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Number of Employees Total Production Marginal Product of Labor Marginal Revenue Product 0 0 0 1 18 18 2 30 12 3 41 11 4 46 5
If the price of the item is $10.00 per unit and the employees cost $100 each, how many employees should the firm hire to maximize their profit?
One employee
Four employees
Three employees
Two employees
CONCEPT
Output Optimization: Marginal Revenue Product 2
As a consumer's income increases, demand for this type of good decreases.
The statement above corresponds to which type of good?
8/10/
Page 2 of 13
A SouthCoast Clothing decides that five machines and 15 workers is the most efficient in production. 8/10/
Veblen good
Inferior good
Luxury good
CONCEPT
Types of Goods 3
Which of the following is true about the long run average cost curve?
The long run average cost curve can be found as the MC from above the shut down point onward.
The long run average cost curve is comprised of all the lowest points of each of the short run average cost curves because no firm will operate at a level of higher per-unit costs in the long run than in the short run.
The long run average cost curve cannot be equal to or lie below any short run average cost curve because in the short run all factors of production can be variable.
The long run average cost curve is shaped like a bell and rises because of economies of scale while falling because of diseconomies.
CONCEPT
Long-Run Supply Curve 4
Which of the following is an example of a constraint?
Peter's Place can serve 300 people in its banquet room, and often has to turn away large parties.
Sarah decides not to purchase an additional pair of Ugg boots because she already has two pairs at home.
Page 4 of 13
The curves are an example of consistent preferences.
If the curves are from the same rational individual, then they do not violate the assumptions of consumer choice theory.
The curves would represent two different individuals.
The curves are from the same rational individual.
CONCEPT
Consumer Choice Theory 8
Which of the following is true regarding contingent valuation?
An approach used to compare expenses and value-added when making a decision relative to the environment
An examination of healthcare costs that are incurred as a result of pollution
Seen when houses located in areas of less pollution have greater value
Used to evaluate individual preferences in order to place a value on the environment
CONCEPT
Assessing Costs of Waste and Pollution--Environmental Economics 9
Which statement below is NOT true regarding process mapping?
Almost all business practices and decisions have been documented in some way or another.
Process mapping is used for evaluating sustainable business solutions.
A process map is a visual representation of the stages in a process. Page 5 of 13
Process mapping forms a foundation for efficiency evaluation.
CONCEPT
Process Mapping--Efficiency 10
Last year, Paula's income was $2,000, and she went to vacation twice. This year, Paula's income increased to $3,000, and she went to vacation five times.
Determine the income elasticity using the midpoint formula.
CONCEPT
Income Elasticity 11
Which definition below defines perfectly elastic demand?
This is a situation in which a change in price will never change a consumer’s decision to buy a certain good.
This is the degree to which demand changes in response to a change of price.
A change in price of one good affects a consumer’s decision to purchase a different good.
Any change in price always results in a very significant change in demand.
Diseconomies of scale
Price effect
Break even point
CONCEPT
Revenue: Total, Marginal and Average 15
Determine which of the following is an example of opportunity cost.
How many times will I be able to wear this shirt before it falls apart or goes out of style?
If I take a second job, I will have more money, but less time to spend with my family.
With my current salary, I can only afford to spend $500/month on food.
We have a week of vacation. Let's go on a Mexican cruise.
CONCEPT
Decision Making Relationships: Rational Consumer 16
Which of the following is an intermediate good?
A tractor used by a farmer
pizza sold to a customer in a restaurant
A textbook used by a teacher in a classroom
Flour used to bake bread in a bakery
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Factor Markets 17
Which one of the answers listed is NOT a reason why businesses have been slow to adopt sustainable practices in regard to unemployment?
Businesses might lay off people in order to meet profitability in a given quarter.
Employment levels follow the business cycle.
Sustainable business practices mean larger profits in the long run.
Sustainable business practices often seem counterintuitive.
CONCEPT
Assessing Costs of Unemployment--Labor Economics 18
Which of the following corresponds with unemployment insurance claims?
Indicators collected by states for tax purposes
Coincident indicators that lets people know which industries might be hiring
Lagging indicator that firms might use to analyze what labor costs will be in the future
Leading indicators that firms might use to predict which part of the business cycle an economy is in
CONCEPT
Key Leading Indicators 19
A graph that shows the change in demand for a good when the price of its complementary good changes Page 10 of 13
Taxation and Subsidy (^) 8/10/
A graph that shows the change in demand for goods and services when income changes
CONCEPT
Utility Theory 21
Select the statement that is true about perfect competition.
Perfect competition is a simplified view of a market.
In perfect competition, firms have the power to set their own prices.
With perfect competition, information is withheld about the market.
There are many real-world examples of perfect competition.
CONCEPT
Perfect Competition 22
The price at which the consumer purchases the taxed good increases by less than the amount of the tax.
Who of the following bears more of the burden of this tax, assuming that demand is more elastic than supply?
Based on the given information, this is unclear
Both consumers and producers would equally share this tax burden
Consumers
Producers
CONCEPT
23 Page 11 of 13
Which of the following best describes externalities?
The result of politicians acting as utility maximizers
The result of information failure and hamper cost-benefit analysis
Third party costs or benefits that skew the correct market equilibrium
An example of a moral hazard
CONCEPT
Details on Regulatory Intervention and Market Failure 24
When a firm uses five machines, it can produce 600 units daily. A sixth machine allows the firm to product 880 units.
Which of the following is true regarding production?
The marginal product for the fifth machine is 600 and the average product is 120 units.
The marginal production for the sixth machine is 880 units and total production would be 1,480 units.
The marginal product for the sixth machine is 280 units and the average product is 147 units.
The total production for 11 machines would be 1,480 units with an average production of 164 units.
CONCEPT
Product: Total, Marginal, Average, and (Marginal) Revenue 25
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