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ECO 201 Assignment

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Question;ECO 201;1. The price elasticity of demand measures the: a. responsiveness of a good's price to a change in quantity demanded b. adaptability of suppliers when a change in demand alters the price of a good c. responsiveness of quantity demanded to a change in a good's price d. adaptability of buyers when there is a change in demand e. responsiveness of quantity supplied to a change in quantity demanded of the entire demand curve 2. If the demand curve is a vertical line: a. demand is perfectly elastic b. quantity demanded is independent of price c. demand is unitarily elastic d. price is determined solely by demand 3. If demand is elastic, then: a. the percentage change in quantity demanded is larger than the percentage change in price b. supply is inelastic c. prices can neither rise nor fall d. the percentage change in quantity demanded is smaller than the percentage change in price e. supply is elastic 4. If the demand curve is a horizontal line: a. demand is perfectly elastic b. demand is perfectly inelastic c. demand is unitarily elastic d. demand is relatively inelastic 5. When demand is price elastic, a decrease in price results in a(n): a. decrease in total revenue on the good b. unfavorable shift in tastes and preferences c. increase in supply of the good d. increase in total revenue on the good 6. At the point where demand is unitarily elastic: a. increases in price will decrease total revenue b. increases in price will increase total revenue c. increases in income will decrease quantity demanded d. increases in price will increase quantity demanded e. changes in price will not change the total revenue 7. For which of the following types of goods would demand be most elastic? a. necessities b. goods with many substitutes c. goods that require only a small portion of the buyer's budget d. goods with vertical supply curves 8. For which of the following is demand likely to be the most inelastic? a. a good for which there are no close substitutes b. goods which constitute a large portion of a consumer?s budget c. a good that is no longer being produced d. a good for which close substitutes are easily obtained Use the following information for questions 9 through 13. Period 1 Period 2 Good 1 Price $15 $20 Quantity 20,000 18,000 Good 2 Price $25 $20 Quantity 12,000 18,000 9. The price elasticity (Ed) for Good 1 is: a. -.368 b. -2/3 c. -3/2 d. -2.714 e. -3 10. The price elasticity (Ed) for Good 2 is: a. -.435 b. -.556 c. -1 d. -1.545 e. -1.8 11. Which of the goods have an inelastic demand? a. Both goods have inelastic demand b. Good 1 c. Good 2 d. Neither good has an inelastic demand 12. Assume that the price of Good 1 is decreased 5%. Quantity demanded will: a. rise by 1.84%. b. fall by 1.84%. c. rise by 13.57%. d. fall by 13.57%. 13. Assume that the price of Good 2 is increased 5%. Quantity demanded will: a. rise by 2.78%. b. fall by 2.78%. c. rise by 9%. d. fall by 9%. 14. Assume that a good?s price elasticity is -1.5 and that you observe that quantity decreases by 8%. What was the %?P? a. -12% b. -5 1/3% c. 5 1/3% d. 12% 15. Assume that 3 million units are currently being sold at a price of $10. The good has a price elasticity of -.6. If the government places a $1 per unit tax on the good, how much will be collected in taxes? a. $1.8 million b. $2.4 million c. $2.5 million d. $2.82 million e. $3 million 16. Assume that at a $20 price, 750,000 units of a good are sold. The good has a price elasticity of -1.2. What price would need to be charged so that 817,500 units are sold? a. $16.67 b. $17.33 c. $18.50 d. $21.50 e. $24.00 Use the following information for questions 17 through 21. Period 1 Period 2 Income $15,000 $16,500 Good 1 Quantity 1,800 2,000 Good 2 Quantity 800 700 17. The income elasticity (EY) for Good 1 is: a. -1.105 b. -.905 c..905 d. 1.105 18. The income elasticity (EY) for Good 2 is: a. -1.4 b. -.714 c..714 d. 1.4 19. Assume that income increases by 10%. Quantity demanded for Good 1will: a. rise by 9.05%. b. fall by 9.05%. c. rise by 11.05%. d. fall by 11.05%. 20. Assume that income increases by 10%. Quantity demanded for Good 2 will: a. rise by 7.14%. b. fall by 7.14%. c. rise by 14%. d. fall by 14%. 21. Which of the goods are normal goods? a. Both goods are normal goods b. Good 1 c. Good 2 d. Neither good is a normal good 22. 