Mr hudson notes that if he produces 10 pairs of shoes

10.
Mr. Hudson notes that if he produces 10 pairs of shoes per day, his average fixed cost
(AFC) is $14 and his marginal cost $8; if he produces 20 pairs of shoes per day, his MC is
$15. What is his AFC when output is 20 pairs of shoes per day?
A) $5
B) $15
C) $8
D) $7
Feedback: If the average fixed cost on 10 pairs is $14, then total fixed cost is 10 x $14 =
$140. As fixed cost does not change with output, then at 20 pairs, you simply divide $140
by 20, which gives us $7/pair.
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Correct Answer(s): D
Lesson 4
1.
The difference between the amount consumers would be willing to pay and the amount
they actually pay for a good is called
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2.
A sugar beet famine reduces the size of the sugar crop by half, and at the same time
candy (made form sugar) is shown to make you smarter. This will result in
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3.
Which of the following is least likely to increase the demand for new tires?

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4.
As societies become wealthier, they tend to eat more meat. This means that meat is
A) an inferior good
B) an Atkins good
C) a normal good
D) a superior good
Feedback: A normal good is one with a positive income elasticity - as somebody gets
wealthier, their consumption of the good increases.
Correct Answer(s): C
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