ECO 550 Week 3 Quiz 2http://homeworkfox.com/tutorials/economics/43 55/eco-550-week-3-quiz-2/Economics - General Economics1. For an inferior good:the income elasticity is positive.the income elasticity if negative.the income elasticity is zero.the income elasticity is unity.Question 21. If cheese spreads and butter are substitutes, an increase in the price of butter will:shift the demand curve for cheese spreads upward.shift the demand curve for cheese spreads downward.shift the demand curve for butter upwards.shift the demand curve for butter downward.Question 31. As observed in China’s steel appliance market, the rise in the price of refrigerators resulted:solely from an increase in the demand for refrigerators.from an increase in the demand for steel from all appliance industries.from a shortage of steel in the world markets.from an increase in the price of steel that was the result of increased demand for refrigerators.Question 41. Bankers supported the Federal Reserve Board’s Regulation Q because:it allowed them to charge lower interest rates on loans.
it protected them from money market volatilities.it increased the demand for loanable funds in the market.it allowed them to borrow at a low rate of interest and lend out at a high rate of interest.Question 51. The own-price elasticity of demand is defined as:the ratio of a change in quantity demanded and the change in price.the ratio of the percentage change in quantity demanded to the percentage change in price.the ratio of the percentage change in quantity demanded to the percentage change in input prices.the ratio of a change in output and the change in input usage.Question 61. A tradesman who purchases diamonds in a country where the price is low and sells them in anothercountry where the price is high, can be said to be practicing:arbitrage.speculation.derivatives trading.forecasting.Question 71. An affordable housing law will affect a city’s housing prices only if:the demand for houses in the city is downward sloping.the demand for houses in the city is almost horizontal.the demand for houses in the city is almost vertical.the demand for houses in the city is backward bending.Question 81. The area above the supply curve and below the market price represents:the consumer surplusthe producer surplus.
the deadweight loss of the producer.the deadweight loss of the consumer.Question 91. A perfectly elastic demand curve will:be a vertical straight line.be a downward sloping straight line.be a horizontal straight line.be an upward sloping straight line.Question 101. The contact points where the terms of forward contracts are set are known as:the underlying markets.the derivative markets.the over-the-counter markets.the futures exchange.Question 111. Suppose a commodity market is initially in equilibrium. An increase in the nation’s skilled laborforce then lowers the marginal cost of producing each unit of output. Which of the following changeswill be observed?The demand curve will shift upwardThe supply curve will shift downwardThe demand curve will shift downwardThe supply curve will shift upwardQuestion 121. An increase in the price of sodium carbonate, a chemical compound used in detergents, will:increase the quantity of detergents demanded.decrease the quantity of detergents demanded.
decrease the demand for detergents.increase the demand for detergents.Question 131. Which of the following commodities can be considered as an inferior good?Dwelling in a small apartment located in a suburbWashing clothes in a washer at homeEating out at an upscale restaurantSpending vacations at exotic locationsQuestion 141. A demand curve is said to be inelastic if:ED = 1ED = 0ED> 1ED< 1Question 151. An increase in the supply of oranges in a town drives down its price by 5 percent. Which of thefollowing changes will be observed in the market?The demand for oranges will decrease.The demand for oranges will increase.The quantity of oranges demanded will increase.The quantity of oranges demanded will decrease.Question 162. Refer to Figure 4-2. The area EFGH is:Figure 4-2The following figure shows the cost curves of a firm producing good X.
Answerthe loss incurred by the firm when market price is $3.5.the profit earned by the firm when the market price is $3.5.the loss incurred by the firm when the market price is $5.the revenue earned by the firm when the market price is $5.Question 172. The greater the curvature of the isoquant:the greater the degree of substitutability between the inputs.the lower the possibility of substitution between inputs.the higher the impact of a change in relative prices of inputs.the lower the prices of inputs.Question 182. Investments with _____ risk usually carry a _____ return.higher; lowerlower; higherzero; highhigher; higher2 pointsQuestion 192. The introduction of new technology and changes in organization are:likely to shift the LRAC curve.unlikely to help in the short-run.likely to shift the SRAC upward.unlikely to affect a firm’s cost curves in the long-run.
Question 202. You decide that it is time to buy a big family car. The opportunity cost you consider is:the cost of the car.the increase in comfort for your family while traveling.the return this money would have earned if it was invested otherwise.the inconvenience you and your family are bearing on account of your old car.Question 212. Let the marginal product of capital (MPK ) be 6; the marginal product of labor (MPL) be 2; the priceof labor is given by $10. What will be the price of capital such that the isocost and the isoquant aretangent to each other?$30$3$60$6Question 222. _____ is the locus of the minimum points of various short-run average cost curves depictingdifferent plant sizes.Long-run marginal costExpansion pathLong-run average costIsocostQuestion 232. A manufacturer of towels finds that his returns to scale are constant. Which of the followingconclusions can be drawn?The long-run total cost curve is horizontal.The long-run average cost curve is horizontal.The long-run total cost curve is downward sloping.
The long-run average cost curve is downward sloping.Question 242. The production function shows:the total cost incurred to produce a certain level of output.the changes in cost incurred as output level varies.the relationship between inputs used and output produced.the impact of a change in production on the firm’s revenues.Question 252. A firm uses two inputs, labor (L) and capital (K) in the production of umbrellas. It can invest$50,000 in the purchase of the two inputs annually. The firm hires 5 units of capital at $1,000 per unit.If the going annual wage rate is $4,500, calculate the number of workers employed by the firm.(Assume that the firm spends the entire budget on K and L.)105159Question 262. An isocost line depicts:the minimum cost required to produce a certain level of output, given input prices.the input combination to produce a certain level of output.the input combinations that satisfy a budget constraint, given input prices.the maximum output that can be produced by a firm given its budget constraint.2 pointsQuestion 272. The gap between average total cost and average variable cost:is constant at all ranges of output.is high at high levels of production.
declines as output expands.depends on the production technology.Question 282. Jeff owns a garage and has 3 mechanics to help him. With the tools used being fixed in the shortrun, his production function is given by 5 + , where L is the number of mechanics and Y is the numberof cars they can fix. If Jeff hires a fourth mechanic, what will be the marginal product of the newmechanic hired?111327Question 292. At outputs less than the minimum of average variable cost:marginal cost is greater than average variable cost.marginal cost is less than average variable cost.marginal cost is equal to average variable cost.marginal cost is parallel to average variable cost.Question 302. In an industry characterized by a natural monopoly, which of the following characteristics will beobserved?The long-run average cost curve will be upward sloping.The market price of the product will be very low.Competition is both impossible and inefficient.Number of producers operating in this market will be low.