The income elasticity of demand for restaurant meals is 1.61. So
A) if income increases by 16.1 percent, the quantity demanded of restaurant meals will increase by 10 percent.
B) if income increases by 10 percent, the quantity demanded of restaurant meals will increase by 16.1 percent.
C) restaurant meals are an income elastic normal good.
D) Both answers B and C are correct.
Ques. 2The table above shows the demand and costs for a single-price monopolist. The firm will
A) maximize profit by producing 3 units.
B) maximize profit by producing 2 units.
C) operate on the inelastic portion of its demand curve.
D) operate on the unit elastic portion of its demand curve.
Ques. 3As output increases, average fixed cost
A) always decreases.
B) increases, then decreases.
C) decreases, then increases.
D) remains constant.
Ques. 4Doug's Dog Grooming is a perfectly competitive firm charging 5 per dog grooming.
Doug's Dog Grooming has the total and marginal product of labor schedules in the above table and can hire workers from a perfectly competitive labor market for 15 per hour. What is the value of marginal product of the third worker? A) 5
B) 25
C) 15
D) 375
Ques. 5If the Fed wants to lower the U.S. exchange rate, what action should it take in the foreign exchange market? Why does the action lower the exchange rate?
What will be an ideal response?
Ques. 6Looking at historical evidence for the United States and other countries, which of the following are TRUE?
I. There is a correlation between the growth rate of the quantity theory of money and the growth rate of real GDP.
II. There is a correlation between the growth rate of the quantity theory of money and the inflation rate.
A) Only I is true.
B) Only II is true.
C) Both I and II are true.
D) Neither I or II is true.
Ques. 7Which of the following statements regarding a profit-maximizing monopolistically competitive firm is NOT true?
A) The MR curve lies below the demand curve.
B) The firm produces the quantity at which the MR curve intersects the MC curve.
C) The MC curve intersects the ATC curve at the ATC curve's lowest point.
D) The firm's price equals the price at which the MR curve intersects the MC curve.
Ques. 8Coca Cola and Pepsi, which together account for about 85 percent of the soft drink market, are best described as being in
A) a monopoly market.
B) an oligopolistic market.
C) a perfectly competitive market.
D) a monopolistically competitive market.
Ques. 9There are two can companies, American and National, which have entered into a collusive agreement. The payoff matrix of economic profits is above. If both firms cheat on the collusive agreement, what amount of economic profit is made by American?
A) 0
B) 3,000
C) 4,000
D) -2,000
Ques. 10The efficient quantity of output of a product with external costs of production is
A) where the demand curve and the producer's supply curve intersect.
B) where the marginal social cost curve and marginal social benefit curve intersect.
C) as low as possible.
D) zero.
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