ECON 1000 Final Review Worksheet Chapter 5-8 PDF

Preview

Summary

ECON 1000 FINAL REVIEW WORKSHEET (Ch 5-8)Chapter 5 Billy Bob's Barber Shop knows that a 5% increase in the price of their haircuts results in a 15% decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop? a. 0. b. 3. c. 0. d. 0. The longer the ti...

Description

ECON 1000 FINAL REVIEW WORKSHEET (Ch 5-8) Chapter 5 1. Billy Bob's Barber Shop knows that a 5% increase in the price of their haircuts results in a 15% decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop? a. b. c. d.

0.15 3.00 0.10 0.05

2. The longer the time that has elapsed since a price change the more time consumers will have to respond to price changes. As a result, demand becomes a. b. c. d. e.

Zero. more inelastic. more elastic. perfectly inelastic. unit elastic.

3. Suppose that Simon Fraser University decides to raise tuition fees to increase the total revenue it receives from students. This policy works only if the demand for a Simon Fraser University education is a. unit elastic. b. Inelastic. c. Elastic. d. greater than the demand for a University of Western Ontario education. e. perfectly elastic. 4. The statement “Even after the reward was doubled no one volunteered for the mission” is an example of a. Law of supply b. Elastic supply c. Inelastic supply d. Inelastic demand e. Law of demand 5. Since real trees take a long time to grow this year’s supply of real Christmas trees is a. Low b. High c. Elastic d. Inelastic e. Unit elastic

Chapter 6 1. a. b. c. d.

Which one of the following is not likely to be an outcome of a rent ceiling? a black market for rent-controlled housing long waiting lists of potential renters for rent-controlled housing a short-run shortage of housing a black-market price below the rent ceiling

e. increased search activity for rent-controlled housing 1. a. b. c. d. e.

A price ceiling set below the equilibrium price will result in excess supply. excess demand. the equilibrium price. an increase in supply. a decrease in demand.

2. Suppose the government introduces a ceiling on the fees that lawyers are permitted to charge. This fee ceiling a. is always inefficient. b. results in an inefficient use of resources when the ceiling is above the equilibrium fee. c. results in an efficient use of resources when the ceiling is above the equilibrium fee. d. results in an efficient use of resources when the ceiling is below the equilibrium fee. e. is always efficient.

Use the figure below to answer the following questions. Figure 6.1.2

4. Refer to Figure 6.1.2. If a rigorously enforced price ceiling is set at $10, then A) 100 units will be sold at a price of $20 each. B) 100 units will be sold at a price of $15 each. C) 150 units will be sold at a price of $15 each. D) 200 units will be sold at a price of $10 each. E) 100 units will be sold at a price of $10 each. 5. Refer to Figure 6.1.2. What would be the maximum black market price of the good if a price ceiling is set at $10 a unit?

A) $10 B) $15 C) $20 D) 50 goods sold at $10 and 50 goods sold at $20 E) 50 goods sold at $10 and 50 goods sold at $15 6. When prices are fixed below equilibrium, all of the following happen except a. b. c. d.

Shortages Frustrated buyers Quantity adjustments Surpluses

7. A price ceiling set by government above the equilibrium price results in a. Surpluses b. Shortages c. The equilibrium price d. An increase in supply 8. In markets without any government interaction, who gets an apartment is decided by who is most a. Willing to pay b. Able to pay c. Willing and able to pay d. Willing and able to dance 9. Market-driven health care generally a. Has few waiting lists b. Is more efficient than equitable health care c. Provides little care to those who cannot afford it d. Does all of the above 10. A right-leaning politician probably a. Is more concerned with efficiency than with equity b. Is right-handed c. Thinks equality of outcomes is more important than equality of opportunities d. Does not think like an economist

Chapter 7 1. Betty's blocking is a small business and prepares the following plan about revenues and expenses in the first year: Expected Revenue: Cost of Renting Equipment: Cost of Web Hosting: Cost of phone & internet: Cost of advertising: What are the explicit costs? a. $15,000

$50,000 $10,000 $3000 $5000 $2000

b. $10,000 c. $20,000 d. $13,000 2. Betty's blocking is a small business and prepares the following plan about revenues and expenses in the first year: Expected Revenue: Cost of Renting Equipment: Cost of Web Hosting: Cost of phone & internet: Cost of advertising:

$50,000 $10,000 $3000 $5000 $2000

What are the expected accounting profits for this year? a. b. c. d.

