MBA 651 Final- Questions With All Correct
Answers
If widgets and gidgets are complements and both are normal goods, then an
increase in the demand for widgets will result from: correct answer -a
decrease in the price of gidgets.
An ad valorem tax shifts the supply curve: correct answer -by rotating it
counter-clockwise.
If firms expect prices to be higher in the future and the product is not
perishable, then: correct answer -the current supply curve shifts to the
left.
Jane pays the market price of $69 for a new pair of running shoes, even
though she would be happy to pay a maximum of $100 for the same pair of
shoes. This is an example of the concept of: correct answer -consumer
surplus.
In a competitive market, the market demand is Qd = 70 - 3P and the market
supply is Qs = 6P. A price ceiling of $4 will result in: correct answer -A
shortage of 34 units.
Suppose the demand for good X is given by Qdx= 10 -2 Px + Py + M. The price
of good X is $1, the price of good Y is $10, and income is $100. Given these
prices and income, how much of good X will be purchased? correct answer
-None of the above.
Suppose the demand for good X is given by Qdx= 20 - 4Px + 2Py + M. The price
of good X is $5, the price of good Y is $15, and income is $150. Given these
prices and income, how much of good X will be purchased? correct answer
-180
Suppose that supply increases and demand decreases. What effect will this
have on price and quantity? correct answer -none of the above.
Suppose the demand for good X is given by Qdx= 10 + ax Px + ay Py + aM M. If
aM is negative, then good x is: correct answer -an inferior good.
,Suppose X and Y are complements and demand for X is Q xd = a0 + aXPX +
aYPY + aMM + aHH. Then we know: correct answer -aY < 0.
Suppose good X is a normal good. Then a decrease in income would lead to:
correct answer -an inward shift of the demand curve.
A decrease in income will not lead to: correct answer -a movement along
the demand curve.
The demand for good X has been estimated by Q xd = 6 - 2Px + 5Py. Suppose
that good X sells at $3 per unit and good Y sells for $2 per unit. Calculate the
own price elasticity. correct answer --0.6.
Assume that the price elasticity of demand is -0.75 for a certain firm's product.
If the firm lowers price, the firm's managers can expect total revenue to:
correct answer -decrease
The demand for Cinnamon Toast Crunch brand cereal is: correct answer -
more elastic than the demand for cereal in general.
If quantity demanded for sneakers falls by 10% when price increases 25% we
know that the absolute value of the own-price elasticity of sneakers is:
correct answer -0.4.
When a demand curve is linear: correct answer -demand is inelastic at low
prices.
You are the manager of a popular shoe company. You know that the
advertising elasticity of demand for your product is .15. How much will you
have to increase advertising in order to increase demand by 10%? correct
answer -66.7%.
The demand for good X is estimated to be Q xd = 10,000 - 4PX + 5PY + 2M +
AX, where PX is the price of X, PY is the price of good Y, M is income and AX is
the amount of advertising on X. Suppose the present price of good X is $50, PY
= $100, M = $25,000, and AX = 1,000 units. Based on this information, good X
is: correct answer -a normal good.
,The management of Local Cinema has estimated the monthly demand for
tickets to belnQ = 22,328 - .41 lnP + 0.5 lnM - .33 lnA + 100 lnPvcr, where Q =
quantity of tickets demanded, P = price per ticket, M = income, A = advertising
outlay, and Pvcr = price of a VCR tape rental. It is known that P = $5.50, M =
$9,000, A = $900, and Pvcr = $3.00. Determine the own-price elasticity of
demand for movie tickets. correct answer --.41.
The lower the standard error: correct answer -the more confident the
manager can be that the parameter estimates reflect the true values.
The cross price elasticity of demand between goods X and Y is -3.5. If the price
of X decreases by 7%, the quantity demanded of Y will: correct answer -
increase by 24.5%.
Suppose the demand for good x is lnQ xd = 21 - .8 lnPx - 1.6 lnPy + 6.2 lnM + .4
lnAx . Then we know goods x and y are: correct answer -complements.
An increase in the price of good X will have what effect on the budget line on a
normal X-Y graph? correct answer -decrease the horizontal intercept.
