Assignment

Part 1

1. Suppose the equilibrium price of housing recently decreased and the equilibrium quantity decreased as well. These changes were caused by a(n)
A. decrease in demandB. increase in supply

2. A change in demand causes a_____ the demand curve.
A. Movement along or b.Shift of
A change in quantity demanded causes a __ the demand curve.
A. Movement along or b.Shift of

3. From the following list, use the drop-down menu to choose the variables that are "held fixed" in drawing a market demand curve.
a. The price of the product__ in drawing a market demand curve.
A.is held fixed or B.is not held fixed
b. consumer income___ in drawing a market demand curve.
A.is held fixed or b. is not held fixed
c. The price of other related goods__ in drawing a market demand curve.
A. is held fixed or B. is not held fixed
d. Consumer expectations about future prices ___ in drawing a market demand curve.
A.is held fixed or B.is not held fixed
e. The quantity of the product purchased ____ drawing a market demand curve.
A.is held fixed or B.is not held fixed

4. Between 2006 and 2009, the equilibrium price of pecans increased by roughly _A__
percent, a result of increased _B_ from china.
A.50 B.70 C.15D. Supply Or Demand

5. If both demand and supplyincrease simultaneously, the equilibrium price will increase if the change in
__ is relatively large.
A. Demand or B. Supply

6. A minimum price above the equilibrium price generates excess __
A. Supply or B. Demand

7. There is ___________ relationship between the price and the quantity demanded
A. a negative B.a flat C.no D. a positive

8. According to the law of supply, a decrease in a good's price____ the quantity supplied of that good.
A. Increases B.Decreases

9. The manager of a pizza shop must decide how much pizza he will produce at a given price. Which of the following would NOT be a consideration for the manager?
A.The cost of the pizza oven.
B.Consumer income.
C.The wage paid to the pizza shop's employees.
D.The cost of dough, cheese, and toppings.

Part 2

1. As the number of substitutes for a particular product increases, the price elasticity of demand for the product____

A. Increases B. Decreases

2. Atlantic Coffee has recently decided to raise its prices by 10%. It was shocked by its customers' reaction to the price increase when sales dropped 24%. Such a sharp drop in sales occurred because
A.the demand for coffee as a commodity is highly inelastic.
B.Atlantic Coffee has changed to a new type of bean.
C.Atlantic Coffee doesn't taste as good as Pacific Coffee.
D.the demand for a specific brand of coffee is highly elastic

3. Suppose at the current price, the price elasticity of demand for a campus film series is
1.5. If administrators cut the price, total revenue will¬¬¬__
A. Increase B. Decreases

4. Income and the Price Elasticity of Demand for Medical Care. Like many other developing nations, Peru subsidizes medical care, charging consumers a small fraction of the cost of providing services such as visits to medical clinics. The price elasticity of demand for medical care is 0.67 for poor households but only 0.03 for wealthy households.

Suppose the government reduced its subsidies for medical care, and the price to consumers increased by 20 percent.

The changes in the quantity of medical care demanded for poor households would be_A__percent (enter your response rounded to one decimal place) and _B__ percent for wealthy households (enter your response rounded to one decimal place).

5. At the midpoint of a linear demand curve, the price elasticity of demand is __
A.Unit elastic B .inelastic C.elastic

6. Where on the Demand Curve? The demand curve for your firm's product is linear. Based on recent sales data, you have determined that at the current price, the price elasticity of demand is 5.00.

a.Given this information, we can state that the current price is on the__ half of the demand curve.
b. In this case, if you want to increase total revenue, you should__ your price.
c. This result is a move__ along the demand.

7. The cross-price elasticity of demand is__ for complementary goods
A. negative B.Positive
The cross-price elasticity of demand is__ for substitute goods.
A.negative B. positive

8. A 13% increase in income produces a16% increase in demand for satellite television. The income elasticity of demand for satellite television is_A_.This indicates that satellite television service is_B_
A.Enter your response rounded to two decimal places.)B.a.An Inferior b. a normal

9. Related to Application: The Short-Run and Long-Run Elasticity of Supply of Milk
The price elasticity of supply of milk is _A_ over a one-year period, compared to_B_over a 10-year period.
A.a0.70 b.1.00 c.2.50 d.0.10 B.a.1.00 b. 2.50 c.10 d.0.70

10. Suppose the price elasticity of demand for accordions is 2.5 and the supply elasticity is 2.5. If a subsidy on accordions increases the supply by 20 percent, the equilibrium price will_A_by_B_percent.
A.a.Decrease b. increase B.answer is a percentagenumber

Part 3

1. The computation of economic cost is based on the principle of¬¬¬¬ __
A. Opportunity cost B. Generally accepted accounting practices

2.The ___ run is defined as a period over which a firm cannot change its production facility
A. Short B. Long

3.Related to Application: Opportunity Cost and Entrepreneurship
Workers who become entrepreneurs earn roughly _A__ percent _B_than workers who remain in paid employment.
A. a.20 b.10 c.12 B. a.lessb.more.

4.Total revenue minus accounting cost equals _A_ which will always be the greater than the _B_
A.a. Accounting profit b. Economic profit

5.The negatively sloped portion of the short-run marginal-cost curve is explained by_A_and the positively sloped portion of the short-run marginal-cost curve is explained by _B_
A. a.Falling average cost b. increasing marginal productivity B.a.increasing marginal productivity b.increasing average cost c.diminishing marginal returns

6. The short-run average cost of production¬¬is the same for all quantities. __
A.true B. false
7. Turner Overdrive produces 380,000 transmissions with a fixed cost of $8.4 million. Its average fixed costs are $__ per transmission. (Enter your response rounded to two decimal places.)

8. Refer to the figure on the right. Suppose the output of a large aluminum firm drops from 1 million pounds to 0.5 million pounds per year. The long-run average cost of producing aluminum will go from $__ to __.

9. The typical short-run average-cost curve is shaped like the letter U, while the typical long-run average-cost curve is shaped like the letter L because_A_not applicable in the _B_ run.
A. a.economics of scales areb.diminishing marginal returns are c. labor specialization is B.a.longb.short

10.The long-run average cost of production might increase as output increases due to
A. Economics of scale B. indivisible inputs C. specialization. D. diseconomies of scale.