Question 1

Refer to Figure 5.2. Using the initial-value method, what is the price elasticity of demand from Point A ($$60, 100) to $$Point B ($$50, 200$$)?

Accepted Answer

Elastic

Question 2

Refer to Figure 5.2. Using the initial-value method, what is the price elasticity of demand from Point E ($$20, 500) to $$Point F ($$10, 600$$)?

Accepted Answer

Inelastic

Question 3

If the price of charcoal grills increases and total revenue for charcoal grill retailers also increases, what can we conclude about the price elasticity of demand for charcoal grills?

Accepted Answer

The demand for charcoal grills is inelastic.

Question 4

Assume Crystal's demand for soup remains constant, but the price of soup increases. What happens to Crystal's consumer surplus?

Accepted Answer

It decreases.

Question 5

Refer to Figure 6.8. If the government limits taxicab services to 20 per day, what will be the price per mile traveled?

Accepted Answer

$2.00

Question 6

Laura makes hand-made jewelry and is willing to sell pairs of earrings for $$50. If she sells each pair for 65$$, what is her producer surplus per pair?

Accepted Answer

$15

Question 7

What does the budget line show in consumer theory?

Accepted Answer

The different combinations of two goods that a consumer can buy.

Question 8

Refer to Figure 7.1. What is the marginal utility of the second movie rental?

Accepted Answer

10

Question 9

When income increases, what happens to the budget constraint?

Accepted Answer

The budget constraint will shift out.

Question 10

You are the owner and only employee of a computer repair company. Last year, you earned total revenues of $$75,000. Your costs for equipment, rent, and supplies were 10$$,000. You quit a job that paid $40,000 a year to start this business. What were your economic profits last year?

Accepted Answer

$25,000

Question 11

Which of the following best describes a fixed cost?

Accepted Answer

A cost that must be paid even if output equals zero.

Question 12

Refer to Figure 8.8. Curve 1 is Outdoor Equipment's:

Accepted Answer

Marginal cost curve.

Question 13

Suppose the price elasticity of demand for a product is $$E_d = 0.4. If $$the firm raises its price by 10%, what will happen to total revenue?

Accepted Answer

Total revenue will increase.

Question 14

If a consumer's marginal utility per dollar spent on good X is greater than that for good Y, what should the consumer do to maximize utility?

Accepted Answer

Buy more of good X and less of good Y.

Question 15

A firm’s opportunity cost of production includes which of the following?

Accepted Answer

Both explicit and implicit costs.

Question 16

If the government imposes a price ceiling below the equilibrium price in the taxi market (see Figure 6.8), what is the likely result?

Accepted Answer

A shortage of taxi services.

Question 17

If the marginal cost of producing an additional sleeping bag is less than the price at which it can be sold, what should the firm do?

Accepted Answer

Increase production.

Question 18

Suppose a consumer’s total utility from renting 3 movies is 28, and from renting 2 movies is 18. What is the marginal utility of the third movie rental?

Accepted Answer

$$28 - 18 = 10$$

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