantity. adding the price and the quantity sold.
multiplying the price times the quantity sold. Demand is said to be inelastic when
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a reduction in price results in a decrease in total revenue. an increase in price results in a reduction in total revenue. a reduction in price results in an increase in total revenue. the absolute value of the price elasticity of demand exceeds 1. Use the figure below to answer the following question.
The diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate period, the short run, and the long run. Supply curves S1, S2, and S3 apply to the
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immediate period, long run, and short run respectively. immediate period, short run, and long run respectively. long run, short run, and immediate period respectively.
short run, long run, and immediate period respectively. Use the figure below to answer the following question.
Which graph shows the immediate period for supply?
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Multiple Choice
graph 1 graph 3 graph 2 graph 4 Economists distinguish among the immediate period, the short run, and the long run by noting that
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supply is most elastic in the short run and perfectly inelastic in the immediate period. supply is most elastic in the short run and perfectly inelastic in the long run. demand is most elastic in the long run and perfectly inelastic in the immediate period. supply is most elastic in the long run and perfectly inelastic in the immediate period. Cross-price elasticity of demand is
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positive for general goods. negative for complementary goods. unitary for secondary goods. negative for substitute goods. For a linear demand curve
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demand is elastic at high prices. elasticity is constant along the curve. elasticity is unity at every point on the curve. demand is elastic at low prices. If a 10% increase in the price of one good results in no change in the quantity demanded of another good, then it can be concluded that the two goods are
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Multiple Choice
unrelated. inferior. complements.
substitutes.
The decision-making process followed by consumers to maximize utility assumes that
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consumers are unable to rank their preferences. consumers have unlimited incomes. consumers do not know how much marginal utility they obtain from consuming additional units of various products.
consumers behave rationally, attempting to maximize their satisfaction.
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