MBA 651 FINAL EXAM VERIFIED QUESTIONS AND CORRECT ANSWERS
Suppose market demand and supply are given by Q d = 100 - 2P and Q S = 5 + 3P. The
equilibrium quantity is:
62.
The supply function for good X is given by Q x s = 1,000 + PX - 5 PY - 2PW, where PX is the
price of X, PY is the price of good Y and PW is the price of input W. If PX = 100, PY = 150 PW
= 50, then the supply curve is
Q x s = 150 + Px.
In a competitive market, the market demand is Qd = 70 - 3P and the market supply is Qs = 6P. A
price ceiling of $4 will result in
A shortage of 34 units.
Suppose the demand for good X is given by Qdx= 20 - 4Px + 2Py + M. The price of good X is
$5, the price of good Y is $15, and income is $150. Given these prices and income, how much of
good X will be purchased?
180
Jane pays the market price of $69 for a new pair of running shoes, even though she would be
happy to pay a maximum of $100 for the same pair of shoes. This is an example of the concept
of
consumer surplus.
If a firm manager has a base salary of $75,000 and also gets 1.5% of all profits, how much will
his/her income be if revenues are $10,000,000 and profits are $5,000,000?
$150,000.
You are a manager in a perfectly competitive market. The price is $14. Your total cost curve is
C(Q) = 10 + 4Q + 0.5 Q2. What level of output should you produce in the short-run?
10.
Let the demand function for a product be Q = 100 - 2P. The inverse demand function of this
demand function is:
P = 50 - 0.5Q.
You are the manager of a firm that sells its product in a competitive market at a price of $60.
Your firm's cost function is C = 50 + 3Q2. Your firm's maximum profits are
250.
,A Herfindahl index of 10,000 suggests
monopoly.
Given that income is $500 and PX = $20 and PY = $5, what is the market rate of substitution
between goods X and Y?
-4.
The marginal cost curve
intersects the ATC and AVC at their minimum points.
You are a manager in a perfectly competitive market. The price in your market is $14. Your total
cost curve is C(Q) = 10 + 4Q + 0.5 Q2. What will happen in the long-run if there is no change in
the demand curve?
Some firms will enter the market eventually.
You are the manager of a firm that sells its product in a competitive market at a price of $40.
Your firm's cost function is C = 60 + 4Q2. Your firm's maximum profits are
40
Which curve(s) does the marginal cost curve intersect at the (their) minimum point?
a and c only.
If a consumer is given a $10 gift certificate, good for items in store X and all items in store X are
inferior goods, then consumer desires to consume
less goods in store X.
The demand for good X is estimated to be Q xd = 10,000 - 4PX + 5PY + 2M + AX, where PX is
the price of X, PY is the price of good Y, M is income and AX is the amount of advertising on X.
Suppose the present price of good X is $50, PY = $100, M = $25,000, and AX = 1,000 units.
Based on this information, we know that the demand for good X is
inelastic.
Suppose the demand for X is given by Q xd = 100 - 2PX + 4PY + 10M + 2A, where PX
represents the price of good X, PY is the price of good Y, M is income and A is the amount of
advertising on good X. Based on this information, we know that good X is
a substitute for good Y and a normal good.
The demand function
recognizes that the quantity of a good consumed depends on its price and demand shifters.
,Producer surplus is measured as the area
above the supply curve and below the market price.
As additional firms enter an industry, the market supply curve
shifts to the right.
Consumer surplus
is the value consumers get from a good but do not pay for.
Suppose you produce wooden desks, and government legislation protecting the spotted owl has
made it more expensive for you to purchase wood. What do you expect to happen to the
equilibrium price and quantity of wooden desks?
price will increase but quantity will decrease.
Competitive market equilibrium
is determined by the intersection of the market demand and supply curves.
The supply function for good X is given by Q x s = 1,000 + PX - 5 PY - 2PW, where PX is the
price of X, PY is the price of good Y and PW is the price of input W. If the price of input W
increases by $10, then the supply of good X
none of the above.
Firms advertise in order to cause the demand for their products to
shift to the right.
An ad valorem tax shifts the supply curve
by rotating it counter-clockwise.
In a competitive market, the market demand is Qd = 60 - 6P and the market supply is Qs = 4P. A
price ceiling of $3 will result in
A shortage of 30 units.
Suppose the demand for X is given by Q xd = 100 - 2PX + 4PY + 10M + 2A, where PX
represents the price of good X, PY is the price of good Y, M is income and A is the amount of
advertising on good X. Based on this information, we know that good Y is
a substitute for good X.
All else held constant, as additional firms enter an industry
more output is available at each given price.
, Technological advances will cause the supply curve to:
shift to the right.
Advertising provides consumers with information about the underlying existence or quality of a
product. These types of advertising messages are called
informative advertising.
An ad valorem tax causes supply curve to:
become steeper.
Other things held constant, the greater the price of a good
the lower the consumer surplus.
Persuasive advertising influences demand by:
altering the underlying tastes of consumers.
Suppose market demand and supply are given by Q d = 100 - 2P and Q S = 5 + 3P. If the
government sets a price floor of $30 and agrees to purchase all surplus at $30 per unit, the total
cost to the government will be:
$1,650.
Which of the following can explain an increase in the demand for housing in retirement
communities?
an increase in the population of the elderly.
When government imposes a price floor above the market price, the result will be that
surpluses occur.
The demand for food (a broad group) is more
inelastic than the demand for beef (specific commodity).
Assume that the price elasticity of demand is -0.75 for a certain firm's product. If the firm lowers
price, the firm's managers can expect total revenue to
decrease
When the own price elasticity of good X is -3.5 then total revenue can be increased by
decreasing the price.
