04 Jun Question 1 Other things held constant, consumer surplus increases as: The price of a good decreases.
Question
1 Other things held constant, consumer surplus increases as:
The price of a good decreases.
The price of a good increases.
The supply curve shifts to the left.
None of the above.
2. When there are diseconomies of scope between two products that are separately
produced by two firms, merging into a single firm can:
accomplish an increase in sales.
accomplish a reduction in costs.
lead to an increase in cost.
lead to a reduction in sales.
3. For a cost function C = 100 + 5Q + 2Q2, the average variable cost of
producing 10 units of output is:
1
2
3
N
4. Other things held constant, producer surplus decreases as:
The price of a good decreases.
The price of a good increases.
The demand curve shifts upward.
None of the above.
5. Managerial economics:
h
h
is
A
6. The change in benefits that arises from a one-unit change in quantity is
the:
m
m
to
v
7. Economic profits are:
th
a
th
to
8. A curve that defines the minimum average cost of producing different
levels of output (allowing for optimal selection of all variables of
production) is:
lo
lo
s
s
9. Other things held constant, consumer surplus decreases as:
T
T
T
N
10 Suppose the cost function is C(Q) = 100 + Q 2Q2 + 2Q3. What are the
fixed costs?
$
$
$
1
11. Given the linear production function Q = 2K + 10L, if Q = 2,000 and L =
100, how much capital is utilized?
5
8
6
1
12. Graphically, an increase in advertising will cause the demand curve to:
b
s
b
s
13. Consider a market characterized by the following inverse demand and
supply functions: PX = 30 3QX and PX = 10 + 2QX. Compute the surplus
consumers receive when a $24 per unit price floor is imposed on the
market.
$
$
$
$
14. When the government imposes a price ceiling above the market price,
the result will be that:
s
s
s
a
.
15. Consumerproducer rivalry happens because:
consumers want to negotiate low prices, while producers want to negotiate high prices.
consumers want to negotiate high prices, while producers want to negotiate low prices.
consumers’ high valuation and producers’ low production cost of a good.
producers’ high production cost and consumers’ low valuation of a good.
16. $20 today is worth _____ than $20 in the future, because:
more; the foregone interest that could be earned if you had the money today.
less; the foregone interest that could be earned if you had the money later.
more; of inflation concerns.
less; of inflation concerns.
17 The demand for good X has been estimated to be ln Qxd = 100 3 ln PX + 7 ln
PY + 5 ln M. The income elasticity of good X is:
3.0.
7.0.
5.0.
5.0.
18. You are the manager of a supermarket, and you know that the income elasticity
of peanut butter is exactly 0.5. Due to the economic recession, you expect incomes
to increase by 10 percent next year. How should you adjust your purchase of peanut
butter?
Buy 5 percent more peanut butter.
Buy 5 percent less peanut butter.
Buy 10 percent more peanut butter.
Buy 10 percent less peanut butter.
19. Suppose the production function is given by Q = 10K + 8L. What is the average
product of capital when 2 units of capital and 10 units of labor are employed?
10
8
50
18
20. Consider a market characterized by the following demand and supply
conditions: PX = 30 – 4QX and PX = 6 + 4QX. The equilibrium price and quantity
are, respectively,
$3 and 9 units.
$9 and 3 units.
$3 and 18 units.
$18 and 3 units.
21The lower the interest rate, the lower the:
present value.
net present value.
Both present value and net present value are correct.
Neither present value nor net present value is correct.
22. What is the present value of $200 received in two years if the interest rate is 12.5
percent?
$175
$158.05
$177.78
$225
23. At what level of output does marginal cost equal marginal revenue?
10
20
30
40
24 What is the average product of labor, given that the level of labor equals 5, total
output equals 500, and the marginal product of labor equals 25?
100
125
20
2,500
25. Competitive market equilibrium is determined by:
Only the most influential buyers and sellers.
Only the demand curve.
Only the supply curve.
The intersection of the demand and supply curves.
26. If Starbuckss marketing department estimates the income elasticity of
demand for its coffee to be 2.55, how will the prospect of an economic bust
(expected to decrease consumers incomes by 3 percent over the next
year) impact the quantity of coffee Starbucks expects to sell?
Instruction: Round your response to 2 decimal places.
It will change by ___________percent.
27. The head of the accounting department at a major software
manufacturer has asked you to put together a pro forma statement of the
company’s value under several possible growth scenarios and the
assumption that the companys many divisions will remain a single entity
forever. The manager is concerned that, despite the fact that the firms
competitors are comparatively small, collectively their annual revenue
growth has exceeded 50 percent over each of the last five years. She has
requested that the value projections be based on the firms current profits
of $3 billion (which have yet to be paid out to stockholders) and the
average interest rate over the past 20 years (9 percent) in each of the
following profit growth scenarios:
a. Profits grow at an annual rate of 11 percent. (This one is tricky.)
The firm’s value is zero
This growth rate is not possible
The firm will have to shut down at this growth rate
The firm’s value is infinite
Instructions: Round your responses to 2 decimal places.
b. Profits grow at an annual rate of 4 percent.
billion
c. Profits grow at an annual rate of 0 percent.
billion
d. Profits decline at an annual rate of 3 percent.
billion
28. A firm produces output according to a production function:
Q = F(K,L) = min {4K,8L}.
a. How much output is produced when K = 2 and L = 3?
b. If the wage rate is $60 per hour and the rental rate on capital is $20 per hour,
what is the cost-minimizing input mix for producing 8 units of output?
Capital: ________
Labor: __________
c. How does your answer to part b change if the wage rate decreases to $20 per
hour but the rental rate on capital remains at $20 per hour?
It does not change.
Capital and labor increase.
Capital decreases and labor increases.
Capital increases and labor decreases.
29. What is the value of a preferred stock that pays a perpetual dividend of
$220 at the end of each year when the interest rate is 3 percent?
Instruction: Round your response to the nearest dollar.
$________
30. The supply curve for product X is given by QXS = -320 + 10PX .
a. Find the inverse supply curve.
P = ________ + _________Q
b. How much surplus do producers receive w
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