IVY SOFTWARE MBA PREPWORKS
FUNDAMENTALS OF ECONOMICS
EXAM
IVY SOFTWARE MBA PREPWORKS FUNDAMENTALS OF ECONOMICS EXAM |
ACCURATE ANSWERS
The main concept demonstrated in the production possibilities frontier is - accurate
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 - accurate 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 - accurate
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)? - accurate answer✅✅five pickup trucks
The opportunity cost of an item is - accurate 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...? -
accurate 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...? - accurate 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 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 ...? - accurate 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...? - accurate 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.
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... - accurate 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...? - accurate 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? - accurate
answer✅✅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.
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. - accurate 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? - accurate 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? - accurate 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.
Profit maximizing rule - accurate 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 - accurate 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
Marginal revenue - accurate 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 - accurate 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
Long run - accurate 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.
FUNDAMENTALS OF ECONOMICS
EXAM
IVY SOFTWARE MBA PREPWORKS FUNDAMENTALS OF ECONOMICS EXAM |
ACCURATE ANSWERS
The main concept demonstrated in the production possibilities frontier is - accurate
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 - accurate 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 - accurate
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)? - accurate answer✅✅five pickup trucks
The opportunity cost of an item is - accurate 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...? -
accurate 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...? - accurate 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 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 ...? - accurate 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...? - accurate 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.
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... - accurate 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...? - accurate 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? - accurate
answer✅✅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.
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. - accurate 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? - accurate 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? - accurate 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.
Profit maximizing rule - accurate 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 - accurate 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
Marginal revenue - accurate 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 - accurate 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
Long run - accurate 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.
