GCU ECN601 Exam 1

GCU ECN601 Exam 1

GCU ECN601 Exam 1

Exam 1 ECN 601

1. An example of a
price floor is:

a. Minimum wages

2. Use the table
provided to answer the following question. If hiring the fourth worker
increases total product by 50 units and the price of each unit is $15:

a. he firm
should hire the fourth worker as MR>MC.

In an oligopoly, firms will tend to compete on the basis of
price.

4. A car dealership
union negotiates a contract that dramatically increases the salaries of all
salesmen. If one of the salesmen is thinking of changing careers to be a
hardware salesman, his opportunity cost:

a. Of becoming a
hardware salesman would increase

5. If the
cross-price elasticity of demand between two goods is negative, then:

a. The two goods
are substitutes.

6. Jim saw a
decrease in the quantity demanded for his firm’s product from 8,000 to 6,000
units per week when he raised the price of the product from $200 to $250. What
is Jim’s own price elasticity of demand?

a. 1.29

7. A business
produces 5,000 units per month. It spends $12,000 on raw materials. It pays
wages of $20,000. Other costs include $50,000 for rent, paid by the month. In
order to break even, the selling price per unit will have to be:

a. 16.40

8. Use the table
provided to answer the following question. If the firm hires five workers, the
average cost equals:

9. An increase in
the price of a complement shifts the demand curve to the:

10. An increase in the price of a substitute shifts the
demand curve to the:

11. A buyer values a house at $525,000 and a seller values
the same house at $485,000. If sales tax is 8% and is levied on the seller,
then what would be the lowest price at which the seller would be willing to
sell?

a. $523,800

12. Peter’s Pizzeria sells both pizzas and soda. It wants to
increase the sales of its pizzas. Assuming that the pizza and the sodas are
complements, which of these strategies can it employ?

a. Both B and C

13. The difference between the minimum price the producer is
willing to accept and the price the producer actually receives for a product is
referred to as:

a. Sellers surplus
or market surplus

14. Use the table provided to answer the following question.
What is the marginal revenue from producing the fourth unit?

a. 20

15. A firm sells 1,000 units per week. It charges $15 per
unit, the average variable costs are $10, and the average fixed costs are $25.
In the long run, the firm should:

a. Continue
operating, as the firm is covering all the variable costs and some of the fixed
costs.

16. At a price for which quantity demanded exceeds quantity
supplied, a __________ is experienced, which pushes the price __________ toward
its equilibrium value.

a. Shortage; upward

17. Use the table provided to answer the following question.
If the firm hires eight workers, the total fixed costs is:

a. 6200

18. The government decided to reduce taxes on fast-food to
increase tax revenue. The government assumes that fast-food products have:

a. An elastic
demand

19. Which of the following describes a firm?

a. All of the above

20. Price ceilings cause:

a. All of the above

21. Which of the following factors would shift the supply
curve for ice cream to the right?

a. Not sure maybe A
and C

22. A company invested $400,000 in a technology that reduced
the overall costs of production by reducing their cost per unit from $2 to
$1.85. Later, a manager has an opportunity to outsource production to another
company at a cost per unit of $1.75. If you are the manager, you:

a. Both A and C

23. In general, the smaller the price elasticity:

a. The smaller the
responsiveness of quantity to changes in price.

24. A firm sells 1,000 units per week. It charges $70 per
unit, the average variable costs are $25, and the average fixed costs are $65.
In the short run, the firm should:

a. Continue
operating, as the firm is covering all the variable costs and some of the fixed
costs.

25. Use the table provided to answer the following question.
How many units should the profit maximizing firm produce?

a. C and B because
both would be 60

26. A manager invests $20,000 in equipment that would help
the company reduce it’s per unit costs from $15 to $12. He expects the
equipment to be in use for the next seven years. After two years, he realizes
that if he outsourced the production, the unit cost would be $7 instead. At
this point what should the senior manager do?

a. Write off the
equipment as sunk cost and allow for outsourcing since it is cheaper

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