ECP3704 Exam #2 Questions And
Answers
For bmost bconsumers, bgasoline bis ba brelatively binelastic bgood. bIn bthe bvery bshort-
term, bthe bdemand bfor bgasoline btends bto bbe b- bcorrect banswers✔✔more binelastic.
When bthe bmarginal bcost bcurve bis bbelow ban baverage btotal bcost bcurve, baverage
btotal bcost bis b- bcorrect banswers✔✔declining bwith boutput.
The bdifference bbetween baverage btotal bcosts band baverage bvariable bcosts bis b-
bcorrect banswers✔✔average bfixed bcost.
Economies bof bscale bexist bwhenever blong-run baverage bcosts b- bcorrect
banswers✔✔decrease bas boutput bis bincreased.
For bthe bcost bfunction bC(Q) b= b100 b+ b4Q b+ b5Q2, bthe bmarginal bcost bof bproducing
bthe b5th bunit bof boutput bis bapproximately b- bcorrect banswers✔✔49
For bgiven binput bprices, bisocosts bfarther bfrom bthe borigin bare bassociated bwith b-
bcorrect banswers✔✔higher bcosts.
When bthe bown bprice belasticity bof bgood bX bis b-3.5 bthen btotal brevenue bcan bbe
bincreased bby b- bcorrect banswers✔✔decreasing bthe bprice.
For bthe bcost bfunction bC(Q) b= b100 b+ b2Q b+ b3Q2, bthe bvariable bcost bof bproducing
b10 bunits bof boutput bis b- bcorrect banswers✔✔320
The bown-price belasticity bof bdemand bfor bapples bis b-1.5. bIf bthe bprice bof bapples bfalls
bby b6%, bwhat bwill bhappen bto bthe bquantity bof bapples bdemanded? b- bcorrect
banswers✔✔It bwill bincrease b9%
Lemonade, ba bgood bwith bmany bclose bsubstitutes, bshould bhave ban bown-price
belasticity bthat bis: b- bcorrect banswers✔✔relatively belastic.
A b25 bpercent bdecrease bin bthe bprice bof bbreakfast bcereal bleads bto ba b20 bpercent
bincrease bin bthe bquantity bof bcereal bdemanded. bAs ba bresult: b- bcorrect
banswers✔✔total brevenue bwill bdecrease.
Answers
For bmost bconsumers, bgasoline bis ba brelatively binelastic bgood. bIn bthe bvery bshort-
term, bthe bdemand bfor bgasoline btends bto bbe b- bcorrect banswers✔✔more binelastic.
When bthe bmarginal bcost bcurve bis bbelow ban baverage btotal bcost bcurve, baverage
btotal bcost bis b- bcorrect banswers✔✔declining bwith boutput.
The bdifference bbetween baverage btotal bcosts band baverage bvariable bcosts bis b-
bcorrect banswers✔✔average bfixed bcost.
Economies bof bscale bexist bwhenever blong-run baverage bcosts b- bcorrect
banswers✔✔decrease bas boutput bis bincreased.
For bthe bcost bfunction bC(Q) b= b100 b+ b4Q b+ b5Q2, bthe bmarginal bcost bof bproducing
bthe b5th bunit bof boutput bis bapproximately b- bcorrect banswers✔✔49
For bgiven binput bprices, bisocosts bfarther bfrom bthe borigin bare bassociated bwith b-
bcorrect banswers✔✔higher bcosts.
When bthe bown bprice belasticity bof bgood bX bis b-3.5 bthen btotal brevenue bcan bbe
bincreased bby b- bcorrect banswers✔✔decreasing bthe bprice.
For bthe bcost bfunction bC(Q) b= b100 b+ b2Q b+ b3Q2, bthe bvariable bcost bof bproducing
b10 bunits bof boutput bis b- bcorrect banswers✔✔320
The bown-price belasticity bof bdemand bfor bapples bis b-1.5. bIf bthe bprice bof bapples bfalls
bby b6%, bwhat bwill bhappen bto bthe bquantity bof bapples bdemanded? b- bcorrect
banswers✔✔It bwill bincrease b9%
Lemonade, ba bgood bwith bmany bclose bsubstitutes, bshould bhave ban bown-price
belasticity bthat bis: b- bcorrect banswers✔✔relatively belastic.
A b25 bpercent bdecrease bin bthe bprice bof bbreakfast bcereal bleads bto ba b20 bpercent
bincrease bin bthe bquantity bof bcereal bdemanded. bAs ba bresult: b- bcorrect
banswers✔✔total brevenue bwill bdecrease.
