Econ 528 Midterm Questions and
Answers (Graded A+)
Managerial economics - ANSWER-helps managers make decisions in the face of
scarcity
Economic costs of production differ from accounting costs in that - ANSWER-economic
costs add the opportunity costs of a firm using its own resources while accounting costs
do not.
How many pounds of apples should Margie sell to maximize her profit? Refer to Table
12-2.A table of market prices Table 12-2 lists the various pounds (lbs.) of apples that
Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market.
- ANSWER-This cannot be determined without knowing Margie's total or marginal
production costs
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly
competitive firm. Identify the short-run shut down point for the firm. Price and Cost
Curves - ANSWER-B
Sally quit her job as an auto mechanic earning $50,000 per year to start her own
business. To save money she operates her business out of a small building she owns
which, until she started her own business, she had rented out for $10,000 per year. She
also invested her $20,000 savings (which earned a market interest rate of 5% per year)
in her business.
You are given the following information about the first year of her operations.
Total revenue: $120,000
Cost of labor: $40,000
Cost of materials: $15,000
Equipment rental: $5,000
Foregone Salary: $50,000
Foregone Interest: $1,000
Opportunity cost of Building: 10,000 - ANSWER-In the first year, economic profit is -
$1,000 and accounting profit is $60,000
A firm that can effectively price discriminate will charge a higher price to - ANSWER-
customers who have the more inelastic demand for the product.
Selling tickets in the orchestra region of the Metropolitan Opera for $55 and selling
tickets in the upper balcony for $28 to listen to Luciano Pavoratti describes which type
of price discrimination? - ANSWER-third-degree price discrimination
Answers (Graded A+)
Managerial economics - ANSWER-helps managers make decisions in the face of
scarcity
Economic costs of production differ from accounting costs in that - ANSWER-economic
costs add the opportunity costs of a firm using its own resources while accounting costs
do not.
How many pounds of apples should Margie sell to maximize her profit? Refer to Table
12-2.A table of market prices Table 12-2 lists the various pounds (lbs.) of apples that
Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market.
- ANSWER-This cannot be determined without knowing Margie's total or marginal
production costs
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly
competitive firm. Identify the short-run shut down point for the firm. Price and Cost
Curves - ANSWER-B
Sally quit her job as an auto mechanic earning $50,000 per year to start her own
business. To save money she operates her business out of a small building she owns
which, until she started her own business, she had rented out for $10,000 per year. She
also invested her $20,000 savings (which earned a market interest rate of 5% per year)
in her business.
You are given the following information about the first year of her operations.
Total revenue: $120,000
Cost of labor: $40,000
Cost of materials: $15,000
Equipment rental: $5,000
Foregone Salary: $50,000
Foregone Interest: $1,000
Opportunity cost of Building: 10,000 - ANSWER-In the first year, economic profit is -
$1,000 and accounting profit is $60,000
A firm that can effectively price discriminate will charge a higher price to - ANSWER-
customers who have the more inelastic demand for the product.
Selling tickets in the orchestra region of the Metropolitan Opera for $55 and selling
tickets in the upper balcony for $28 to listen to Luciano Pavoratti describes which type
of price discrimination? - ANSWER-third-degree price discrimination