400,000 units of a good with an income elasticity of 1.5 are currently being sold. If consumer income increases by 4%, how many units of the good will be sold? a. 376,000 b. 384,000 c. 416,000 d. 424,000 e. 600,000 23. Assume that when the price of one increases from $10 to $12, the quantity of a second good rises from 20,000 units to 22,000 units. The cross price elasticity of these goods is ___ and the goods are ____. a. -1.908, complements b. -.524, substitutes c..524, complements d..524, substitutes e. 1.908, substitutes 24. Assume that when the price of one increases from $10 to $12, the quantity of a second good falls from 10,000 units to 9,500 units. The cross price elasticity of these goods is ___ and the goods are ____. a. -3.546, substitutes b. -.282,compliments c..282, substitutes d. 3.546, substitutes e. 3.546, compliments 25. Bacon and eggs have a cross price elasticity of -0.8. 10,000 pounds of bacon are currently being sold. If egg prices drop by 5%, how many pounds of bacon will be sold? a. 8,000 b. 9,500 c. 10,400 d. 10,500 e. 10,800 26. If the income elasticity of demand is negative, this means that the good is: a. an inferior good b. at a lower than equilibrium price c. provided by a monopoly producer d. provided by competitive producers e. a normal good 27. The cross-price elasticity of demand between butter and margarine is most likely: a. positive, since the goods are substitutes b. positive, since the goods are complements c. negative, since the goods are complements d. negative, since the goods are substitutes e. zero, since the goods are both normal 28. If the cross-price elasticity of demand is negative, then the: a. two goods are complements b. two goods are substitutes c. two goods have no relationship to each other d. price is below the equilibrium e. price is above 29. In measuring the sensitivity of demand, the:a. price and income elasticities refer to movements along the demand curve, other elasticities refer to shifts of the entire demand curve b. price and cross-price elasticities analyze movements along the demand curve, other elasticities refer to shifts of the entire demand curve c. income and cross-price elasticities refer to movements along the demand curve, price elasticity refers to shifts of the entire demand curve d. price elasticity refers to movements along the demand curve, income and cross-price elasticities refer to shifts of the entire demand curve e. income elasticity refers to movements along the demand curve, other elasticities refer to shifts 30. The term utility in economics refers to the: a. satisfaction received by individuals from consuming goods and services b. real income available to consumers for purchasing goods and services c. relationship between the demand for a product and the supply of a product d. usefulness of a good or service e. slope of the budget line 31. The change in total utility arising from a one-unit increase in consumption of a good is referred to as: a. average utility b. the principle of diminishing marginal utility c. real income d. marginal utility e. price 32. Which of the following most clearly illustrates the law of diminishing marginal utility? a. the total satisfaction from consuming a good falls as more of the good is consumed b. marginal utility falls as total utility falls c. the quantity of a good demanded falls as price rises d. the additional satisfaction from consuming a good falls as more of the good is consumed e. there is a direct relationship between the price of a good and its total utility 33. As more of a good is consumed, the marginal utility of the good will ____ and total utility will ____: a. increase, increase b. increase, decrease c. decrease, increase d. decrease, decrease 34. If bread costs $2 per pound and meat costs $4 per pound, a consumer whose marginal utility of meat equals 80 utils per pound is maximizing utility only if the marginal utility per pound of bread equals: a. 4 utils b. 5 utils c. 10 utils d. 20 utils e. 40 utils 35. If a consumer allocates her income between two goods, x and y, then she will be in equilibrium when: a. MUx/Px = MUy/Py and she is below her budget constraint b. MUx = MUy and she has spent all of her income c. MUx/MUy > Px/Py and all of her income is spent d. MUx/Px = MUy/Py and all of her income is spent e. MUx = MUy and she is below her budget constraint 36. An indifference curve represents: a. the combinations of two goods that yield the same level of total utility b. the relationship between the price of a good and the quantity demanded c. the relationship between price and utility d. combinations of goods that could be purchased with the same level of income e. the total output resulting from various combinations of inputs 37. If a person could increase total utility by purchasing more candy and fewer apples, then the:a. total utility of candy must exceed the total utility of applesb. marginal utility of candy must exceed the marginal utility of apples c. marginal utility per dollar spent on candy must exceed the marginal utility per dollar spent on apples d. total utility per dollar spent on candy must exceed the total utility per dollar spent on apples e. marginal utility per dollar spent on candy must be less than the marginal utility per dollar spent on apples 38. Smith's current rates of purchase are such that the marginal utility of shirts is 18 and the marginal utility of shoes is 4. If shirts and shoes are priced at $6 and $1 respectively, one can conclude that Smith: a. should buy more shoes. b. should buy more shirts. c. is spending his income on shirts and shoes so as to maximize his satisfaction. d. should buy shirts and shoes in the same respective quantities as the total utility derived from each. 39. Use the following table for questions 39 and 40. Total Marginal Units Utility Utility 1 35 35 2 65? 