What is the Degree of Operating Leverage? What will be an ideal response? ANSWER It is an elasticity formula which calculates the percentage change in profit resulting from some percentage change in the level of operation (output and sales).
Date: September 9th, 2020
Cindy’s attitudes towards risk are summarized by the utility function U(w) = . Cindy has an initial wealth of $100. There is a 10% chance that her home will sustain flood damage next year costing her $40 in repairs. What is the most she will pay to for a full $40 of flood insurance? […]
Date: September 9th, 2020
The Social Security program is like a private pension plan in that _____. a. it is a pay-as-you-go system b. it is voluntary c. benefits are a function of earlier contributions d. you have a legal right to your benefits ANSWER c
Date: September 9th, 2020
If a firm sets marginal revenue equal to marginal cost it will make an economic profit. Indicate whether the statement is true or false ANSWER False . When a firm sets MR = MC it maximizes profits but the profit-maximizing level of output might still be negative (the smallest loss possible).
Date: September 9th, 2020
For a theme park two-tier pricing can include a positive admission price and a zero per-ride fee. Indicate whether the statement is true or false ANSWER True . Both fees do not have to be positive. The firm will choose the combination of fee and per-ride price that maximizes profits.
Date: September 9th, 2020
Demand and supply in the wheat market are given by: QD = 2000 – 1000 P and QS = -500 + 1000 P where Q is millions of bushels and P is price per bushel. a. Find the equilibrium price and quantity. b. Suppose that the government wishes to support farm income and thus sets […]
Date: September 9th, 2020
What are the limitations in using break-even analysis? What will be an ideal response? ANSWER It requires the use of linear cost and revenue functions; it isn’t applicable if the functions are non-linear. It assumes that there are fixed costs, which means the analysis can be applied only to short-run operations. It can’t handle […]
Date: September 9th, 2020
The official name of the Social Security program is _____. a. Old Age, Survivors, Disability, and Health Insurance b. Old Age, Dependents, Survivors, and Disability Insurance c. Old Age, Dependents, Disability, and Health Insurance d. Seniors, Survivors, Dependents, and Health Insurance ANSWER a
Date: September 9th, 2020
Unions have generally been far more successful in organizing and raising wages in skilled trades such as carpentry than in unskilled trades. Use the laws of derived demand to explain why. What will be an ideal response? ANSWER There are at least two reasons. One is that the elasticity of substitution between skilled workers […]
Date: September 9th, 2020
One way a government can eliminate a market failure A) is to regulate the price so that it equals marginal cost. B) is to implement a price floor equal to marginal cost. C) is to regulate the price so that it is below average cost. D) None of the above solutions will eliminate a market […]
Date: September 9th, 2020
