IVY SOFTWARE MBA PREPWORKS FUNDAMENTALS OF ECONOMICS
- EXAM WITH ACTUAL QUESTIONS AND VERIFIED ANSWERS |
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The main concept demonstrated in the production possibilities frontier is -
ANSWER-Opportunity cost
When country A has a lower opportunity cost of producing sugar relative to
country B, then country A is said to have - ANSWER-Comparative Advantage
A graph that shows the combinations of two goods that the economy can
produce given the available scarce resources and available technology is called
a - ANSWER-Production Possibilities Frontier
Assume a production possibilities frontier for pickup trucks and big Mac
hamburgers. The economy is producing 20 big Mac hamburgers and 65 pickup
trucks (point 20, 65). What is the opportunity cost of producing an additional
20 Big Mac hamburgers (point 40, 60)? - ANSWER-Five Pickup Trucks
The opportunity cost of an item is - ANSWER-whatever must be given up to
obtain the item.
Consider market for pork, suppose that price of beef, a substitute for pork,
increases. Because of the change in price of beef, the equilibrium price of
pork...? - ANSWER-Increases
Consider the market for pork, suppose that the price of beef, a substitute for
pork, increases. Because of this change in the price of beef, the equilibrium
,quantity of pork will...? - ANSWER-Increase because increase in price of beef
causes demand curve for pork to shift North East. B/c of this shift, the
equilibrium quantity of pork will increase.
Consider the market for pork. Suppose that 1) disposable income increases and
pork is a normal good, And 2) the price of hog feed decreases. Because of these
changes, the equilibrium price of pork is... - ANSWER-Indeterminate because
the increase in disposable income causes the demand curve for pork to shift
north east because pork is a normal good. The decrease in price of hog feed
causes the supply curve to shift to the south east. The net effect of these shifts
leaves us unable to say waht will happen to the equilibrium price of pork.
Consider the market for pork. Suppose that disposable income increases and
pork is a normal good and the price of hog feed decreases. The equilibrium
quantity of pork...? - ANSWER-Increases.
Suppose the price elasticity for demand for retail phone service in the US is
0.95. If the # of retail substitutes for retail telephone service increases, will the
price elasticity of demand become more elastic or more inelastic? -
ANSWERElastic. When the number of substitute products increases, the price
elasticity of demand will become more elastic. consumers become more
sensitive to price when they have more options to chose among.
True or False: the law of demand states that if the price of a good increases, CP,
then the quantity demanded of that good will increase. - ANSWER-False.
quantity demanded of that good will decrease.
Suppose the cross-price elasticity of demand for home heating oil with respect
to the price of natural gas is +0.6. This number tells us that home heating oil
and natural gas are substitute or compliment goods? - ANSWER-Substitute
goods. When the cross price elasticity is positive then they are substitutes.
,Consider the market for mustard which is a complement to hot dogs. Suppose
the price of hot dogs increase. What happens to the equilibrium price and
equilibrium quantity of the mustard market? - ANSWER-Equilibrium price
decreases and equilibrium quantity decreases. The price of hot dogs is an
independent variable in the demand function for mustard. This is because hot
dogs and mustard are complementary goods. Therefore, if the price of hot dogs
increases, then the demand curve for mustard shifts to the south-west. People
demand less mustard at every price when hot dogs are more expensive. In the
mustard market, the equilibrium price decreases and equilibrium quantity
decreases.
Consider the market for pork. Suppose that the price of hog feed, an input to
the production of pork, increases. Because of that change in the price of hog
feed, the equilibrium quantity of pork ...? - ANSWER-Decreases because the
increase in price of hog feed causes the supply curve for pork to shift NW. B/c
of this shift, the quantity of pork decreases.
Consider the market for pork. Suppose that disposable income increases and
pork is an inferior good. Because of that change in income, the equilibrium
price of pork...? - ANSWER-Decreases because the increase in disposable
income causes the demand curve for pork to shift south west, because pork is
an inferior good. because of this shift, the equilibrium price of pork decreases.
profit maximizing rule - ANSWER-a business maximizes profits when it produces
where the marginal revenue from selling another unit equals the marginal cost
of producing another unit.
Marginal Revenue=Marginal Cost
, Marginal cost - ANSWER-is equal to the change in the total cost that arises from
an extra unit of production. It is calculated by taking the change in total cost
and dividing it by the change in the quantity produced
=change in TC/change in Q
Long Run - ANSWER-a situation where the fixed costs (the inputs) become
variable. a time horizon long enough for the seller to adjust all inputs. If you
observe a business with no fixed costs, then it is in a long run state.
\when prices remain low for a very long period of time, then the business
moves into a long run decision mode. In the long run there are no fixed costs.
fixed costs - ANSWER-costs that do not vary with changes in the quantity
produced. what expenses must be paid even if production equals zero? variable
costs - ANSWER-costs that do vary with changes in the quantity produced
total cost - ANSWER-equals the sum of the fixed costs and variable costs
TC=VC+FC
average fixed cost - ANSWER-equals fixed cost divided by quantity produced
AFC= TC/Q
Marginal revenue - ANSWER-is the change in total revenue generated from an
additional unit sold. It is calculated by taking the change in total revenue
divided by the change in quantity sold
Short Run - ANSWER-a time horizon where some fixed costs exist.
is a time horizon within which a business is unable to adjust at least one input
because there is a fixed cost of some kind.
we think in terms of the short run not the long run
- EXAM WITH ACTUAL QUESTIONS AND VERIFIED ANSWERS |
GRADED A+ | LATEST UPDATE 2026/2027 | 100% GUARANTEED
SUCCESS!!
