MATH533 week 1 quiz 1

Quiz 1

1.

Question:

(TCO A) There is an increase
in the cost of materials for producing bicycles.
(4 pts.) What happens to bicycle supply?
(6 pts.) What happens to bicycle demand?

2.

Question:

(TCO A) Digital cameras and
memory cards are complements in consumption. The price of digital
cameras falls.
(4 pts.) What happens to the demand for memory cards?
(6 pts.) What happens to the demand for digital cameras?

3.

Question:

(TCO A) The number of corn
producers increases.
(4 pts.) What happens to the supply of corn?
(6 pts.) What happens to the demand for corn?

4.

Question:

(TCO A) A market is in
equilibrium with equilibrium quantity Q* and equilibrium price P*.
(2 pts.) What happens to P* if there is an increase in supply?
(4 pts.) What happens to Q* if there is a decrease in supply and a decrease
in demand?
(4 pts.) What happens to P* if there is an increase in demand followed by a
decrease in supply followed by another increase in demand?

5.

Question:

(TCO B) The following table
shows part of the demand for tickets to a local sporting event:
Price(P)…Quantity(Q)
15………..40
10……….100
6…………150
3…………250
(2 pts.) Is demand elastic in the $6 – $10 price range?
(4 pts.) Ed = 0.75 in the $3 – $6 price range. In this range of demand,
by what percentage would quantity demanded change if price changes by 20
percent?
(4 pts.) Price falls from $15 to $10. Does total revenue (TR) increase,
decrease, or remain the same?

6.

Question:

(TCO B) Use a
hypothetical example to illustrate whether you agree or disagree with the
following statement, “Unemployment will go up more if the demand for
labor is inelastic, because the demand for labor will decrease more when
you have inelastic demand than if demand were elastic”.Explain why,
using hypothetical numbers to illustrate your case.

7.

Question:

(TCO C) You have been hired
to manage a small manufacturing facility which has cost and production data
given in the table below.

No. of workers Total Labor Cost
Output Total Revenue

1 $550
100
$170

2 1100
108
350

3 1650
114
800

4 2200
119
1270

5
2750
123
1600

6
3300
125
1700

7 3850
126
1750
(2 points) What is the marginal product of the third worker?
(2 points) What is the marginal revenue product of the second worker?
(2 points) What is the marginal cost of the fourth worker?
(4 points) Based on your knowledge of marginal analysis, how many workers
should you hire? Explain you answer.

8.

Question:

(TCO C) Answer the next
question on the basis of the following cost data for a purely competitive
seller:
Total Product TFC
TVC

0
$50 $0

1
50 70

2
50 120

3
50 150

4
50 220

5
50 300

6
50 390
Refer to the above data. If the product price is $85, at its
optimal output will the firm realize an economic profit, break even, or
incur an economic loss? How much will the profit or loss be? Show
all calculations.

9.

Question:

(TCO C) Answer the next question
on the basis of the following cost data for a purely competitive seller:
Total Product
TFC TVC

0 $50
$0

1 50
70

2 50
120

3
50 150

4
50 220

5
50 300

6
50 390
Refer to the above data. If the product price is $105, at its optimal
output will the firm realize an economic profit, break even, or incur an
economic loss? How much will the profit or loss be? Show all
calculations.

10.

Question:

(TCO C) A firm has Total
Costs (TC) of $12,000 over the next three months (TOTAL for the 3
months – not per month), of which $8,000 are fixed costs (TFC) for rent
on its lease that cannot be broken. If it stays in business over those
months, then the firm will collect only $6,000 in revenues (TR). So,
considering only this information, should they stay in business for those three
months, or should they close down right now? Provide your reasoning.