# Trade will take place – if the maximum that a consumer

if the maximum that a consumer is willing and able to pay is less than the minimum price the producer is willing and able to accept for a good. if the maximum that a consumer is willing and able to pay is greater than the minimum price the producer is willing and able to accept for a good. only if the maximum that a consumer is willing and able to pay is equal to the minimum price the producer is willing and able to accept for a good. None of the statements associated with this question are correct. A firm will have constant profits of $100,000 per year for the next four years, and the interest rate is 6 percent. Assuming these profits are realized at the end of each year, what is the present value of these future profits? $325,816 $376,741 $400,000 $346,511 As the interest rate increases, the opportunity cost of waiting to receive a future amount: increases. decreases. may rise or fall. remains the same. “Our marginal revenue is greater than our marginal cost at the current production level.” This statement indicates that the firm: is maximizing profits. should increase the quantity produced to increase profits. should decrease the quantity produced to increase profits. None of the statements associated with this question are correct. What is the marginal net benefit of producing the twentieth unit? 2 -5 -2 8 The value of the firm is the: current value of profits. present discounted value of all future profits. average value of all future profits. total value of all future profits. The curve which summarizes the total quantity producers are willing and able to produce at differing prices is the: market demand curve. consumer surplus curve. average cost curve. market supply curve. Suppose the demand for X is given by Qxd = 100 – 2PX + 4PY + 10M + 2A, where PX represents the price of good X, PY is the price of good Y, M is income and A is the amount of advertising on good X. Good X is an inferior good. a normal good. a Giffen good. a complement. Producer surplus is measured as the area below the demand curve and above the market price. above the demand curve and below the market price. above the supply curve and below the market price. below the supply curve and above the market price. Competitive market equilibrium is determined by the intersection of the market demand and supply curves. implies that quantity supplied is sufficiently larger than quantity demanded. is determined by the intersection of the excess demand and excess supply curves. implies that quantity demanded is sufficiently larger than quantity supplied. Consider a market characterized by the following demand and supply conditions: PX = 50 – 5QX and PX = 32 + QX. The equilibrium price and quantity are, respectively, $35 and 3 units. $3 and 35 units. $82 and 50 units. $20 and 6 units. The minimum legal price that can be charged in a market is: a price floor. a price ceiling. non-pecuniary price. full economic price. Suppose market demand and supply are given by Qd = 100 – 2P and QS = 5 + 3P. If a price ceiling of $15 is imposed, what will be the resulting full economic price? $19. $21. $6. $25. If the income elasticity for lobster is 0.4, a 40 percent increase in income will lead to a: 10 percent drop in demand for lobster. 16 percent increase in demand for lobster. 20 percent increase in demand for lobster. 4 percent increase in demand for lobster. If the absolute value of the own price elasticity of steak is 0.4, a decrease in price will lead to: a reduction in total revenue. an increase in total revenue. no change in total revenue. None of the statements is correct. When marginal revenue is positive for a linear (inverse) demand function, decreases in output will cause total revenues to: increase. decrease. remain unchanged. There is not sufficient information to answer the question. The demand for good X has been estimated to be ln Qxd = 100 ? 2.5 ln PX + 4 ln PY + ln M. The own price elasticity of good X is: ?2.5. 4.0. ?2.5 percent. 4.0 percent. Which of the following measures of fit penalizes a researcher for estimating many coefficients with relatively little data? t-statistic R-square Adjusted R-square Neither the t-statistic, the R-square, nor the adjusted R-square Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed? 3 4 7 45 If the marginal product per dollar spent on capital is less than the marginal product per dollar spent on labor, then in order to minimize costs the firm should use: less capital and more labor. less labor and more capital. less labor and less capital. more labor and more capital For given input prices, isocosts closer to the origin are associated with: lower costs. the same costs. higher costs. initially lower, then higher costs. Which of the following “costs” could a firm that wants to remain in business avoid if it halted current production? Fixed costs Variable costs Sunk costs Opportunity costs For the cost function C(Q) = 100 + 2Q + 3Q2, the marginal cost of producing 2 units of output is: 2. 3. 12. 14. The minimum average cost of producing alternate levels of output, allowing for optimal selection of all variables of production is defined by the: long-run average total cost curve. short-run average fixed cost curve. short-run marginal cost curve. long-run marginal cost curve. Cost complementarity exists in a multiproduct cost function when: the average cost of producing one output is reduced when the output of another product is increased. the average cost of producing one output is increased when the output of another product is increased. the marginal cost of producing one output is increased when the output of another product is decreased. the marginal cost of producing one output is reduced when the output of another product is increased. What is the value of a preferred stock that pays a perpetual dividend of $200 at the end of each year when the interest rate is 4 percent? Instruction: Round your response to the nearest dollar. $ You’ve recently learned that the company where you work is being sold for $290,000. The company’s income statement indicates current profits of $9,000, which have yet to be paid out as dividends. Assuming the company will remain a “going concern” indefinitely and that the interest rate will remain constant at 8 percent, at what constant rate does the owner believe that profits will grow? Instruction: Round your response to 2 decimal places. Growth rate of: percent. The supply curve for product X is given by QXS = -400 + 10PX . a. Find the inverse supply curve. P=+Q b. How much surplus do producers receive when Qx = 500? When Qx = 1,250? When QX = 500: $ When QX = 1,250: $ Suppose the cross-price elasticity of demand between goods X and Y is 2. How much would the price of good Y have to change in order to change the consumption of good X by 50 percent? percent If Starbucks’s marketing department estimates the income elasticity of demand for its coffee to be 1.7, how will the prospect of an economic boom (expected to increase consumers’ incomes by 4 percent over the next year) impact the quantity of coffee Starbucks expects to sell? Instruction: Round your response to 2 decimal places. It will change by percent.

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