IVY SOFTWARE MBA PREP WORKS FUNDAMENTALS OF
ECONOMICS EXAM NEWEST ACTUAL EXAM COMPLETE 300
QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) |ALREADY GRADED A+|| BRAND NEW!
1. 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?: 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 com- plementary 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.
2. In the WSJ article it was reported that Mitsubishi is seeking a buyer for
its U.S> operations, a move that may well signal the company's intent to exit
the world's largest car market. The potential move by Mitsubishi is a matter
of economies of scale or economies of scope?: Economies of scale. it is
trying to sell its U.S> operations because they have been losing money
for some time in the
U.S. market. By contracting its scale of operation, Mitsubishi believes
that it can turn its financial situation around.
3. Consider the following decision made by Old Century Power Company.
In electricity production, once electricity has been generated at a power
plant, distribution networks are needed to bring electricity to the customer.
Suppose Old Century Power Company has decided to build its own
electricity generat- ing plants and its own electricity distribution network. In
making this decision, OCPC has calculated that economies of scale or
economies of scope exist when electricity generation and electricity
distribution are integrated under unified ownership?: economies of scope.
OCPC must observe an advantage to having unified ownership of
electricity generation and electricity distribution. If two activities in the
production of a good are integrated under unified ownership for a cost
advantage, then economies of scope are present.
,4. 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: Production Possibilities Frontier
5. 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)?: Five Pickup Trucks
6. 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...?: Increases
7. 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 equilib- rium quantity of pork will...?: 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.
8. 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 ...?: 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.
9. 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...?: 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.
10. Consider the market for pork. Suppose that 1) disposable income
increas- es and pork is a normal good, And 2) the price of hog feed
decreases. Because of these changes, the equilibrium price of pork is...:
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.
, 11. 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...?: Increases.
12. 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?:
Elastic. 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.
13. 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.: False.
quantity demanded of that good will decrease.
14. 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?:
Substitute goods. When the cross price elasticity is positive then they
are substitutes.
15. The accountants hired by Costa law firm have calculated that at the
profit maximizing quantity, total fixed costs equal $56,791, total variable
costs equal
$113,555 and total revenue equals $112,000. Because of this info, Costa Law
firm decides:
A) to exit the industry
B) to shut down
C) decides to stay open because shutting down would be more expensive
D) decides to stay open because they are making an economic profit: B. to shut
down. the shutdown rule states that a business should shut down in the
short run only if total revenue is less than total variable costs. In this
case, total revenue is
$112,000 and total variable cost is $113,555. Because total variable cos
exceeds total revenue, CLF should shut down.
16. How can you tell if a business is operating in a perfectly competitive
market?: the marginal revenue from selling an additional unit does not
change as output increases. They are also known as a price taker. You
ECONOMICS EXAM NEWEST ACTUAL EXAM COMPLETE 300
QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) |ALREADY GRADED A+|| BRAND NEW!
1. 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?: 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 com- plementary 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.
2. In the WSJ article it was reported that Mitsubishi is seeking a buyer for
its U.S> operations, a move that may well signal the company's intent to exit
the world's largest car market. The potential move by Mitsubishi is a matter
of economies of scale or economies of scope?: Economies of scale. it is
trying to sell its U.S> operations because they have been losing money
for some time in the
U.S. market. By contracting its scale of operation, Mitsubishi believes
that it can turn its financial situation around.
3. Consider the following decision made by Old Century Power Company.
In electricity production, once electricity has been generated at a power
plant, distribution networks are needed to bring electricity to the customer.
Suppose Old Century Power Company has decided to build its own
electricity generat- ing plants and its own electricity distribution network. In
making this decision, OCPC has calculated that economies of scale or
economies of scope exist when electricity generation and electricity
distribution are integrated under unified ownership?: economies of scope.
OCPC must observe an advantage to having unified ownership of
electricity generation and electricity distribution. If two activities in the
production of a good are integrated under unified ownership for a cost
advantage, then economies of scope are present.
,4. 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: Production Possibilities Frontier
5. 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)?: Five Pickup Trucks
6. 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...?: Increases
7. 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 equilib- rium quantity of pork will...?: 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.
8. 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 ...?: 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.
9. 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...?: 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.
10. Consider the market for pork. Suppose that 1) disposable income
increas- es and pork is a normal good, And 2) the price of hog feed
decreases. Because of these changes, the equilibrium price of pork is...:
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.
, 11. 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...?: Increases.
12. 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?:
Elastic. 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.
13. 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.: False.
quantity demanded of that good will decrease.
14. 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?:
Substitute goods. When the cross price elasticity is positive then they
are substitutes.
15. The accountants hired by Costa law firm have calculated that at the
profit maximizing quantity, total fixed costs equal $56,791, total variable
costs equal
$113,555 and total revenue equals $112,000. Because of this info, Costa Law
firm decides:
A) to exit the industry
B) to shut down
C) decides to stay open because shutting down would be more expensive
D) decides to stay open because they are making an economic profit: B. to shut
down. the shutdown rule states that a business should shut down in the
short run only if total revenue is less than total variable costs. In this
case, total revenue is
$112,000 and total variable cost is $113,555. Because total variable cos
exceeds total revenue, CLF should shut down.
16. How can you tell if a business is operating in a perfectly competitive
market?: the marginal revenue from selling an additional unit does not
change as output increases. They are also known as a price taker. You
