Economics - Topics in Demand and Supply Analysis

If the price elasticity coefficient of the demand curve for paper clips is equal to

–1, demand is:

• elastic.

• inelastic.

• unit elastic.

• -0.778

• -0.500

• -0.438

Price elasticity of demand for a good will most likely be greater if:

• there are no substitutes for the good.

• consumers consider the good as discretionary.

• consumers spend a small portion of their budget on the good.

For a Giffen good, the:

• demand curve is positively sloped.

• substitution effect overwhelms the income effect.

• income and substitution effects are in the same direction.

The production relationship between the number of machine hours and total

product for a company is presented below.

Diminishing marginal returns first occur beyond machine hour:

• 3.

• 4.

• 5.

The marginal revenue per unit sold for a firm doing business under conditions

of perfect competition will most likely be:

• equal to average revenue.

• less than average revenue.

• greater than average revenue.

The short-term breakeven point of production for a firm operating under perfect

competition will most likely occur when:

• price is equal to average total cost.

• marginal revenue is equal to marginal cost.

• marginal revenue is equal to average variable costs.

A profit maximum is least likely to occur when:

• average total cost is minimized.

• marginal revenue equals marginal cost.

• the difference between total revenue and total cost is maximized.

A company is experiencing economies of scale when:

• cost per unit increases as output increases.

• it is operating at a point on the LRAC curve where the slope is negative.

• It is operating beyond the minimum point on the long-run average total cost curve.

Under conditions of perfect competition, in the long run firms will most likely

earn:

• normal profits.

• positive economic profits.

• negative economic profits.