$30,000 $20,000 $40,000 $45,000

3. Betty's blocking is a small business and prepares the following plan about revenues and expenses in the first year: Expected Revenue: Cost of Renting Equipment: Cost of Web Hosting: Cost of phone & internet: Cost of advertising:

$50,000 $10,000 $3000 $5000 $2000

Betty's best alternative employment is working for $25,000 for a marketing company. Betty has to borrow $20,000 from the bank to start the business, at an interest rate of 10%. Betty wants her own business more than anything in the world and is not looking for any risk compensation. Does this information change Betty's expected accounting process and if so, what are her expected accounting profits now? a. b. c. d.

No Yes, they are now $3000 Yes, they are now ($5000) Yes, they are now $28,000

4. Betty's blocking is a small business and prepares the following plan about revenues and expenses in the first year: Expected Revenue: Cost of Renting Equipment: Cost of Web Hosting: Cost of phone & internet: Cost of advertising:

$50,000 $10,000 $3000 $5000 $2000

Betty's best alternative employment is working for $25,000 for a marketing company. Betty has to borrow $20,000 from the bank to start the business, at an interest rate of 10%. Betty wants her own business more than anything in the world and is not looking for any risk compensation. What are her implicit costs? a. b. c. d.

$45,000 $25,000 $47,000 There are no implicit costs

5. Betty's blocking is a small business and prepares the following plan about revenues and expenses in the first year: Expected Revenue: Cost of Renting Equipment: Cost of Web Hosting: Cost of phone & internet: Cost of advertising:

$50,000 $10,000 $3000 $5000 $2000

Betty's best alternative employment is working for $25,000 for a marketing company. Betty has to borrow $20,000 from the bank to start the business, at an interest rate of 10%. Betty wants her own business more than anything in the world and is not looking for any risk compensation. What are her expected economic profits? a. b. c. d.

$45,000 $3000 $28,000 ($17000)

6. Firms will choose to enter an industry only when: a. b. c. d.

Revenues are greater than explicit costs Revenues are greater than implicit costs Revenues are greater than opportunity costs The economic profit is equal to the accounting profit

7. What are characteristics of both short run and long run equilibrium? a. b. c. d. e.

Quantity demanded equals the quantity supplied Firms are making economic profits or suffering economic losses The market demand curve intersects the market supply curve Answers A & C are correct Answers A, B and C are correct

8. An economist considers someone who is a gambler and does not need much compensation to go for an uncertain investment to be a. b. c. d.

crazy risk loving risk averse. Risk neutral

e. all of the above 9. the compensation for a business owner’s time and profit make up a. b. c. d.

marginal profit normal profit explicit profit implied profit

10. If your business earns accounting profits of $50 000 and economic losses of $20 000, what are your hidden opportunity costs? a. b. c. d.

$20 000 $30 000 $60 000 $70 000

Chapter 8 1. In Toronto, there are thousands of restaurants, each with its own cuisine, menu, decor, and service style. This market is a. b. c. d.

monopolistic perfectly competitive oligopolistic monopolistically competitive

2. Which of the following is not a characteristic of perfect competition: a. b. c. d.

Firms are price takers Individual firms invest substantially in advertising Individual firms face a horizontal demand curve Firms produce an identical product

3. Which one of the following does not occur in perfect competition? a. b. c. d. e.

No single firm can exert a significant influence on the market price of the good. There are many buyers. There are significant restrictions on entry into the market. Sellers and buyers are well informed about prices. Established firms have no advantage over new ones.

4. Which market structure has no pricing power? a. b. c. d.

Monopoly Perfect competition Oligopoly Monopolistic competition

5. In perfect competition sellers

a. b. c. d.

Produce a product with no advertising. Produce identical products seek the price that yields zero profits. seek the price that yields the greatest profits.

6. The elasticity of demand is lowest in a. Oligopoly b. Monopoly c. Perfect competition d. Monopolistic competition 7. Which of the following is not a characteristic of market structure? a. b. c. d.

availability of substitutes number of competitors barriers to entry of new competitors time it takes to produce a product

8. Copyrights and patents are: a. Good for increasing competition in the market b. Legal barriers to entry c. Economies of scale d. Part of every single industry 9. An industry where many small businesses make similar but slightly differentiated products or services. The sellers have some price-making power, but there are no barriers to entry is called a. b. c. d. e.

Monopoly Perfect competition Monopolistic competition Oligopoly Market structure

10. An industry in which more than one business has price-making power and there are usually barriers to entry is called a. oligopoly b. monopolistic competition c. differentiated competition d. monopoly...