A firm manager with vertical indifference curves (output on the horizontal
axis, profit on the vertical axis) views: correct answer -only output to be
"goods".
Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L
is the hours of leisure. What is the price to the worker of consuming an
additional hour of leisure? correct answer -$7.
The absolute value of the slope of the indifference curve is called the:
correct answer -marginal rate of substitution.
Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of
$100 per day, and he can use 24 hours per day. What is the maximum total
earnings the worker can earn in a day? correct answer -$292.
If you sell an inferior good, offering to sell gift certificates to those looking for
a gift may result in: correct answer -a greater quantity sold than if the
customer resorts to giving a cash gift.
, By the completeness property, if neither A > B nor A < B hold, then: correct
answer -The consumer is indifferent between A and B.
Given that income is $750 and PX = $32 and PY = $8, what is the market rate
of substitution between goods X and Y? correct answer --4
Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of
$100 per day, and he can use 24 hours per day. What is the market rate of
substitution between leisure and income? correct answer -$8.
If the slope of the indifference curve is steeper than the slope of the budget
line, and X is on the horizontal axis: correct answer -the consumer is
willing to give up more of good Y to get an additional unit of good X than is
necessary under the current market prices.
Suppose the own-price elasticity of demand for good X is -0.5, and that the
price of good X increases by 10%. What would you expect to happen to the
total expenditures on good X? correct answer -increase.
The supply function for good X is given by Q x s = 1,000 + PX - 5 PY - 2PW ,
where PX is the price of X, PY is the price of good Y and PW is the price of
input W. If the price of input W increases by $10, then the supply of good X:
correct answer -none of the above.
Good X is a normal good if an increase in income leads to: correct answer -
an increase in the demand for good X.
For the cost function C(Q) = 75 + 4Q + 2Q2, the marginal cost of producing 5
units of output is: correct answer -24
For the cost function C(Q) = 1000 + 14Q + 9Q2 + 3Q3, what is the marginal
cost of producing the fourth unit of output? correct answer -$230.
With a linear production function: correct answer -there is a perfect
substitutable relationship between all inputs.
For a cost function C = 100 + 10Q + Q2, the average variable cost of producing
20 units of output is: correct answer -30.
Answers
If widgets and gidgets are complements and both are normal goods, then an
increase in the demand for widgets will result from: correct answer -a
decrease in the price of gidgets.
An ad valorem tax shifts the supply curve: correct answer -by rotating it
counter-clockwise.
If firms expect prices to be higher in the future and the product is not
perishable, then: correct answer -the current supply curve shifts to the
left.
Jane pays the market price of $69 for a new pair of running shoes, even
though she would be happy to pay a maximum of $100 for the same pair of
shoes. This is an example of the concept of: correct answer -consumer
surplus.
In a competitive market, the market demand is Qd = 70 - 3P and the market
supply is Qs = 6P. A price ceiling of $4 will result in: correct answer -A
shortage of 34 units.
Suppose the demand for good X is given by Qdx= 10 -2 Px + Py + M. The price
of good X is $1, the price of good Y is $10, and income is $100. Given these
prices and income, how much of good X will be purchased? correct answer
-None of the above.
Suppose the demand for good X is given by Qdx= 20 - 4Px + 2Py + M. The price
of good X is $5, the price of good Y is $15, and income is $150. Given these
prices and income, how much of good X will be purchased? correct answer
-180
Suppose that supply increases and demand decreases. What effect will this
have on price and quantity? correct answer -none of the above.
Suppose the demand for good X is given by Qdx= 10 + ax Px + ay Py + aM M. If
aM is negative, then good x is: correct answer -an inferior good.
,Suppose X and Y are complements and demand for X is Q xd = a0 + aXPX +
aYPY + aMM + aHH. Then we know: correct answer -aY < 0.
Suppose good X is a normal good. Then a decrease in income would lead to:
correct answer -an inward shift of the demand curve.
A decrease in income will not lead to: correct answer -a movement along
the demand curve.
The demand for good X has been estimated by Q xd = 6 - 2Px + 5Py. Suppose
that good X sells at $3 per unit and good Y sells for $2 per unit. Calculate the
own price elasticity. correct answer --0.6.
Assume that the price elasticity of demand is -0.75 for a certain firm's product.
