Econ 101 - Microeconomics » Spring 2023 » Quiz 2

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Question #1
Use the following information to answer questions 1-3. A company uses 5 machines per day. The daily rental rate is $50. The marginal production of the 5th machine is 300 units per day. This company also employs 100 employees per day. The daily wage is $200. The marginal production of the 100th employee is 600 units per day. 1: Which of the following is true?
A.   The company should invest more in labor and less in capital to maximize efficiency.
B.   Currently labor is more productive per dollar spent than machines.
C.   This company is allocating resources efficiently.
D.   None of these.
E.   Currently machines are more productive per dollar spent than labor.
Question #2
Which of the following would you recommend as a course of action for this firm to maximize efficiency?
A.   Use more labor and less machines.
B.   Use more machines and less labor.
C.   Use less labor and less machines.
D.   Use more labor and more machines.
E.   None of these.
Question #3
Which of the combinations of marginal utilities below could reflect an efficient combination of labor and machines (capital) for this company?
A.   MU labor = 400, MU capital = 100
B.   MU labor = 300, MU capital = 100
C.   MU labor = 200, MU capital = 100
D.   MU labor = 100, MU capital = 300
E.   MU labor = 100, MU capital = 200
Question #4
Use the following information to answer question. Given a budget of $36, and a utility schedule shown below, how much water and food will this person buy? Water (Price = $2) Food (Price = $10) Quantity Total Utility Quantity Total Utility 1 6 1 20 2 10 2 35 3 13 3 45 4 14 4 50 5 16 5 50
A.   3 units of food and 3 units of water
B.   None of these.
C.   5 units of water and 2 units of food
D.   2 units of water and 5 units of food.
E.   5 units of water and 3 units of food.
Question #5
Use the following information to answer question. Given a budget of $36, and a utility schedule shown below, what will be the total amount of utility for this person? Water (Price = $2) Food (Price = $10) Quantity Total Utility Quantity Total Utility 1 6 1 20 2 10 2 35 3 13 3 45 4 14 4 50 5 16 5 50
A.   60
B.   64
C.   58
D.   63
E.   48
Question #6
Use the following information to answer question. A company is currently selling 100,000 products a year at a price of $10 each. Through market research they know that if they were to lower the price to $8 they would sell 110,000 products a year. Which of the following is true about the elasticity of demand for this product at the prices given?
A.   Ed = 0.4, demand is inelastic
B.   Ed = 0.9, demand is inelastic
C.   Ed = 0.9, demand is elastic
D.   Ed = 2.3, demand is elastic
E.   Ed = 0.4, demand is elastic
Question #7
Use the following information to answer question. A company is currently selling 100,000 products a year at a price of $10 each. Through market research they know that if they were to lower the price to $8 they would sell 110,000 products a year. Which of the following is most likely being described?
A.   An item that consumers can quickly and easily change their consumption of
B.   Luxury
C.   An item with many substitutes
D.   Necessity
E.   An item that represents a large portion of consumers’ income
Question #8
Which of the following could be the income elasticity of demand for bus rides (assuming this consumer does not enjoy taking the bus)?
A.   1
B.   -0.5
C.   0.5
D.   None of these.
E.   0
Question #9
If the cross elasticity of demand between products A and B is negative, this implies:
A.   products A and B are substitutes, if the price falls for B the demand for A rises
B.   products A and B are substitutes, if the price falls for B the demand for A fall
C.   products A and B are complements, if the price falls for B the demand for A falls
D.   products A and B are unrelated
E.   products A and B are complements, if the price falls for B the demand for A rises
Question #10
If a company knows the demand curve for their product is inelastic, which of the following is true?
A.   They would lose revenue from a small price increase. They would gain revenue from a small price decrease
B.   They would gain revenue from a small price increase. They would lose revenue from a small price decrease
C.   They would gain revenue from a small price increase. They would gain revenue from a small price decrease
D.   They would lose revenue from a small price decrease They would gain revenue from a small price decrease
E.   None of these.

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