Economic midterm

SST. Charles Hospital, located in an upper-income neighborhood of a large city, recently received a restored mansion as a gift from an appreciative patient. The board of directors decided to remodel the mansion and use It as recuperative quarters for patients willing to pay a premium for luxurious accommodations. The cost to the hospital of using the mansion includes Selected Answer: d. Both b and c Question 2 O out of 0. 5 points Which of the following statements Is false? Selected Answer: c. D If economic profit is positive, accounting profit must also be positive. Question 3
Economic profit is the best measure of a firm’s performance because the opportunity cost of using ALL resources Is subtracted from total revenue. Question 4 Mallory decides to spend three hours working overtime rather than watching a video with her friends. She earns $8 an hour. Her opportunity cost of working is the enjoyment she would have received had she watched the video. Question 5 Russell spends an hour studying Instead of playing tennis. The opportunity cost to him of studying is Selected Answer: c. The enjoyment and exercise he would have received had he played tennis. OF 22 Economic profit Selected Answer: a. Al never exceed accounting profit. Question 7 Bee is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bee hadn’t opened her own business, she would have earned a salary of $25,000. In her first year, Bees revenues were $30,000. Which of the following statements is correct? Selected Answer: c. B Bees total explicit costs are $25,300. Question 8 Suppose that the firm’s only variable input is labor.
When 50 workers are used, the average product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total cost of the fixed input is $500. What is average variable cost? Selected Answer: b. $1. 60 Question 9 Suppose that you run a house-painting company and currently have 2 workers painting a total of 4 houses per month. If you hire a third worker, 6 houses can be painted per month. If you hire a fourth worker, 9 houses can be painted, and a fifth and sixth worker will increase the number of houses painted to 13 and 15, respectively. Diminishing returns Selected Answer: set in when the sixth worker is hired.

Question 10 When marginal cost is rising, average variable cost Selected Answer: a. D must be rising. Lorry’s Lunchmeats is a small street vendor business. If Larry makes 15 pretzels in his first hour of business and incurs a total cost of $16. 50, his average total cost per pretzel is $1. 10. Question 12 At all levels of production higher than the point where the marginal cost curve crosses the average variable cost curve, average variable cost rises. Question 13 Teacher’s Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts.
Then the Selected Answer: b. A Question 18 Consumer surplus all of the above Question 19 Suppose a frost destroys much of the Florida orange corp.. At the same time, suppose consumer tastes shift toward orange Juice. What would we expect to happen to the equilibrium price and quantity in the market for orange Juice? Price will increase, quantity is indeterminate (may increase or decrease). Question 20 You lose your Job and, as a result, you buy fewer romance novels. This shows that you consider romance novels to be a(n) Selected Answer: c. A luxury good.
Question 21 Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. Question 22 Which cell in the following table represents an increase in equilibrium quantity and an indeterminate change in equilibrium price? An Increase in Supply An Increase in Demand A A Decrease in Supply Selected Answer: b. D c Question 23 An example off price floor is Selected Answer: a. B rent control. Question 24 Which of these statements best represents the law of demand? When the price of a good decreases, buyers purchase more of the good.
Question 25 In the housing market, rent control causes quantity supplied to fall and quantity demanded to rise. Question 26 If the market price of eggs rises at the same time as the market quantity of eggs researches decreases, this could have been caused by a decrease in supply with no change in demand. Question 27 Question 28 Use the following demand and supply functions to answer the following question: Demand: Q = 50 – UP supply SQ = 20 + UP If the price is $10, there is a surplus of 30 units. Question 29 Which of the following will cause an increase in consumer surplus? Technological improvement in the production of the good Question 30 Suppose you are in charge of setting prices at a local sandwich shop. The business needs to increase its total revenue and your Job is on the line. If the demand for sandwiches is elastic, you Selected Answer: d. C should not change the price of sandwiches. Question 31 Merrill’s income elasticity of demand for football tickets is 1. 50. All else equal, this means that if her income increases by 20 percent, she will buy 30 percent more football tickets.
Question 32 Which of the following could be the cross-price elasticity of demand for two goods that are complements? Question 33 Selected Answer: d. B demand is inelastic and supply is elastic. Question 34 When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand Selected Answer: b. C always becomes smaller. Question 35 When the price of bubble gum is $0. 50, the quantity demanded is 400 packs per day. When the price falls to $0. 40, the quantity demanded increases to 600.
Given this information and using the midpoint method, we know that the demand for bubble gum is elastic. Question 36 At age 40, Joe is considering quitting his Job and going back for a college degree. He needs two more years full-time. Tuition is $10,000 per year. He earns $30,000 per year. A college degree would raise his annual income by $10,000 per year. He will retire at age 70. From an investment standpoint, Joe will go back full-time if Selected Answer: a 10,000 x > 40,000 x Question 37 Martha and Sarah have the same preferences and incomes.
Just as Martha arrived at the theater to see a play, she discovered that she had lost the $10 ticket she had purchased earlier. Sarah Just arrived at the theater planning to buy a ticket to see the same play when she discovered that she had lost a $10 bill from her wallet. If both Martha and Sarah are rational and both still have enough money to pay for a ticket, which one of the following statements is correct? Martha and Sarah will take the same action (either to pay for another ticket or not to ay) because the ticket lost or $10 lost is a sunk cost and it should not factor into their decisions.
Because bagels and cream cheese are often eaten together, they are complements. Suppose we observe that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. Which of the following explanations is consistent with these changes in the bagels and cream cheese markets? Price of milk increased. Question 39 complements. Suppose we observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have increased. Which of the following Price of flour decreased.

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