If the firm lowers price, the firm's managers can expect total revenue to:
correct answer -decrease
The demand for Cinnamon Toast Crunch brand cereal is: correct answer -
more elastic than the demand for cereal in general.
If quantity demanded for sneakers falls by 10% when price increases 25% we
know that the absolute value of the own-price elasticity of sneakers is:
correct answer -0.4.
When a demand curve is linear: correct answer -demand is inelastic at low
prices.
You are the manager of a popular shoe company. You know that the
advertising elasticity of demand for your product is .15. How much will you
have to increase advertising in order to increase demand by 10%? correct
answer -66.7%.
The demand for good X is estimated to be Q xd = 10,000 - 4PX + 5PY + 2M +
AX, where PX is the price of X, PY is the price of good Y, M is income and AX is
the amount of advertising on X. Suppose the present price of good X is $50, PY
= $100, M = $25,000, and AX = 1,000 units. Based on this information, good X
is: correct answer -a normal good.
,The management of Local Cinema has estimated the monthly demand for
tickets to belnQ = 22,328 - .41 lnP + 0.5 lnM - .33 lnA + 100 lnPvcr, where Q =
quantity of tickets demanded, P = price per ticket, M = income, A = advertising
outlay, and Pvcr = price of a VCR tape rental. It is known that P = $5.50, M =
$9,000, A = $900, and Pvcr = $3.00. Determine the own-price elasticity of
demand for movie tickets. correct answer --.41.
The lower the standard error: correct answer -the more confident the
manager can be that the parameter estimates reflect the true values.
The cross price elasticity of demand between goods X and Y is -3.5. If the price
of X decreases by 7%, the quantity demanded of Y will: correct answer -
increase by 24.5%.
Suppose the demand for good x is lnQ xd = 21 - .8 lnPx - 1.6 lnPy + 6.2 lnM + .4
lnAx . Then we know goods x and y are: correct answer -complements.
An increase in the price of good X will have what effect on the budget line on a
normal X-Y graph? correct answer -decrease the horizontal intercept.
A firm manager with vertical indifference curves (output on the horizontal
axis, profit on the vertical axis) views: correct answer -only output to be
"goods".
Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L
is the hours of leisure. What is the price to the worker of consuming an
additional hour of leisure? correct answer -$7.
The absolute value of the slope of the indifference curve is called the:
correct answer -marginal rate of substitution.
Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of
$100 per day, and he can use 24 hours per day. What is the maximum total
earnings the worker can earn in a day? correct answer -$292.
If you sell an inferior good, offering to sell gift certificates to those looking for
a gift may result in: correct answer -a greater quantity sold than if the
customer resorts to giving a cash gift.
, By the completeness property, if neither A > B nor A < B hold, then: correct
answer -The consumer is indifferent between A and B.
Given that income is $750 and PX = $32 and PY = $8, what is the market rate
of substitution between goods X and Y? correct answer --4
Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of
$100 per day, and he can use 24 hours per day. What is the market rate of
substitution between leisure and income? correct answer -$8.
If the slope of the indifference curve is steeper than the slope of the budget
line, and X is on the horizontal axis: correct answer -the consumer is
willing to give up more of good Y to get an additional unit of good X than is
necessary under the current market prices.
Suppose the own-price elasticity of demand for good X is -0.5, and that the
price of good X increases by 10%. What would you expect to happen to the
total expenditures on good X? correct answer -increase.
The supply function for good X is given by Q x s = 1,000 + PX - 5 PY - 2PW ,
where PX is the price of X, PY is the price of good Y and PW is the price of
input W. If the price of input W increases by $10, then the supply of good X:
correct answer -none of the above.
Good X is a normal good if an increase in income leads to: correct answer -
an increase in the demand for good X.
For the cost function C(Q) = 75 + 4Q + 2Q2, the marginal cost of producing 5
units of output is: correct answer -24
For the cost function C(Q) = 1000 + 14Q + 9Q2 + 3Q3, what is the marginal
cost of producing the fourth unit of output? correct answer -$230.
With a linear production function: correct answer -there is a perfect
substitutable relationship between all inputs.
For a cost function C = 100 + 10Q + Q2, the average variable cost of producing
20 units of output is: correct answer -30.