3? 25 4 110 20 The marginal utility for the second unit is: a. 25 b. 30 c. 35 d. 65 40. The total utility for the third unit is: a. 30 b. 35 c. 65 d. 90 41. The intercept of a budget line measures the: a. amount of a good that a consumer will purchase b. maximum amount of a good that a consumer could purchase, given his consumption of some other good c. maximum amount of a good that could be consumed at given prices and income d. minimum amount of a good that could be consumed at given prices and income e. minimum consumption of a good consistent with utility maximization 42. If income and the prices of both goods all double, the budget line will:a. become flatterb. become steeper c. remain unchanged d. experience a parallel outward shift e. experience a parallel inward shift 43. Assume that a consumer?s utility function is given by U = X12/5X23/5. If the consumer is currently consuming 10 units of good 1 and 20 units of good 2, what will be the consumer?s total utility? a. 13.4 b. 15.2 c. 24.3 d. 35.6 e. 50.0 44. Assume that the consumer from the prior question has total utility of 50 and is consuming 10 units of good 1. How many units of good 2 are being consumed? a. 20.0 b. 25.7 c. 47.3 d. 75.1 e. 146.2 45. If a consumer's income rises, her: a. indifference curve shifts inward b. indifference curve shifts outward c. budget line shifts outward d. budget line shifts inward e. budget line becomes steeper 46. A consumer spends a total of $100 on two goods. She buys 13 units of good 1 and 6 units of good 2. If the price of good 1 is $4, what is the price of good 2? a. $4 b. $5 c. $6 d. $7 e. $8 Use the following information for questions 47 through 57. A consumer?s budget line is given by 16x1 + 24x2 = 184. The total utility that the consumer receives from consuming various amounts of the two goods is shown in the following table. Total Utility: Units Good 1 Good 2 1 200.0 374.4 2 382.4 688.8 3 545.6 974.4 4 689.6 1,233.6 5 819.2 1,449.6 6 934.4 1,639.2 7 1,035.2 1,797.6 8 1,121.6 1,939.2 47. What is the slope of the budget line? a. -1/3b. -2/3 c. -1.5 d. -3 e. -3.33 48. What is the maximum number of units of good 1 the consumer can buy? a. 5 b. 6 c. 7 2/3 d. 8.4 e. 11.5 49. What is the maximum number of units of good 2 the consumer can buy? a. 5 b. 6 c. 7 2/3 d. 8.4 e. 11.5 50. Assume that the consumer is consuming 3 units of good 2. How many units of good 1 are being consumed? a. 4 b. 5 c. 6 d. 7 e. 8 51. How many units of good 1 will be consumed when the consumer is maximizing utility? a. 4 b. 5 c. 6 d. 7 e. 8 52. How many units of good 2 will be consumed when the consumer is maximizing utility? a. 4 b. 5 c. 6 d. 7 e. 8 53. What will be the consumer's total utility in equilibrium? a. 1,745.6 b. 1,923.2 c. 2,139.2 d. 2,268.8 e. 2,789.3 Use the following graph for questions 54 through 57. Label the points on the graph using the appropriate numbers that you determined from questions 47 through 53.54. Point A is: a. 4 b. 5 c. 7 2/3 d. 8.4 e. 11.5 55. Point B is: a. 4 b. 5 c. 7 2/3 d. 8.4 e. 11.5 56. Point C is: a. 4 b. 5 c. 7 2/3 d. 8.4 e. 11.5 57. Point D is: a. 4 b. 5 c. 7 2/3 d. 8.4 e. 11.5 58. Assume that a consumer?s real income increases due to a raise. According to the substitution effect, the consumer will: a. buy less of all goods b. buy more of all goods c. buy more of some goods, but less of other goods d. there would be no substitution effect U Good 1 Good 2 B A C D 59. Assume that a consumer?s real income increases. According to the income effect, the consumer will:a. buy less of all goodsb. buy more of all goods c. buy more of some goods, but less of other goods d. there would be no income effect 60. A consumer buys only two goods. If the price of good 2 increases, according to the substitution effect, the consumer will: a. buy more of good 1, but less of all good 2 b. buy less of good 1, but more of good 2 c. buy more both goods d. buy less of both goods e. there would be no substitution effect 61. A consumer buys only two goods. If the price of good 2 increases, according to the income effect, the consumer will: a. buy more of good 1, but less of all good 2 b. buy less of good 1, but more of good 2 c. buy more both goods d. buy less of both goods e. there would be no income effect 62. One of the advantages of the sole proprietorship form of business ownership is: a. the