Suppose during a week a store sold 100 dress shirts of a particular brand when p
ID: 1094387 • Letter: S
Question
Suppose during a week a store sold 100 dress shirts of a particular brand when price was $120.00 In order to clear the inventory, the store declared a sale "buy one get one free". As a result, the store sold 300 dress shirts in the following week.
(a). Calculate elasticity of demand. You must define elasticity of demand and show your work
(b). Interpret your result. (Points : 10)
Question 2. 2. Define progressive, regressive and proportional tax with examples. (Points : 10)
Question 3. 3. With appropriate example, explain the shut down decision of a firm. (Points : 10)
Question 4. 4. With appropriate examples, explain change in quantity demanded and change in demand. (Points : 10)
Question 5. 5. Price elasticity of demand is related to (Points : 2)
price of inputs
level of technology
price of a product and its quantity demanded
quantity of the good supplied
Question 6. 6. One of the "other things" held constant in defining the Law of Demand is (Points : 2)
Technology
Price of inputs
Price of outputs
Price of related goods
Question 7. 7. The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to ________ and demand is described as (Points : 2)
0.2; inelastic
5; inelastic
0.2; elastic
5; elastic
Question 8. 8. The income elasticity of demand of good y is 1.23 Good Y is (Points : 2)
a complementary good
a substitute good
a normal good
an inferior good
Question 9. 9. If the income elasticity of demand for a good is negative, the good is said to be: (Points : 2)
an inferior good
a substitute good.
a normal good.
a positive good.
Question 10. 10. When a public transit system (such as a subway or bus line) raises its fares, it may experience an increase in total revenue. This suggests that demand is: (Points : 2)
unstable.
price-inelastic
price-elastic
price unit-elastic
Question 11. 11. After eating six chocolate candy bars in ten minutes, Jody says, "You would have to pay me to eat another chocolate candy bar!" This statement best illustrates (Points : 2)
the law of demand.
the substitutability among goods.
the law of diminishing marginal utility.
that chocolate candy bars are an inferior good.
Question 12. 12. Which of the following is an implicit cost of the business? (Points : 2)
wages paid to part-time employees
the job offer you did not accept at a local catering service
bread, meat, and vegetables used to produce the items on your menu
your monthly utility bill.
Question 13. 13. To maximize her grade in Physics, Stacey should study until (Points : 2)
her marginal cost of studying begins to increase
her marginal benefit of studying begins to decrease
her marginal benefit of studying equals her marginal cost of studying
her marginal cost of studying reaches zero.
Question 14. 14. Accountants use only ________ costs in their computations of short-run total cost. (Points : 2)
opportunity
implicit
explicit
variable
Question 15. 15. Sunk costs (Points : 2)
have no impact on marginal cost
are the losses associated with failed business ventures.
is a short-run phenomenon
is a long-run phenomenon
Question 16. 16. The relationship between an individual's consumption bundle and utility is called a: (Points : 2)
demand function.
production function.
consumption function.
utility function
Question 17. 17. While eating banana every morning with breakfast, you discover that the marginal benefit of eating banana is greater than the marginal cost You then conclude: (Points : 2)
you will be better off if you eat banana every morning
you will be no better off and no worse off from eating banana
you will be worse off if you eat one more banana
the total cost of eating banana will be more than the total benefit of eating it
Question 18. 18. You own a small deli that produces sandwiches, soups, and other items for customers in your town. Which of the following is a fixed input for the production function at your deli? (Points : 2)
the dining room where customers eat their meals.
the loaves of bread used to make sandwiches.
the cans of tomato sauce used to make soups.
the employees hired to help make the food.
Question 19. 19. Use the table below to answer the following question.
Units
Total Fixed Cost
Total Variable
of Output
(dollars)
Cost (dollars)
1
150
25
2
150
48
3
150
70
4
150
100
What is the marginal cost of producing the third unit of output?
(Points : 2)
$22
$23.33
$73.33
This cannot be determined from the data.
Question 20. 20. Consumer's surplus is attained at the point where (Points : 2)
price equals quantity
demand equals supply
the budget line touches an indifference curve
market price is less than demand price
Question 21. 21. Demand price is (Points : 2)
the minimum price a consumer is willing to pay
the maximum price a consumer is willing to pay
the market price a consumer is willing to pay
the equilibrium price a consumer is willing to pay
Question 22. 22. Producer's surplus surplus is (Points : 2)
demand price minus supply price
demand price plus supply price
demand price plus market price
market price minus supply price
Question 23. 23. Supply price is (Points : 2)
the lowest price a supplier is willing to accept
the highest price a supplier is able charge for the product
equal to the market price
market price minus lowest price
Question 24. 24. The cross-price elasticity of demand of X and Y is 1.77. X and Y are (Points : 2)
complementary goods
substitute goods goods
normal goods
inferior goods
Suppose during a week a store sold 100 dress shirts of a particular brand when price was $120.00 In order to clear the inventory, the store declared a sale "buy one get one free". As a result, the store sold 300 dress shirts in the following week.
(a). Calculate elasticity of demand. You must define elasticity of demand and show your work
(b). Interpret your result. (Points : 10)
Explanation / Answer
1.
Elasticity of demand refers to the demand responsiveness of the product to changes in its price.
Since the quantity demanded of the good increases after the offer at the same price, the demand is completely elastic in nature.
2.
Progressive tax: tax where lower-income entities pay a lower fraction of their income in taxes than do higher-income entities
Regressive tax: tax where lower-income entities pay a higher fraction of their income in taxes than do higher-income entities
Proportional tax: tax where everyone, regardless of income, pays the same fraction of income in taxes
3.
A firm decides to shut down in the long run only when it finds it hard to cover even its variable costs.
4.
Change in demand: Shift in demand curve
Reason: Change in no. of consumers, consumer income, price of substitute and complementary goods
Change in quantity demanded: Movement along the demand curve
Reason: Change in price
5.
Price of a product and its quantity demanded
6.
Price of related goods
7.
0.2, inelastic
8.
Normal good
9.
Inferior good
10.
Price elastic
11.
The law of diminishing marginal utility.
12.
The job offer you did not accept at a local catering service
13.
Her marginal benefit of studying equals her marginal cost of studying
14.
Explicit
15.
Have on impact on marginal cost
16.
Utility function
17.
You will be better off if you eat banana every morning
18.
The dining room where customers eat their meals
19.
22 (i.e. 70-48)
20.
Market price is less than demand price
21.
The maximum price a consumer is willing to pay
22.
Market price minus supply price
23.
The lowest price a supplier is willing to accept
24.
Substitute goods