Econ 8069: Business Economics
2013
Tutorial week 5 Answers
1 The federal government decides that Australia should reduce air pollution by
reducing its use of petrol. The government imposes a $0.50 tax for each litre of petrol
sold. [13 points]
a.
Should t
Econ 8069: Business Economics
Semester 2, 2014
Tutorial 5 (Week 6)
Question 1
Most states tax the purchase of new cars. Suppose that Victoria currently requires car
producers to pay the state $1500 for each car sold and plans to decrease the tax to $1000
Question1
Jenniferdividesherincomebetweencoffeeandcroissants.AnearlyfrostinBrazilcausesalarge
increaseinthepriceofcoffeeinAustralia.
a) ShowtheeffectofthefrostonJennifersbudgetconstraint.
b) ShowtheeffectofthefrostonJennifersoptimalbundle,assumingthatthes
75.
Refer to the above information to answer this question. If the beer producers could price
discriminate on the basis of blood types, in order to maximize total revenue what price should
be charged to type A, type B and type O respectively?
A. $3, $3 an
58.
Refer to the information above to answer this question. As one reads down the TVC column,
what is the pattern in the numbers?
A. They fall until the fifth unit of labour used and then rise.
B. They rise until the fifth unit of labour used and then fal
111.What could have caused the average total cost curve to increase from ATC1 to ATC2?
A. Marginal product of the factor input has increased.
B. The price of the variable input has decreased.
C. Average product has decreased.
D. Average variable costs hav
177.Why are firms at times forced to operate at an output level less than at economic capacity?
178.What might cause the MC curve to shift down?
179.Why would firms want to operate at an output level above economic capacity?
180.Why would a firm not produ
153.Stefanie is presently working part time as an activities facilitator at a local community centre where
she earns $1,400 a month. She is not happy with her job and is thinking of returning to college to
do a two-year programme to upgrade her skills. Sh
111.
What could have caused the average total cost curve to increase from ATC1 to ATC2?
A. Marginal product of the factor input has increased.
B. The price of the variable input has decreased.
C. Average product has decreased.
D. Average variable costs ha
127.If we assume that the level of output remains unchanged, which of the following could cause a
decrease in average total, average variable, and marginal costs?
A. A decrease in the price of resources.
B. An increase in the price of resources.
C. An inc
29.
If marginal product is declining, which of the following statements is correct?
A. Average product must be falling.
B. Average product could be rising or falling.
C. Marginal cost must be falling.
D. Average variable cost must be rising.
E. Average va
121.
How do economists define economic capacity?
A. The maximum physical output possible.
B. The output that maximizes total cost.
C. The output that maximizes total product.
D. The output that minimizes marginal cost.
E. The output that minimizes average
104.
Refer to Table 5.16 to answer this question. If Ketta has a budget of $15 and the price of
croissants is $3, but the price of coffees is $2, what will be her optimal purchase?
A. 5 croissants.
B. 3 coffees and 2 croissants
C. 3 coffees and 3 croissan
54. Refer to the information above to answer this question. What are the missing numbers for AP in
the fourth column?
A. 20, 25, 20, 17.5 and -5.
B. 20, 15, 20, 17.5 and -5.
C. 10, 15, 20, 16.9 and 13.
D. 10, 25, 25, 16.9 and 0.
E. 10, 20, 20, 17.5 and -5
Difficulty: Difficult
Learning Objective: 06-04 List and graph the seven specific cost definitions used by economists.
Sayre - Chapter 06 #88
Topic: 06-05 Total Costs and Average Total Costs
Type: Pickup
89.
Refer to the graph above to answer this questio
171."A change in the AVC curve will lead to a change in the ATC curve; therefore, if there is a change
in the ATC curve, there must have been a change in the AVC curve." Evaluate this statement.
172.State whether each of the cost curves is U-shaped.
a) AT
81.
Refer to the information above to answer this question. At what output does MC = ATC?
A. 1.
B. 2.
C. 3.
D. 4.
E. 5.
Blooms: Analysis, Application
Difficulty: Difficult
Learning Objective: 06-03 Demonstrate the important difference between fixed costs
33. What is the law of diminishing returns?
A. As more of a fixed input is added to a variable input in the production process the resulting
increase in output will, at some point, accelerate.
B. As more of a variable input is added to a fixed input in th
43. Refer to the graph above to answer this question. How many units of labour does the firm need to
employ to achieve economic capacity?
A. 3.
B. 6.
C. 9.
D. 12.
E. Cannot be determined.
44. Refer to the graph above to answer this question. At what outpu
Difficulty: Difficult
Learning Objective: 06-05 Explain the meaning of increasing productivity and cutting costs.
Sayre - Chapter 06 #96
Topic: 06-05 Total Costs and Average Total Costs
Type: Pickup
97.
Refer to the information above to answer this questi
20.
What is meant by the term short run?
A. A production period in which at least one input is variable.
B. A production period in which at least one input is fixed.
C. Any period shorter than one year.
D. The time it takes for a capital asset to wear out
66. Refer to the information above to answer this question. What is the most productive level of
output?
A. 30.
B. 40.
C. 50.
D. 60.
E. Cannot be determined.
67. Refer to the information above to answer this question. What is the value of average variable
78. Refer to the information above to answer this question. What is average total cost when output is
2?
A. $8.
B. $11.
C. $12.
D. $14.
E. $28.
79. Refer to the information above to answer this question. What is total variable cost when output is
3?
A. Ze
102.Refer to the graph above to answer this question. What is the level of economic capacity?
A. 80.
B. 120.
C. 160.
D. 180.
E. 200.
103.Refer to the graph above to answer this question. At what output does excess capacity exists?
A. 180.
B. 200.
C. Any o
146.What is the difference between normal profits and economic profits?
147.How does the calculation of profit differ between an economist and an accountant?
148.The diagram below shows the production function for Clean-Like-New car wash business.
Number
90. Refer to the graph above to answer this question. Which curve illustrates average fixed cost?
A. 1.
B. 2.
C. 3.
D. 4.
91. Refer to the graph above to answer this question. At what output does diminishing returns begin?
A. 40.
B. 70.
C. 80.
D. 90.
92.
66.
Refer to the information above to answer this question. What is the most productive level of
output?
A. 30.
B. 40.
C. 50.
D. 60.
E. Cannot be determined.
Blooms: Analysis, Application
Difficulty: Difficult
Learning Objective: 06-03 Demonstrate the imp
105.
Refer to the graph above to answer this question. What is the most productive output?
A. 80.
B. 160.
C. 180.
D. 200.
E. 120.
Blooms: Analysis, Application
Difficulty: Difficult
Learning Objective: 06-03 Demonstrate the important difference between fi
128.
You have just spent two hours studying microeconomics and this has made you very hungry.
You have $10 to spend on a snack and decide to go to Taco Bell. Putting your newly acquired
economics knowledge to use, you have developed the following table to
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36.
Refer to the previous question to answer this question. How many units of labour are being
used when diminishing returns first become evident?
A. 1.
B. 2.
C. 3.
D. 4.
E. Cannot be determined.
Blooms: Analysis, Application
Difficulty: Difficult
Learnin
90.
In order for price discrimination to work, three conditions must be fulfilled. Which of the
following is not one of those conditions?
A. The seller must be able to identify and separate different groups of buyers.
B. The different groups of buyers mus
98.
What does the diamond-water paradox refer to?
A. The fact that water is far more plentiful than diamonds, even though people need more
diamonds.
B. The fact that water is far more valuable than diamonds, yet its price tends to be far lower.
C. The fac