Ch 1 5 MGE Quiz Question 1 1 Answer 1 points Question 2 1 Answer 1 points Question 3 1 Answer If the absolute value of the own price elasticity of steak is 0 4 a decrease in price will lead to a reduction in total revenue an increase in total revenue no change in total revenue none of the statements associated with this question are correct Assume that the price elasticity of demand is 2 for a certain firm s product If the firm raises price the firm s managers can expect total revenue to Decrease Increase Remain constant Either increase or remain constant depending upon the size of the price increase When marginal revenue is zero total revenue will increase when price increases is maximized will decrease when price decreases will decrease as quantity decreases The price elasticity of demand is 2 0 for a certain firm s product If the firm raises price the firm manager can expect total revenue to decrease increase remain constant either increase or remain constant depending upon the size of the price increase A price increase causes a consumer s real income to decrease increase remain unchanged vary along the budget line 1 points Question 4 1 Answer 1 points Question 5 1 Answer 1 points Question 6 1 If income increases then the Answer budget line rotates counter clockwise budget line rotates clockwise budget line shifts to the right opportunity set contracts 1 points Question 7 1 Answer 1 points Question 8 1 Answer 1 points If the price of good X increases what will happen to the budget line It will shift outward It will become steeper It will become flatter It will shift inward The budget set defines the combinations of good X and Y that are desirable to the consumer are affordable to the consumer maximizes consumer s utility maximizes supplier s profit The possible goods and services a consumer can afford to consume represents the consumer behavior consumer preferences consumer status consumer opportunities Question 9 1 Answer 1 points Question 10 1 1 points Question 11 1 Answer The marginal cost curve Answer lies always below the average total cost curve ATC lies always above the average variable cost curve AVC intersects the ATC and AVC at their maximum points intersects the ATC and AVC at their minimum points Changes in the price of an input cause Isoquants to become steeper Slope changes in the isocost line Parallel shifts of the isocost lines Changes in both the isoquants and isocosts of equal magnitude Economies of scale exist whenever long run average costs increase as output is increased decrease as output is increased remain constant as output is increased none of the statements associated with this question are correct 1 points Question 12 1 Answer 1 points Question 13 1 Average fixed cost Answer 1 points Question 14 1 initially declines reaches a minimum and then begins to increase as output increases increases continuously as output increases declines continuously as output is expanded keeps constant as output is expanded Suppose the long run average cost curve is U shaped When LRAC is in the increasing stage there exist Accounting costs generally understate economic costs Accounting profits generally overstate economic profits In the absence of any opportunity costs accounting profits equal economic profits All of the statements associated with this question are correct Answer economies of scope diseconomies of scope economies of scale diseconomies of scale Which of the following is are true 1 points Question 15 1 Answer 1 points Question 16 1 Answer 1 points Question 17 Which of the following is the main goal of a continuing company to maximize the value of the firm to minimize costs to improve product quality to enhance the service to its customers 1 Answer 1 points Question 18 1 Answer 1 points Question 19 1 Answer The opportunity cost of receiving ten dollars in the future as opposed to getting that ten dollars today is the foregone interest that could be earned if you had the money today the taxes paid on any earnings the value of 10 relative to the total income of that person the value of 10 relative to the total income of all persons Good X is a normal good if an increase in income leads to an increase in the supply for good X an increase in the demand for good X a decrease in the demand for good X a decrease in the supply for good X Suppose that good X is a substitute for good Y Then an increase in the price of good Y leads to an increase in the demand of good X a decrease in the demand of good X a decrease in the supply of good X an increase in the supply of good X 1 points Question 20 1 Answer shift rightward shift leftward become flatter become steeper Graphically an increase in the number of vegetarians will cause the demand curve for Tofu a meat substitute to