If the cross-price elasticity between ketchup and hamburgers is -2.5, a 2% increase in the price of
ketchup will lead to a
Suppose market demand and supply are given by Q d = 100 - 2P and Q S = 5 + 3P. The
equilibrium quantity is:
62.
The supply function for good X is given by Q x s = 1,000 + PX - 5 PY - 2PW, where PX is the
price of X, PY is the price of good Y and PW is the price of input W. If PX = 100, PY = 150 PW
= 50, then the supply curve is
Q x s = 150 + Px.
In a competitive market, the market demand is Qd = 70 - 3P and the market supply is Qs = 6P. A
price ceiling of $4 will result in
A shortage of 34 units.
Suppose the demand for good X is given by Qdx= 20 - 4Px + 2Py + M. The price of good X is
$5, the price of good Y is $15, and income is $150. Given these prices and income, how much of
good X will be purchased?
180
Jane pays the market price of $69 for a new pair of running shoes, even though she would be
happy to pay a maximum of $100 for the same pair of shoes. This is an example of the concept
of
consumer surplus.
If a firm manager has a base salary of $75,000 and also gets 1.5% of all profits, how much will
his/her income be if revenues are $10,000,000 and profits are $5,000,000?
$150,000.
You are a manager in a perfectly competitive market. The price is $14. Your total cost curve is
C(Q) = 10 + 4Q + 0.5 Q2. What level of output should you produce in the short-run?
10.
Let the demand function for a product be Q = 100 - 2P. The inverse demand function of this
demand function is:
P = 50 - 0.5Q.
You are the manager of a firm that sells its product in a competitive market at a price of $60.
Your firm's cost function is C = 50 + 3Q2. Your firm's maximum profits are
250.
,A Herfindahl index of 10,000 suggests
monopoly.
Given that income is $500 and PX = $20 and PY = $5, what is the market rate of substitution
between goods X and Y?
-4.
The marginal cost curve
intersects the ATC and AVC at their minimum points.
You are a manager in a perfectly competitive market. The price in your market is $14. Your total
cost curve is C(Q) = 10 + 4Q + 0.5 Q2. What will happen in the long-run if there is no change in
the demand curve?
Some firms will enter the market eventually.
You are the manager of a firm that sells its product in a competitive market at a price of $40.
Your firm's cost function is C = 60 + 4Q2. Your firm's maximum profits are
40
Which curve(s) does the marginal cost curve intersect at the (their) minimum point?
a and c only.
If a consumer is given a $10 gift certificate, good for items in store X and all items in store X are
inferior goods, then consumer desires to consume
less goods in store X.
The demand for good X is estimated to be Q xd = 10,000 - 4PX + 5PY + 2M + AX, where PX is
the price of X, PY is the price of good Y, M is income and AX is the amount of advertising on X.
Suppose the present price of good X is $50, PY = $100, M = $25,000, and AX = 1,000 units.
Based on this information, we know that the demand for good X is
inelastic.
Suppose the demand for X is given by Q xd = 100 - 2PX + 4PY + 10M + 2A, where PX
represents the price of good X, PY is the price of good Y, M is income and A is the amount of
advertising on good X. Based on this information, we know that good X is
a substitute for good Y and a normal good.
The demand function
recognizes that the quantity of a good consumed depends on its price and demand shifters.
,Producer surplus is measured as the area
above the supply curve and below the market price.
As additional firms enter an industry, the market supply curve
shifts to the right.
Consumer surplus
is the value consumers get from a good but do not pay for.
Suppose you produce wooden desks, and government legislation protecting the spotted owl has
made it more expensive for you to purchase wood. What do you expect to happen to the
equilibrium price and quantity of wooden desks?
price will increase but quantity will decrease.
Competitive market equilibrium
is determined by the intersection of the market demand and supply curves.
The supply function for good X is given by Q x s = 1,000 + PX - 5 PY - 2PW, where PX is the
price of X, PY is the price of good Y and PW is the price of input W. If the price of input W
increases by $10, then the supply of good X
none of the above.
Firms advertise in order to cause the demand for their products to
shift to the right.
An ad valorem tax shifts the supply curve
by rotating it counter-clockwise.
In a competitive market, the market demand is Qd = 60 - 6P and the market supply is Qs = 4P. A
price ceiling of $3 will result in
A shortage of 30 units.
Suppose the demand for X is given by Q xd = 100 - 2PX + 4PY + 10M + 2A, where PX
represents the price of good X, PY is the price of good Y, M is income and A is the amount of
advertising on good X. Based on this information, we know that good Y is
a substitute for good X.
All else held constant, as additional firms enter an industry
more output is available at each given price.
, Technological advances will cause the supply curve to:
shift to the right.
Advertising provides consumers with information about the underlying existence or quality of a
product. These types of advertising messages are called
informative advertising.
An ad valorem tax causes supply curve to:
become steeper.
Other things held constant, the greater the price of a good
the lower the consumer surplus.
Persuasive advertising influences demand by:
altering the underlying tastes of consumers.
Suppose market demand and supply are given by Q d = 100 - 2P and Q S = 5 + 3P. If the
government sets a price floor of $30 and agrees to purchase all surplus at $30 per unit, the total
cost to the government will be:
$1,650.
Which of the following can explain an increase in the demand for housing in retirement
communities?
an increase in the population of the elderly.
When government imposes a price floor above the market price, the result will be that
surpluses occur.
The demand for food (a broad group) is more
inelastic than the demand for beef (specific commodity).
Assume that the price elasticity of demand is -0.75 for a certain firm's product. If the firm lowers
price, the firm's managers can expect total revenue to
decrease
When the own price elasticity of good X is -3.5 then total revenue can be increased by
decreasing the price.
If the cross-price elasticity between ketchup and hamburgers is -2.5, a 2% increase in the price of
ketchup will lead to a
