ECON test 1

Since the total cost of producing a T-shirt can be represented as TC = 50 + 2q, the average cost of the 5th shirt is

12

Suppose the cross-price elasticity of demand between good A and good B is -2.3. If the price of good A decreases, which of the following statements is true?

The quantity demanded for good A will increase; the quantity demanded for good B will decrease.

Suppose the demand curve in a market is given by: P = 10 – 2Q, and the supply curve is given by P = aQ, where P is the market price, Q is the market quantity, and a > 0 is an unknown value. If the (absolute value of) point price elasticity of demand at the market equilibrium price and quantity is equal to 1.8, then a= ______.

3.6

Bob views apples and oranges as perfect substitutes in his consumption, and MRS = 1 for all combinations of the two goods on his indifference curves.  Suppose the price of apples is £2 per kg, the price of oranges is £3 per kg, and Bob's budget is £30 per week.  What is Bob's utility maximizing choice between these two goods?

15 kg of apples and no oranges

The supply curve in a market is given by P = 2 + 3Q; demand is given by P = 7 – 2Q. If a price ceiling is imposed at a price of 4.5, then comparing to without the restriction, consumer surplus will ______ and producer surplus will ______.

Increase; decrease

Suppose Lisa maximizes her utility by consuming both books and pizzas.  The price of a book is £10 and the price of a pizza is £5.  When Lisa's utility is maximized

The correct answer is: the marginal utility of book is larger than the marginal utility of pizza.

A market equilibrium is efficient because ____.

it maximizes the total economic surplus

Suppose good A is an inferior good. Following an increase in the consumer's income, the quantity demanded of good A will ____. 

decrease

The supply curve in a market is given by P = 3 + 2Q; demand is given by P = 11 – 2Q. Suppose the government impose a price ceiling of £5, the producer surplus will ______.

The correct answer is: decrease by less than 4

Which of the following will NOT cause a rightward shift in the demand curve for beer?

A change in the price of beer

Suppose you have to decide for this afternoon between watching a movie and studying Economics. Watching a movie will cost you £3 to buy the movie online, but you value watching the movie at £6. The movie is two hours long. You value studying economics at £1 per hour. What is your economic surplus of watching the movie?

1

A perfectly inelastic supply curve results in _____.

The correct answer is: no change in quantity when the demand curve shifts. 

The market supply curve for a good is given by p = 5 + 3Q. The market demand curve is given by:  p = 30 – 2Q.

A price ceiling of 21 will:

have no immediate effect on this market

A vertical demand curve results in

no change in quantity when the supply curve shifts.

Which of the following would shift the demand curve for new textbooks to the right?

An increase in the number of students attending college

In consumer theory, if two consumption bundles are on the same indifference curve, then

the consumer derives the same level of utility from each consumption bundle.

Suppose good A is a normal good. Following an increase in the price of good A, the quantity demanded of good A will ____. 

decrease

Suppose that a firm’s output, q, is determined by a Cobb-Douglas production function of capital, K, and labour, L, such that q = 20K^½L^½. Suppose further that the firm wishes to produce 2000 units of output, and that it employs 400 units of capital. How much labour does the firm need to employ?

25

The supply curve in a market is given by P = 2 + 3Q; demand is given by P = 7 – 2Q. In equilibrium, consumer surplus is _______ and producer surplus is ________.

The correct answer is: Less than 2; Less than 2