1. At what level of output does marginal cost equal marginal revenue?

10

20

30

40

2. The demand for good X has been estimated by Q_x^d = 20 - 5P_x + 4P_y. Suppose that good X sells at $3 per unit and good Y sells for $2 per unit. Calculate the own price elasticity.

-1.15

-21.67

-5.0

0.92

3. Consider a market characterized by the following demand and supply conditions: P_X =100 - 5Q_X and P_X = 20 + 3Q_X. The equilibrium price and quantity are, respectively,

$50 and 10 units

$10 and 50 units

$25 and 5 units

$5 and 25 units

4. Suppose market demand and supply are given by Q^d = 100 - 2P and O^S = 5 + 3P. If a price ceiling of $10 is imposed:

there will be a surplus of 45 units

there will be neither a surplus or shortage

there will be a shortage of 45 units

there will be a shortage of 18 units

5. Good X is an inferior good and its demand is given by Q_X^d = α₀ + α_XP_X + α_YP_Y + α_MM + α_HH. Then we know that:

α_X < 0

 α_X > 0

α_M < 0

 α_M > 0

6. Consider a market characterized by the following inverse demand and supply functions: P_X = 30 - 3Q_X and P_X =10 + 2Q_X. Compute the surplus consumers receive when a $24 per unit price floor is imposed on the market.

$0

$12

$24

$6

7. Consider a market characterized by the following demand and supply conditions: P_X = 30 - 4Q_X and P_X = 6 + 4Q_X. The equilibrium price and quantity are, respectively,

$3 and 9 units

$9 and 3 units

$3 and 18 units

$18 and 3 units

8. When the government imposes a price floor above the market price, the result will be that

surpluses occur

shortages become a problem

supply and demand will shift up to the new equilibrium

a price ceiling  set above the equilibrium price will have no effect on the market equilibrium  

9. Other things held constant, producer surplus decreases as:

The price of a good decreases.

The price of a good increases.

The demand curve shifts upward.

None of the above.

10. Marginal benefit is defined as:

The additional benefits that arise by using an additional unit of the managerial control variable.

The total benefits that arise by using an additional unit of the managerial control variable.

The amount that would have to be invested today at the prevailing interest rate to generate the given future benefit of an action.

The present benefit from a project minus the current cost of the project.

11. Consumer-producer rivalry happens because:

consumers want to negotiate low prices, while producers want to negotiate high prices.

consumers want to negotiate high prices, while producers want -to negotiate low prices.

consumers' high valuation and producers' law production cost of a good

producers' high production cost and consumers' low valuation of a good.

12. 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?

$325,816.49

$376,741.64

$400,000.85

$346,510.56

13. The own price elasticity of demand for apples is -1.5 If the price of apples increases by 10 percent, what will happen to the quantity of apples demanded?

It will increase 15 percent.

It will fall 15 percent.

It will increase 10 percent

It will fall 10 percent

 14. Managerial economics:

helps managers with day-to-day decisions.

helps managers with long-term decisions.

is valuable to the manager of a not-for-profit organization.

All of the above statements are correct.

15. For a linear (inverse) demand function, increases in output will cause total revenue to increase when marginal revenue is:

positive

negative

unit elastic

elastic

16. The cost curve that declines continuously as output increases is the:

total cost curve

average cost curve

average fixed costs curve.

variable cost curve

17. Suppose the production function is given by Q = 10K + 4L. What is the marginal product of capital when 5 units of capital and 10 units of labor are employed?

10

4

18

9

18. At what level of output does marginal cost equal marginal revenue?

1

2

3

5

19. An isocost line:

represents the combinations of inputs that cost the firm the same amount of money_

defines the combinations of inputs that yield the same level of output.

is the rate at which a producer can substitute between two inputs and maintain the same level of output.

has a convex shape.

20. Suppose Q_X^d = 5,000 - 2P_X + 3 P_Y - 2M, where P_X = $100, P_Y = $100, and M = $2,000. What is the own price elasticity of demand?

-2

-0.27

-0.21

-0.18

21. An excise tax of $2.00 per pound of sugar placed on the suppliers of sugar would shift the supply curve:

down by $2.00.

down by more than $2.00.

up by $2.00.

up by less than $2.00_

22. What is the average product of labor, given That the level of labor equals 5, total output equals 500, and the marginal product of labor equals 25?

100

125

20

2.500

23. The demand for good X has been estimated to be In Q_X^d = 100 - 5 In P_X + 2 In P_Y + 4 In M. The cross-price elasticity of demand between goods X and Y is:

2

-5

-2

There is insufficient information needed to find the elasticity of good X

24. The head of-the accounting department at a major software manufacturer has asked you to put together a pro forma statement of the company's value under several possible growth scenarios and the assumption that the company's many divisions will remain a single entity forever. The manager is concerned that, despite the fact that the firm's competitors are comparatively small, collectively their annual revenue growth has exceeded 50 percent over each of the last five years. She has requested that the value projections be based on the firm's current profits of $3.2 billion (which have yet to be paid out to stockholders) and the average interest rate over the past 20 years (6 percent) in each of the following profit growth scenarios:

a. Profits grow at an annual rate of 9 percent. (This one is tricky.)

b. Profits grow at an annual rate of 2 percent.

c. Profits grow at an annual rate of 0 percent

d. Profits decline at an annual rate of 4 percent.

25. What is the value of a preferred stock that pays a perpetual dividend of $150 at the end of each year when the interest rate is 7 percent? Instruction: Round your response to the nearest dollar.

 26. The supply curve for product X is given by Q_X^S = -420 + 20P_X.

a. Find the inverse supply curve.

b. How much surplus do producers receive when Q_X = 380? When Q_X = 1,060?

27. From California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on noncustomers, who make $10 million in withdrawals from other banks' ATM machines. On average, noncustomers earn a wage of $22 per hour and pay ATM fees of $3.50 per transaction. It is estimated that banks would be willing to maintain services for 4 million transactions at $1.00 per transaction, while noncustomers would attempt to conduct 20 million transactions at that price. Estimates suggest that, for every 1 million gap between the desired and available transactions, a typical consumer will have to spend an extra minute traveling to another machine to withdraw cash.

Based on this information, what would be the nonpecuniary cost of legislation that would place a $1.00 cap on the fees banks can charge for noncustomer transactions?

What would be the full economic price of this legislation?

28. You've recently learned that the company where you work is being sold for $250,400. The company's income statement indicates current profits of $12,000, 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 9 percent, at what constant rate does the owner believe that profits will grow?