AGEC 500 Final Exam Study Guide – Practice Questions, Flashcards &
Comprehensive Review
The inputs for a lawn mowing business are drivers and riding lawn mowers. A riding lawn
mower is only useful to the firm when it has a driver and vice versa. In this case, drivers and
riding lawn mowers are ____. - ✔✔Perfect compliments
Income elasticity for beef steak in the United States is 2.5. Assume the economy is improving
and analysts forecast that real consumer income next year will increase by 5%. The beef
industry should expect _____ next year. - ✔✔sell 12.5% more ground beef
Which of the following plots all the combinations of market bundles an individual consumer can
afford? - ✔✔budget line
Income elasticity for beef steak in the United States is 1.5. Assume the economy is in decline
and analysts forecast that real consumer income next year will decline by 5%. The beef industry
should expect _____ next year. - ✔✔sell 7.5% less steak (1.5*5)
Which of the following will directly cause a shift in market demand for frozen yogurt? - ✔✔A
change in real consumer income
If market price equals a firms _____ then the firm breaks even. - ✔✔ATC
Economic models are based on economic theories and attempt to __________ real-world
economic phenomena. - ✔✔explain or predict
Which of the following scenarios is consistent with a product that has an elastic own-price
elasticity of demand? - ✔✔if price increases, total revenue decreases
, Which of the following is a basic assumption of perfect competition? - ✔✔all firms are price
takers
Which of the following is a sunk cost for John Deere? - ✔✔money spent for research and
development
Market demand for car washes in a city was 30,000 in 2010 and, in the same year, real
consumer income was $20,000. In 2011, consumer income was $22,000 and 36,000 car washes
were demanded. Assuming no other factors changed in that time, the income elasticity for car
washes is about _____. - ✔✔2 (6000/2000*22000/36000)
Income elasticity for beef steak in the United States is 2.5. Assume the economy is declining and
analysts forecast that real consumer income next year will decrease by 5%. All else equal, the
beef industry should expect _____ next year. - ✔✔to sell 12.5% less steak
Which of the following is not a basic assumption of perfect competition? - ✔✔there are
barriers to entry into the market/all firms produce different products/products are
differentiated by advertising and branding
Which of the following would be a firms demand curve for labor? - ✔✔VMP of labor curve
A firm calculates their cost measures at their current level of output (q) and finds that MC =
$150, ATC = $150, AVC = $120. Which of the following do we know for certain? - ✔✔at the
current level of q, ATC is at a minimum
Which of the following plots all the combinations of input combinations a producer can
purchase for a fixed amount of money? - ✔✔isocost line
Producer surplus in the short run is _____________. - ✔✔Total Revenue Variable Costs
Comprehensive Review
The inputs for a lawn mowing business are drivers and riding lawn mowers. A riding lawn
mower is only useful to the firm when it has a driver and vice versa. In this case, drivers and
riding lawn mowers are ____. - ✔✔Perfect compliments
Income elasticity for beef steak in the United States is 2.5. Assume the economy is improving
and analysts forecast that real consumer income next year will increase by 5%. The beef
industry should expect _____ next year. - ✔✔sell 12.5% more ground beef
Which of the following plots all the combinations of market bundles an individual consumer can
afford? - ✔✔budget line
Income elasticity for beef steak in the United States is 1.5. Assume the economy is in decline
and analysts forecast that real consumer income next year will decline by 5%. The beef industry
should expect _____ next year. - ✔✔sell 7.5% less steak (1.5*5)
Which of the following will directly cause a shift in market demand for frozen yogurt? - ✔✔A
change in real consumer income
If market price equals a firms _____ then the firm breaks even. - ✔✔ATC
Economic models are based on economic theories and attempt to __________ real-world
economic phenomena. - ✔✔explain or predict
Which of the following scenarios is consistent with a product that has an elastic own-price
elasticity of demand? - ✔✔if price increases, total revenue decreases
, Which of the following is a basic assumption of perfect competition? - ✔✔all firms are price
takers
Which of the following is a sunk cost for John Deere? - ✔✔money spent for research and
development
Market demand for car washes in a city was 30,000 in 2010 and, in the same year, real
consumer income was $20,000. In 2011, consumer income was $22,000 and 36,000 car washes
were demanded. Assuming no other factors changed in that time, the income elasticity for car
washes is about _____. - ✔✔2 (6000/2000*22000/36000)
Income elasticity for beef steak in the United States is 2.5. Assume the economy is declining and
analysts forecast that real consumer income next year will decrease by 5%. All else equal, the
beef industry should expect _____ next year. - ✔✔to sell 12.5% less steak
Which of the following is not a basic assumption of perfect competition? - ✔✔there are
barriers to entry into the market/all firms produce different products/products are
differentiated by advertising and branding
Which of the following would be a firms demand curve for labor? - ✔✔VMP of labor curve
A firm calculates their cost measures at their current level of output (q) and finds that MC =
$150, ATC = $150, AVC = $120. Which of the following do we know for certain? - ✔✔at the
current level of q, ATC is at a minimum
Which of the following plots all the combinations of input combinations a producer can
purchase for a fixed amount of money? - ✔✔isocost line
Producer surplus in the short run is _____________. - ✔✔Total Revenue Variable Costs
