ECO100Y5 Study Guide - Final Guide: Marginal Revenue, Equilibrium Point, Economic Equilibrium

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ECO100Y5 Full Course Notes

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Multiple choice (10 marks total)-choose the single best answer and write it on the blank provided. ___c____1) suppose that the demand curves for goods a, b, and c have the following functional forms, where q denotes quantity demanded and p denotes price:! Qa = 120 - 3. 5pa - 6pb > complements ! Qb = 100 - 2pb + 3pc > substitutes ! Substitutes: prices of one good increases, other good will increase in qd! Compliment: price of one good goes up,demand of compliment decrease ! *look for positive relationship between one good and other* ! ___a____4) assume a rm is using 10 units of capital and 10 units of labour to produce 10 widgets per hour. By doubling both inputs the result is a doubling of output. This rm is experiencing: constant returns to scale, economies of scale, decreasing returns, increasing costs, diseconomies of scale.

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1. Fill in the table below.

Q	FC	VC	TC	MC	AFC	AVC	ATC
0			20	-	-	-	-
1		1
2				3
3						4
4							12

16. Government Motors can produce cars according to the following schedule.

Labor	Total Product	Average Product	Marginal Product
0	0	-	-
1	?	3	?
2	?	?	4

What is the average product of labor when 2 units of labor are used in production?

(a) 4

(b) 3.5

(d) 1.5

17. Suppose demand is given by the equation Q_D = 12-3P. What is the price where demand is exactly unitary elastic?

(a) 1

(b) 2

(d) 4

18. When the price of good A is $20, the quantity of good B purchased is 400. When the price of good A is $40, the quantity of good B purchased is 750. Using the midpoint rule, the cross-price elasticity of demand between goods A and B is

(a) -0.91 and the goods are complements

(b) 0.91 and the goods are substitutes

(d) -2.20 and the goods are complements

whitecricket532

1. When demand is inelastic, a decrease in price will cause

a. an increase in total revenue.

b. a decrease in total revenue.

c. no change in total revenue but an increase in quantity demanded.

d.no change in total revenue but a decrease in quantity demanded.

2. For which of the following types of goods would the income elasticity of demand be positive and relatively large?

a. all inferior goods

b. all normal goods

c. goods for which there are many complements

d. luxuries

3. Which of the following should be held constant when calculating the income elasticity of demand?

a. the quantity of the good demanded

b. the price of the good

c. income

d. All of the above should be held constant.

4. Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

a. positive.

b. negative.

c. either positive or negative. It depends on whether A and B are normal goods or inferior goods.

d. either positive or negative. It depends on whether the current price level is on the elastic or inelastic portion of the demand curve.

5. As the price elasticity of supply increases, the supply curve

a. becomes flatter

b. becomes steeper

c. becomes downward sloping.

d. shifts to the right.

brownsea-lion330

Ch. 6: Simple Pricing

a. define the Law of Demand?

b. Explain the distinction between a change in demand and a change in quantity demanded?

c. create a demand curve from a simple demand schedule in Table 6.2?

d. determine the calculated values in a table such as Table 6.4?

e. Can you apply your understanding of Chapter 4s marginal analysis to pricing decisions in a price-making (versus price-taking) firm?

f. Can you explain in words what Own Price Elasticity, Cross-Price Elasticity, and Income Elasticity mean?

g. Given specific values for Own-Price Elasticity of Demand, can you determine whether demand for the good is elastic, inelastic, or unit elastic?

h. Given specific values for Cross-Price Elasticity, can you determine whether the two goods are substitutes or complements?

i. Given specific values for Income Elasticity, can you determine whether the good is a normal or inferior good?

j. Can you calculate each of these elasticities, such as in the homework?

k. Identify relatively elastic and inelastic demand curves?

l. List factors that may affect demand elasticity.

m. Indicate whether total revenue will increase or decrease as a result of a price change, depending on the demand elasticity?

The textbook used for this assignment is Managerial Economics, Froeb Chapters.

rubylouse898

ECO100Y5 Study Guide - Final Guide: Marginal Revenue, Equilibrium Point, Economic Equilibrium

ECO100Y5 Full Course Notes

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