a. Describes how much of good x will be purchased at the alternative price of good X, given all other variable being constant b. Recognizes that the

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1 1. Which of the following are true? a. Accounting costs generally understate economic costs b. Accounting profits generally overstate economic profits c. In the absence of any opportunity costs, accounting profits equal economic profits d. All of the statements associated with this question are correct. 2. Suppose total benefits and total costs are given by B(Y)=100Y-8Y 2 and C(Y)=10Y 2. Then marginal costs are a. 20Y 3. The change in net benefits that arise from a on unit change in quantity is the: a. Marginal net benefits 4. The interest rate is 3%, the present value of $900 revieved at the end of 4 yrs is: a. 797 b c d To maximize net benefits in the above table it is most appropriate to use a. five units of control, since marginal net benefits are zero 6. If the interest rate is 7%, $500 received at the end of 9 years is worth hos much today? a. 500 / ( ) 9 7. A firm will have constant profits of $100,000 per year for the next four years and the interest rate is six percent. Assuming these profits are realized at the end of each year, what is the present value of future profits? a. 325,816 b. 376,74 c. 400,000 d. 346, Negotiation between buyer and seller of new ski-boat is an example of: a. Consumer-producer rivalry

2 9. Accounting profits are a. Total revenue minus total cost 10. Suppose total benefits and total costs are given by B(Y)=100Y-8Y 2 and C(Y)=10Y 2. What level of Y will yield the maximum net benefits? a. 100/ The higher the interest rate, the greater the a. Present value b. Net present value c. All of the statements are correct d. Non of the statements are correct 12. A farm must decide whether or not to purchase a new tractor. The tractor will reduce costs by $2,000 in the first year, $2,500 in the second and $3,000 in the third and final year of usefulness. The tractor costs $9,000 today, while the above cost savings will be realized at the end of each year. If the interest rate is seven percent, what is the net present value of purchasing the tractor? a. 6,764 b c. 18,362 d. non of the statements associated with this question are correct 13. (Look at the above image) What is the total cost associated with producing eight units of the control variable? (value B in the table) a Looking at the same table, the marginal cost is a. Increasing at a constant rate 15. What is an implicit cost of going to college? a. Foregone wages 16. What is the marginal cost of producing the tenth unit? a Under producer-producer rivalry, individual firms want to sell the product to maximum price the consumers will pay, but are unable to do this because of a. Competition among sellers 18. Suppose the demand for good X is given by Qdx = 10 + axpx + aypy + amm. If ay is positive, then: a. Goods Y and X are substitutes 19. The demand function:

3 a. Describes how much of good x will be purchased at the alternative price of good X, given all other variable being constant b. Recognizes that the quantity of a good consumed depends in its price and demand shifters c. Shows the relationship between the quantity demanded of X and variable other than its price d. Des not include expectations 20. Suppose there is a simultaneous increase in demand and decrease in supply, what effect with this have on equilibrium price? a. It will rise b. It will fall c. It may rise or fall d. It will remain the same 21. Competitive market equilibrium a. is determined by the intersection of the market demand and supply curves 22. Given a linear supply function of the form QXS = 3, PX - 2Pr - Pw, find the inverse linear supply function assuming Pr = $1,000 and Pw = $100 a. PX = QX. 23. If A and B are substitutes goods, an increase in the price of good A would: a. lead to an increase in demand for B 24. Given a linear demand function of the form QXd = 500-2PX - 3PY M, find the inverse linear demand function assuming M = 20,000 and PY = 10. a. PX = QX 25. Good X is a normal good and its demand is given by Qx d = a0 + axpx + aypy + amm + ahh. Then we know that a. am > Other things held constant, the lower the price of a good a. the lower the producer surplus 27. When the qty demanded exceeds qty supplied a. The price is below equilibrium 28. An ad valorem tax causes supply curve to a. Shift to the right 29. Suppose the market demand for good X is given by QX d = 20-2PX. If the equilibrium price of X is $5 per unit then consumers' expenditure on X is a. $5 b. $25 c. $50 d. Cannot be determined from the information given 30. Under a price ceiling, the full economic price is a. Higher than the free market price 31. Consider a market characterized by the following inverse demand and supply functions: PX = 10-2QX and PX = 2 + 2QX. Compute the equilibrium price and quantity in this market. a. $24 and 24 units b. $4 and 4 units

4 c. $2 and 6 units d. $6 and 2 units 32. Which of the follow is not a supply shifter? a. Avg income level 33. 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 a The demand for good X has been estimated to be lnqx d = lnpx + 4 lnpy + lnm. The cross price elasticity of demand between goods X and Y is a The cross price elasticity of demand for textbooks and copies of old exams is if the price of copies of old exams increase by 10%, the qty demanded of textbook will a. Fall by 35% 36. If the cross-price elasticity between ketchup and hamburgers is -2.5 and 2% increase in the price of ketchup will lead to a a. 5% drop in qty demanded of hamburgers 37. Demand is more inelastic in the short term because consumers a. Have no time to find available substitutes 38. Advertising elasticity is of demand is How much will you have to increase advertising in order to increase demand by 5%? a. 20% 39. If the cross-price elasticity between ketchup and hamburgers is -1.2 and 4% increase in the price of ketchup will lead to a 4.8% a. Drop in qty demanded of ketchup 40. Suppose the own-price elasticity of demand for good X is -0.5 and that price of good X increases by 10%. We would expect the qty demanded of good X to a. decrease by 5% 41. Assume that the price elasticity of demand is for a certain firm's product. If the firm lowers price, the firm's managers can expect total revenue to a. Either increase or remain constant depending upon the size of price decrease b. Decrease c. Increase d. Remain constant

5 42. The demand function in the above table is QX d = 100-2PX. Based on this information, when PX = $30, quantity demand, QX d, (point B) is a If the own price elasticity of demand is infinite in the absolute value then a. Demand is perfectly elastic 44. Which of the following provides a measure of the overall fit of regression? a. T-stat b. F-stat c. R-square d. The F-stat and R square 45. The demand for video recorders has been estimated to be Qv = Pf + 46Pm -2.1Pv - 5I, where Qv is the quantity of video recorders, Pf denotes the price of video recorder film, Pm is the price of attending a movie, Pv is the price of video recorders, and I is income. Based on the estimated demand equation we can conclude: a. Video recorders are inferior goods 46. The demand for good X has been estimated by Q x d = 12-3Px + 4Py. Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price elasticity. a b c d If the cross price elasticity of good X and Y is positive, we know the goods are: a. Substitutes 48. Suppose the own-price elasticity of demand for good X is -5, and that the quantity of good X decreases by 5%. What would you expect to happen to the total expenditures on good X? a. Decrease 49. Since most consumers spend very little on salt, a small increase in the price of salt will a. Not reduce qty demanded by very much

6 50. A firm derives revenue from two sources: goods X and Y. Annual revenues from good X and Y are $10,000 and $20,000, respectively. If the price elasticity of demand for good X is -4.0 and the cross-price elasticity of demand between Y and X is 2.0 then a 2 percent price decrease will a. Increase total revenues from X and Y by $520