ECON 528 MIDTERM
STUDY TEST QUESTIONS
AND CORRECT ANSWERS
GRADED A+ 2025-2026
Managerial economics - ANS-helps managers make decisions in the face of scarcity
Economic costs of production differ from accounting costs in that - ANS-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.
- ANS-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 - ANS-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 - ANS-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 - ANS-
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? - ANS-third-degree price discrimination
If a firm charges customers $ 200 per unit of the first unit purchased, and $160 per
unit for each additional unit purchased in excess of one unit. Then, what is the
economic term of this strategy? - ANS-Second-degree price discrimination
If the Apple iPhone and the Samsung Galaxy are considered substitutes, then, other
things equal, an increase in the price of the iPhone will - ANS-increase the demand for
the Galaxy.
If the price of automobiles was to increase, then - ANS-the demand for gasoline would
decrease.
Studies have shown links between calcium consumption and a reduction in
osteoporosis. How does this affect the market for calcium? - ANS-The calcium demand
curve shifts to the right because of a change in tastes in favor of calcium.
Buyers rush to purchase stocks in California vineyards following a forecast of a 30
percent decline in this year's grape harvest. What happens in the California wine
market as a result of this announcement? - ANS-The demand curve for California wine
shifts to the right in anticipation of higher prices in the future.
If the cross-price elasticity of demand for two goods is 1.25, then - ANS-the two goods
are substitutes.
STUDY TEST QUESTIONS
AND CORRECT ANSWERS
GRADED A+ 2025-2026
Managerial economics - ANS-helps managers make decisions in the face of scarcity
Economic costs of production differ from accounting costs in that - ANS-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.
- ANS-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 - ANS-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 - ANS-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 - ANS-
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? - ANS-third-degree price discrimination
If a firm charges customers $ 200 per unit of the first unit purchased, and $160 per
unit for each additional unit purchased in excess of one unit. Then, what is the
economic term of this strategy? - ANS-Second-degree price discrimination
If the Apple iPhone and the Samsung Galaxy are considered substitutes, then, other
things equal, an increase in the price of the iPhone will - ANS-increase the demand for
the Galaxy.
If the price of automobiles was to increase, then - ANS-the demand for gasoline would
decrease.
Studies have shown links between calcium consumption and a reduction in
osteoporosis. How does this affect the market for calcium? - ANS-The calcium demand
curve shifts to the right because of a change in tastes in favor of calcium.
Buyers rush to purchase stocks in California vineyards following a forecast of a 30
percent decline in this year's grape harvest. What happens in the California wine
market as a result of this announcement? - ANS-The demand curve for California wine
shifts to the right in anticipation of higher prices in the future.
If the cross-price elasticity of demand for two goods is 1.25, then - ANS-the two goods
are substitutes.