The main concept demonstrated in the production possibilities frontier is -
ANSWER-Opportunity cost
When country A has a lower opportunity cost of producing sugar relative to
country B, then country A is said to have - ANSWER-Comparative Advantage
A graph that shows the combinations of two goods that the economy can
produce given the available scarce resources and available technology is called
a - ANSWER-Production Possibilities Frontier
Assume a production possibilities frontier for pickup trucks and big Mac
hamburgers. The economy is producing 20 big Mac hamburgers and 65 pickup
trucks (point 20, 65). What is the opportunity cost of producing an additional
20 Big Mac hamburgers (point 40, 60)? - ANSWER-Five Pickup Trucks
The opportunity cost of an item is - ANSWER-whatever must be given up to
obtain the item.
Consider market for pork, suppose that price of beef, a substitute for pork,
increases. Because of the change in price of beef, the equilibrium price of
pork...? - ANSWER-Increases
Consider the market for pork, suppose that the price of beef, a substitute for
pork, increases. Because of this change in the price of beef, the equilibrium
,quantity of pork will...? - ANSWER-Increase because increase in price of beef
causes demand curve for pork to shift North East. B/c of this shift, the
equilibrium quantity of pork will increase.
Consider the market for pork. Suppose that 1) disposable income increases and
pork is a normal good, And 2) the price of hog feed decreases. Because of these
changes, the equilibrium price of pork is... - ANSWER-Indeterminate because
the increase in disposable income causes the demand curve for pork to shift
north east because pork is a normal good. The decrease in price of hog feed
causes the supply curve to shift to the south east. The net effect of these shifts
leaves us unable to say waht will happen to the equilibrium price of pork.
Consider the market for pork. Suppose that disposable income increases and
pork is a normal good and the price of hog feed decreases. The equilibrium
quantity of pork...? - ANSWER-Increases.
Suppose the price elasticity for demand for retail phone service in the US is
0.95. If the # of retail substitutes for retail telephone service increases, will the
price elasticity of demand become more elastic or more inelastic? -
ANSWERElastic. When the number of substitute products increases, the price
elasticity of demand will become more elastic. consumers become more
sensitive to price when they have more options to chose among.
True or False: the law of demand states that if the price of a good increases, CP,
then the quantity demanded of that good will increase. - ANSWER-False.
quantity demanded of that good will decrease.
Suppose the cross-price elasticity of demand for home heating oil with respect
to the price of natural gas is +0.6. This number tells us that home heating oil
and natural gas are substitute or compliment goods? - ANSWER-Substitute
goods. When the cross price elasticity is positive then they are substitutes.
,Consider the market for mustard which is a complement to hot dogs. Suppose
the price of hot dogs increase. What happens to the equilibrium price and
equilibrium quantity of the mustard market? - ANSWER-Equilibrium price
decreases and equilibrium quantity decreases. The price of hot dogs is an
independent variable in the demand function for mustard. This is because hot
dogs and mustard are complementary goods. Therefore, if the price of hot dogs
increases, then the demand curve for mustard shifts to the south-west. People
demand less mustard at every price when hot dogs are more expensive. In the
mustard market, the equilibrium price decreases and equilibrium quantity
decreases.
Consider the market for pork. Suppose that the price of hog feed, an input to
the production of pork, increases. Because of that change in the price of hog
feed, the equilibrium quantity of pork ...? - ANSWER-Decreases because the
increase in price of hog feed causes the supply curve for pork to shift NW. B/c
of this shift, the quantity of pork decreases.
Consider the market for pork. Suppose that disposable income increases and
pork is an inferior good. Because of that change in income, the equilibrium
price of pork...? - ANSWER-Decreases because the increase in disposable
income causes the demand curve for pork to shift south west, because pork is
an inferior good. because of this shift, the equilibrium price of pork decreases.
profit maximizing rule - ANSWER-a business maximizes profits when it produces
where the marginal revenue from selling another unit equals the marginal cost
of producing another unit.
Marginal Revenue=Marginal Cost
, Marginal cost - ANSWER-is equal to the change in the total cost that arises from
an extra unit of production. It is calculated by taking the change in total cost
and dividing it by the change in the quantity produced
=change in TC/change in Q
Long Run - ANSWER-a situation where the fixed costs (the inputs) become
variable. a time horizon long enough for the seller to adjust all inputs. If you
observe a business with no fixed costs, then it is in a long run state.
\when prices remain low for a very long period of time, then the business
moves into a long run decision mode. In the long run there are no fixed costs.
fixed costs - ANSWER-costs that do not vary with changes in the quantity
produced. what expenses must be paid even if production equals zero? variable
costs - ANSWER-costs that do vary with changes in the quantity produced
total cost - ANSWER-equals the sum of the fixed costs and variable costs
TC=VC+FC
average fixed cost - ANSWER-equals fixed cost divided by quantity produced
AFC= TC/Q
Marginal revenue - ANSWER-is the change in total revenue generated from an
additional unit sold. It is calculated by taking the change in total revenue
divided by the change in quantity sold
Short Run - ANSWER-a time horizon where some fixed costs exist.
is a time horizon within which a business is unable to adjust at least one input
because there is a fixed cost of some kind.
we think in terms of the short run not the long run
