Economics 5050
• Question 1
0 out of 1 points In making a decision about whether to increase its advertising budget the firm management should not consider
Answer
Selected Answer: the added revenue from increased sales
Correct Answer: interest payments on the firm's loan.
Response Feedback: Is this fixed cost that the firm has to pay regardless of advertising? • Question 2
0 out of 1 points If marginal cost is equal to average total cost, then
Answer
Selected Answer: a. marginal cost is minimized.
Correct Answer: b. average total cost is minimized. • Question 3
0 out of 1 points A restaurant currently has two cooks and ten waiters. Cooks earn $10 an hour and waiters earn $5 an hour. The last cook added 40 meals served to total output, while the last waiter added 25 meals served to total output. In order to maximize the number of meals served with a fixed budget, the manager should
Answer
Selected Answer: b. should use more cooks and fewer waiters because cooks are more productive than waiters.
Correct Answer: d. should use more waiters and fewer cooks because productivity per dollar is higher for waiters than for cooks.
Response Feedback: What is the Marginal Product (additional meals served) per dollar spent (wages) for cooks? What is the Marginal Product per dollar spent for waiters? Which is more productive per dollar spent? • Question 4
0 out of 1 points If the price elasticity of demand is 1.5 (in absolute value), regardless of which two points on the demand curve are used to compute the elasticity, then
Answer
Selected Answer: c. demand is perfectly elastic, and the demand curve is horizontal.
Correct Answer: d. demand is elastic, and the demand curve is downward sloping but not a straight line. • Question 5
0 out of 1 points When marginal cost is rising, average variable cost
Answer
Selected Answer: a. must be rising.
Correct Answer: d. could be rising or
0 out of 1 points In making a decision about whether to increase its advertising budget the firm management should not consider
Answer
Selected Answer: the added revenue from increased sales
Correct Answer: interest payments on the firm's loan.
Response Feedback: Is this fixed cost that the firm has to pay regardless of advertising? • Question 2
0 out of 1 points If marginal cost is equal to average total cost, then
Answer
Selected Answer: a. marginal cost is minimized.
Correct Answer: b. average total cost is minimized. • Question 3
0 out of 1 points A restaurant currently has two cooks and ten waiters. Cooks earn $10 an hour and waiters earn $5 an hour. The last cook added 40 meals served to total output, while the last waiter added 25 meals served to total output. In order to maximize the number of meals served with a fixed budget, the manager should
Answer
Selected Answer: b. should use more cooks and fewer waiters because cooks are more productive than waiters.
Correct Answer: d. should use more waiters and fewer cooks because productivity per dollar is higher for waiters than for cooks.
Response Feedback: What is the Marginal Product (additional meals served) per dollar spent (wages) for cooks? What is the Marginal Product per dollar spent for waiters? Which is more productive per dollar spent? • Question 4
0 out of 1 points If the price elasticity of demand is 1.5 (in absolute value), regardless of which two points on the demand curve are used to compute the elasticity, then
Answer
Selected Answer: c. demand is perfectly elastic, and the demand curve is horizontal.
Correct Answer: d. demand is elastic, and the demand curve is downward sloping but not a straight line. • Question 5
0 out of 1 points When marginal cost is rising, average variable cost
Answer
Selected Answer: a. must be rising.
Correct Answer: d. could be rising or