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1 Other things held

constant, consumer surplus increases as:

The price of a good decreases.

The price of a good increases.

The supply curve shifts to the left.

None of the above.

2. When there are

diseconomies of scope between two products that are separately produced by two

firms, merging into a single firm can:

accomplish

an increase in sales.

accomplish

a reduction in costs.

lead to

an increase in cost.

lead to

a reduction in sales.

3. For a cost function C = 100 + 5Q + 2Q2, the average

variable cost of producing 10 units of output is:

10.

25.

35.

None of

the answers are correct.

4. Other things held

constant, producer surplus decreases as:

The price of a good decreases.

The price of a good increases.

The demand curve shifts upward.

None of the above.

5. Managerial

economics:

helps

managers with day-to-day decisions.

helps

managers with long-term decisions.

is

valuable to the manager of a not-for-profit organization.

All of

the above statements are correct.

6. The change in benefits that arises from a one-unit change

in quantity is the:

marginal

net benefits.

marginal

benefits.

total

net benefits.

variable

benefits.

7. Economic profits

are:

the

same as accounting profits.

accounting

profits minus implicit costs.

the

same as total revenue.

total

profits of the economy as a whole.

8. A curve that defines the minimum average cost of

producing different levels of output (allowing for optimal selection of all

variables of production) is:

long-run

average cost curve.

long-run

variable cost curve.

short-run

average variable cost curve.

short-run

variable cost curve.

9. Other things held

constant, consumer surplus decreases as:

The

price of a good decreases.

The

price of a good increases.

The

supply curve shifts to the right.

None of

the above.

10 Suppose the cost

function is C(Q) = 100 + Q ? 2Q2 + 2Q3. What are the fixed costs?

$4

$2

$100

1 â 4Q

+ 6Q2

11. Given the linear

production function Q = 2K + 10L, if Q = 2,000 and L = 100, how much capital is

utilized?

500

units

800

units

600

units

1,000

units

12. Graphically, an

increase in advertising will cause the demand curve to:

become

steeper.

shift

rightward.

become

flatter.

shift

leftward.

13. Consider a market

characterized by the following inverse demand and supply functions: PX = 30 â

3QX and PX = 10 + 2QX. Compute the surplus consumers receive when a $24 per

unit price floor is imposed on the market.

$0.

$12.

$24.

$6.

14. When the

government imposes a price ceiling above the market price, the result will be

that:

surpluses

occur.

shortages

become a problem.

supply

and demand will shift up to the new equilibrium.

a price

floor set above the equilibrium price will have no effect on the market

equilibrium

.

15. Consumer?producer

rivalry happens because:

consumers want to negotiate low prices, while producers want

to negotiate high prices.

consumers want to negotiate high prices, while producers

want to negotiate low prices.

consumers’ high valuation and producers’ low production cost

of a good.

producers’ high production cost and consumers’ low valuation

of a good.

16. $20 today is

worth _____ than $20 in the future, because:

more; the foregone interest that could be earned if you had

the money today.

less; the foregone interest that could be earned if you had

the money later.

more; of inflation concerns.

less; of inflation concerns.

17 The demand for

good X has been estimated to be lnQxd = 100 ? 3 ln PX + 7 ln PY + 5 ln M. The

income elasticity of good X is:

â3.0.

7.0.

5.0.

?5.0.

18. You are the manager of a supermarket, and you know that

the income elasticity of peanut butter is exactly ?0.5. Due to the economic

recession, you expect incomes to increase by 10 percent next year. How should

you adjust your purchase of peanut butter?

Buy 5 percent more peanut butter.

Buy 5 percent less peanut butter.

Buy 10 percent more peanut butter.

Buy 10 percent less peanut butter.

19. Suppose the production function is given by Q = 10K +

8L. What is the average product of capital when 2 units of capital and 10 units

of labor are employed?

10

8

50

18

20. Consider a market

characterized by the following demand and supply conditions: PX = 30 – 4QX and

PX = 6 + 4QX. The equilibrium price and quantity are, respectively,

$3 and 9 units.

$9 and 3 units.

$3 and 18 units.

$18 and 3 units.

21The lower the interest rate, the lower the:

present

value.

net

present value.

Both

present value and net present value are correct.

Neither

present value nor net present value is correct.

22. What is the

present value of $200 received in two years if the interest rate is 12.5

percent?

$175

$158.05

$177.78

$225

23. At what level of

output does marginal cost equal marginal revenue??

10

20

30

40

24 What is the average product of labor, given that the

level of labor equals 5, total output equals 500, and the marginal product of

labor equals 25?

100

125

20

2,500

25. Competitive

market equilibrium is determined by:

Only the most influential buyers and sellers.

Only the demand curve.

Only the supply curve.

The intersection of the demand and supply curves.

26. If Starbucksâs

marketing department estimates the income elasticity of demand for its coffee

to be 2.55, how will the prospect of an economic bust (expected to decrease

consumersâ incomes by 3 percent over the next year) impact the quantity of

coffee Starbucks expects to sell?

Instruction: Round your response to 2 decimal places.

It will change by ___________percent.

27. The head of the accounting department at a major

software manufacturer has asked you to put together a pro forma statement of

the company’s value under several possible growth scenarios and the assumption

that the companyâs many divisions will remain a single entity forever. The manager is concerned that, despite the

fact that the firmâs competitors are comparatively small, collectively their

annual revenue growth has exceeded 50 percent over each of the last five

years. She has requested that the value

projections be based on the firmâs current profits of $3 billion (which have

yet to be paid out to stockholders) and the average interest rate over the past

20 years (9 percent) in each of the following profit growth scenarios:

a. Profits grow at an annual rate of 11 percent. (This one

is tricky.)

The firm’s value is zero

This growth rate is not possible

The firm will have to shut down at this growth rate

The firm’s value is infinite

Instructions: Round your responses to 2 decimal places.

b. Profits grow at an annual rate of 4 percent.

billion

c. Profits grow at an annual rate of 0 percent.

billion

d. Profits decline at an annual rate of 3 percent.

billion

28. A firm produces output according to a production

function:

Q = F(K,L) = min {4K,8L}.

a. How much output is produced when K = 2 and L = 3?

b. If the wage rate is $60 per hour and the rental rate on

capital is $20 per hour, what is the cost-minimizing input mix for producing 8

units of output?

Capital: ________

Labor: __________

c. How does your answer to part b change if the wage rate

decreases to $20 per hour but the rental rate on capital remains at $20 per

hour?

It does

not change.

Capital

and labor increase.

Capital

decreases and labor increases.

Capital

increases and labor decreases.

29.What is the value of a preferred stock that pays a

perpetual dividend of $220 at the end of each year when the interest rate is 3

percent?

Instruction: Round your response to the nearest dollar.

$________

30. The supply curve

for product X is given by QXS = -320 + 10PX .

a. Find the inverse supply curve.

P = ________ + _________Q

b. How much surplus do producers receive when Qx = 460? When

Qx = 1,040?

When QX = 460: $_______

When QX = 1,040: $____________