separation of ownership and control b. limited liability for business debt c. ease of organization d. the ability to pool resources e. ease of obtaining funding 63. A partnership and a sole proprietorship have which of the following in common? a. both have less liability for losses from the firm than under a corporation b. both can raise funds by selling bonds c. both can raise funds by selling shares of stock d. neither can raise funds by selling stock e. the owners of neither can be held liable for losses incurred by the firm 64. Unlimited liability for the firm's losses occurs in: a. sole proprietorships only b. partnerships only c. corporations only d. sole proprietorships and partnerships e. all types of business firms 65. Double taxation of profits is a problem for: a. corporations only b. corporations and partnerships c. sole proprietorships and partnerships d. corporations and sole proprietorships e. partnerships only 66. If? > 0, then: a. the firm?s ROR > market ROR b. the firm?s ROR = market ROR c. the firm?s ROR < market ROR d. unable to determine from the information given Use the following data for questions 67 and 68.Total revenues $45,000 Explicit costs 39,000 Accounting net income 6,000 Implicit costs 4,000? 2,000 67. Assume that you purchase the business for $75,000. What will be your rate of return? a. 2.7% b. 6.0% c. 8.0% d. 10.0% e. 28.6% 68. Assume that you normally earn 12% on your investments. What is the maximum price that you would pay for this business? a. $2,000 b. $6,000 c. $16,667 d. $50,000 69. If? < 0, then the firm?s owners: a. are earning no profits b. are earning profits greater than they could earn elsewhere c. are earning profits less than they could earn elsewhere d. are earning profits greater equal to what they could earn elsewhere 70. In the long run: a. at least one of the firm's inputs is fixed b. customer tastes and preferences are fixed c. the firm may vary all inputs d. sunk costs become variable costs 71. In the short run: a. at least one of the firm's inputs is fixed b. customer tastes and preferences are fixed c. the firm may vary all inputs d. sunk costs are variable e. government intervention is inevitable 72. The marginal product of labor is the: a. total output produced when one more worker is hired b. change in average output produced when one more worker is hired c. total output per worker when one more worker is hired d. change in total output when one more worker is hired e. maximum quantity of output when one more worker is hired 73. What is the definition of productivity? a. output plus quantity of input b. output minus quantity of input c. quantity of input divided by output d. output divided by quantity of input e. output times quantity of input 74. Assume that the marginal product of labor is positive. As additional labor is hired, output will:a. increaseb. decrease c. remain constant d. unable to determine from the information given 75. Average product will be maximized when: a. total output is maximized b. MPL = 0 c. APL = MPL d. q = 0 76. Output will be maximized when: a. q = MPL b. MPL = 0 c. APL = MPL d. q = 0 Use the following production function for questions 77 through 83. q = A K1/3L2/3Assume that A = 8, K = 40, and L = 20. 77. What is total output? a. 151.1 b. 183.1 c. 201.5 d. 526.3 e. 1,066.7 78. The average product of labor is: a. 1.5 b. 9.2 c. 10.1 d. 26.3 e. 33.3 79. The capital to labor ratio is: a. 1.5 b. 2.0 c. 2.5 d. 3.0 e. 3.5 For questions 80 through 82 assume that K = 60. 80. What is total output? a. 173.1 b. 184.2 c. 230.8 d. 478.5 e. 1,422.2 81. The average product of labor is:a. 7.5b. 9.2 c. 10.1 d. 11.5 e. 23.4 82. The capital to labor ratio is: a. 1.5 b. 2.0 c. 2.5 d. 3.0 e. 3.5 83. The above change would be shown on a graph by: a. a move to the right along a single production function. b. a move to the left along a single production function. c. a shift up in the production function. d. a shift down in the production function. 84. Use the following information for questions 84 through 88. Assume that a firm?s production function is given by q = A K.5L.5 and that A = 8 and K = 40. Assume that L = 50. What is the firm's total output? a. 325.9 b. 347.2 c. 357.8 d. 373.6 e. 391.9 85. What will be the total output if 60 workers are employed? a. 325.9 b. 347.2 c. 357.8 d. 373.6 e. 391.9 86. What is the MPL for the 51st worker? a. 2.5 b. 3.0 c. 3.5 d. 4.0 e. 4.5 87. Assume that output is increased to 438.2. How many workers (to the nearest worker) are required to produce this level of output? a. 65 b. 70 c. 75 d. 80 e. 85 88. The above change would be shown on a graph by: a. a move to the right along a single production function. b. a move to the left along a single production function. c. a shift up in the production function. d. a shift down in the production function.

 

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