Question 1. Regarding utility:
a. the total satisfaction one gets from one's consumption is called marginal utility.
b. if you buy one Big Mac that gives you marginal utility of 400 and a second one that gives you marginal utility of 250, total utility of eating two Big Macs is 650.
c. according to the law of diminishing marginal utility the more we consume of something, the smaller the total satisfaction received from that good.
d. total utility received from the consumption of a good will be maximized when marginal utility is at a maximum.
Question 2. Prices for artificial flowers have fallen by 10 percent and the quantity the public demands has risen by 10 percent. This is an example of __________ demand.
a. elastic
b. inelastic
c. unit elastic
d. inverse
Question 3. Which of the following will cause total revenue earned by swimsuit producers to rise?
a. The demand is price elastic, and the price rises.
b. The price falls, and demand is inelastic.
c. Demand is reduced because consumers learn of new hazards of exposure to sunlight.
d. The population along both the East and West Coasts increases dramatically.
Question 4. Regarding elasticities:
a. the more substitutes, the more elastic the demand
b. the number of James Bond is 008
c. with elastic demand, a rise in price increases total revenue.
d. firms have a strong incentive to separate out people with more elastic demand and charge them a higher price.
Question 5. If you are an economist consulting with management as to how to increase revenue, you would most likely recommend:
a. raising prices knowing that demand is elastic.
b. raising prices knowing that demand is inelastic.
c. lowering prices knowing that demand is elastic.
d. lowering prices knowing that demand is inelastic.
Question 6. Regarding accounting profit and economic profit:
a. economic profit = total revenue - total cost.
b. a calculation for economic profit is required when filling out an income tax return.
c. accounting profit includes owners' opportunity costs while economic profit does not.
d. economic profit = explicit and implicit revenue - explicit and implicit cost.
Question 7. The long run:
a. refers to a production planning period of longer than one year.
b. typically refers to the period of time in which the firm has sufficient time to change the amounts of any of its inputs.
c. means all inputs are variable.
d. means all costs are fixed.
Question 8. The short run:
a. refers to a production planning period of less than one year.
b. typically refers to the period of time in which the firm has sufficient time to change the amounts of only some of its inputs.
c. means all inputs are variable.
d. means all costs are fixed.
Question 9. ___________________ is the increase (decrease) total cost from increasing (or decreasing) the level of output by one unit.
a. Average variable cost.
b. Average fixed cost.
c. Average cost.
d. Marginal cost.
Question 10. A firm is producing 100 units of output at a total cost of $800. The firm's average variable cost is $5 per unit. The firm's:
a. marginal cost is $8.
b. total variable cost is $300.
c. average fixed cost is $3.
d. average total cost is $500.