Practice Mid-Term
1. In making a decision about whether to increase its advertising budget the firm management should not consider a. the added revenue from increased sales
b. the added cost of producing more goods for sale.
c. interest payments on the firm's loan.
d. the cost of increased advertising.
2. When marginal revenue is positive, a. demand is elastic. b. marginal revenue is greater than price. c. decreasing price will decrease total revenue. d. both b and c
3. When Sonoma Vineyards reduces the price of its Cabernet Sauvignon from $15 a bottle to $12 a bottle, the result is an increase in a. the demand for this wine. b. the supply of this wine. c. the quantity of this wine demanded. d. the quantity of this wine supplied.
4. Suppose a frost destroys much of the Florida orange corp. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice? a. Price will increase, quantity is indeterminate (may increase or decrease). b. Price will increase, quantity will increase. c. Price will decrease, quantity is indeterminate. d. The impact on both price and quantity is indeterminate.
5. When marginal cost is rising, average variable cost a. must be rising. b. must be falling. c. must be constant. d. could be rising or falling.
6. Economic profit is the best measure of a firm’s performance because a. normal profit is generally too difficult to measure. b. economic profit fully accounts for all sources of revenue. c. only explicit costs influence managerial decisions since, in general, only explicit costs can be subtracted from revenue for the purposes of computing taxable profit. d. the opportunity cost of using ALL resources is subtracted from total revenue.
7. Which of the following will NOT affect the elasticity of demand for a product? a. the number of substitutes
b. the added cost of producing more goods for sale.
c. interest payments on the firm's loan.
d. the cost of increased advertising.
2. When marginal revenue is positive, a. demand is elastic. b. marginal revenue is greater than price. c. decreasing price will decrease total revenue. d. both b and c
3. When Sonoma Vineyards reduces the price of its Cabernet Sauvignon from $15 a bottle to $12 a bottle, the result is an increase in a. the demand for this wine. b. the supply of this wine. c. the quantity of this wine demanded. d. the quantity of this wine supplied.
4. Suppose a frost destroys much of the Florida orange corp. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice? a. Price will increase, quantity is indeterminate (may increase or decrease). b. Price will increase, quantity will increase. c. Price will decrease, quantity is indeterminate. d. The impact on both price and quantity is indeterminate.
5. When marginal cost is rising, average variable cost a. must be rising. b. must be falling. c. must be constant. d. could be rising or falling.
6. Economic profit is the best measure of a firm’s performance because a. normal profit is generally too difficult to measure. b. economic profit fully accounts for all sources of revenue. c. only explicit costs influence managerial decisions since, in general, only explicit costs can be subtracted from revenue for the purposes of computing taxable profit. d. the opportunity cost of using ALL resources is subtracted from total revenue.
7. Which of the following will NOT affect the elasticity of demand for a product? a. the number of substitutes