17 Jan 25. Use the table provided to

Question
Exam 1 ECN 601

1. An example of a price floor is:

a. Minimum wages

2. Use the table provided to answer the following question. If hiring the fourth worker increases total product by 50 units and the price of each unit is $15:

a. he firm should hire the fourth worker as MR>MC.

In an oligopoly, firms will tend to compete on the basis of price.

4. A car dealership union negotiates a contract that dramatically increases the salaries of all salesmen. If one of the salesmen is thinking of changing careers to be a hardware salesman, his opportunity cost:

a. Of becoming a hardware salesman would increase

5. If the cross-price elasticity of demand between two goods is negative, then:

a. The two goods are substitutes.

6. Jim saw a decrease in the quantity demanded for his firm’s product from 8,000 to 6,000 units per week when he raised the price of the product from $200 to $250. What is Jim’s own price elasticity of demand?

a. 1.29

7. A business produces 5,000 units per month. It spends $12,000 on raw materials. It pays wages of $20,000. Other costs include $50,000 for rent, paid by the month. In order to break even, the selling price per unit will have to be:

a. 16.40

8. Use the table provided to answer the following question. If the firm hires five workers, the average cost equals:

9. An increase in the price of a complement shifts the demand curve to the:

10. An increase in the price of a substitute shifts the demand curve to the:

11. A buyer values a house at $525,000 and a seller values the same house at $485,000. If sales tax is 8% and is levied on the seller, then what would be the lowest price at which the seller would be willing to sell?

a. $523,800

12. Peter’s Pizzeria sells both pizzas and soda. It wants to increase the sales of its pizzas. Assuming that the pizza and the sodas are complements, which of these strategies can it employ?

a. Both B and C

13. The difference between the minimum price the producer is willing to accept and the price the producer actually receives for a product is referred to as:

a. Sellers surplus or market surplus

14. Use the table provided to answer the following question. What is the marginal revenue from producing the fourth unit?

a. 20

15. A firm sells 1,000 units per week. It charges $15 per unit, the average variable costs are $10, and the average fixed costs are $25. In the long run, the firm should:

a. Continue operating, as the firm is covering all the variable costs and some of the fixed costs.

16. At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which pushes the price __________ toward its equilibrium value.

a. Shortage; upward

17. Use the table provided to answer the following question. If the firm hires eight workers, the total fixed costs is:

a. 6200

18. The government decided to reduce taxes on fast-food to increase tax revenue. The government assumes that fast-food products have:

a. An elastic demand

19. Which of the following describes a firm?

a. All of the above

20. Price ceilings cause:

a. All of the above

21. Which of the following factors would shift the supply curve for ice cream to the right?

a. Not sure maybe A and C

22. A company invested $400,000 in a technology that reduced the overall costs of production by reducing their cost per unit from $2 to $1.85. Later, a manager has an opportunity to outsource production to another company at a cost per unit of $1.75. If you are the manager, you:

a. Both A and C

23. In general, the smaller the price elasticity:

a. The smaller the responsiveness of quantity to changes in price.

24. A firm sells 1,000 units per week. It charges $70 per unit, the average variable costs are $25, and the average fixed costs are $65. In the short run, the firm should:

a. Continue operating, as the firm is covering all the variable costs and some of the fixed costs.

25. Use the table provided to answer the following question. How many units should the profit maximizing firm produce?

a. C and B because both would be 60

26. A manager invests $20,000 in equipment that would help the company reduce it’s per unit costs from $15 to $12. He expects the equipment to be in use for the next seven years. After two years, he realizes that if he outsourced the production, the unit cost would be $7 instead. At this point what should the senior manager do?

a. Write off the equipment as sunk cost and allow for outsourcing since it is cheaper