1. Suppose that a widget is considered a normal good. What is the impact of a decrease in income on the perfectly competitive market for widgets?

1. The price of widgets will increase and the quantity exchanged will decrease.
2. The price of widgets will decrease and the quantity exchanged will decrease
3. The price of widgets will increase and the quantity exchanged will increase.
4. The price of widgets will decrease and the quantity exchanged will increase.

2. What is the absolute value of price elasticity of demand from (P =6, Q=900)   to (P = 8, Q= 800)

Round your answer to 3 decimal points and interpret the meaning of your answer.

3. A decrease in demand for oil and an increase in supply of oil will:

     A) quantity decreases, but price may either increase, decrease, or remain unchanged.

     B) price increases, but quantity may either increase, decrease, or remain unchanged.

     C) quantity increases, but price may either increase, decrease, or remain unchanged.

     D) price decreases, but quantity may either increase, decrease, or remain unchanged.

4. A firm in a perfectly competitive industry is producing where short run marginal cost is less than price. Total revenue is $1700; short run total cost is $1800 and total fixed cost is $500. The firm’s best strategy in the short run is to

A) Increase its price.              B) Increase its output.

C) Decrease its output.           D) Shut down.

E) Maintain output at its present level.

5. A firm in a perfectly competitive industry is producing where short run marginal cost is equal to price. Total revenue is $700; short run total cost is $800 and total fixed cost is $300. The firm’s best strategy in the short run is to

A) Increase its price.              B) Increase its output.

C) Decrease its output.           D) Shut down.

E) Maintain output at its present level.

6. Productive efficiency refers to:

A) maximizing profits by producing where MR = MC.              B) setting TR = TC.

C) cost minimization, where P = minimum ATC.                D) equilibrium, where MB = MC

1. Cross Price elasticity of demand between two substitute goods is:

     A)   positive.    B) unitary.    C) zero.    D) negative.

2. Allocative efficiency occurs when producing the quantity where:

A) Marginal Revenue = Marginal Cost.                          B) Marginal Benefits = Marginal Cost.

C)   Price = minimum Average total Cost.                      D) Total Revenue = Total Cost.

3. A normative statement is one which

A) is based on the law of averages.                                       B) is based on generalizations.

C) is based upon, subjective beliefs or opinions.                  D) is based on facts.

4. Which of the following goods has the characteristic of non-rivalry, and non-excludability?

A) congested highway with a toll booth.                            B) A cell phone signal

   C) a pair of pants.                                                                D) asteroid defence.

Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial information pertaining to cost of quality (COQ) in 2019 and 2020 (in thousands of dollars):

QUESTIONS:

1. Classify the cost items in the table into cost-of-quality (COQ) categories. Calculate the ratio of each COQ category to revenues in each of the 2 years.

2. Calculate the percentage change in each COQ category and total COQ and comment on the results:

If total assets of Brooks Corporation are $100,000, total liabilities are $17,000, and capital stock is $20,000, how much are the retained earnings of Brooks Corporation?

Assume that total output is determined by this formula: TOTAL OUTPUT = NUMBER OF WORKERS X PRODUCTIVITY assume there are 100 workers and each worker produces $100 of output. QUESTION: If the workforce is growing by 1% a year but productivity does not improve, how fast can output increase? Remember, the number of workers grows by 1%. Productivity does not change. Also remember the percentage change formula which is: [(new value - original value) / original value] x 100

a1%

b 3%

c2.3

d % $10,500

e $62.50

Briefly describe the 4 alternative ways to measure total production and total income:

Total Product Curve.

a. Draw a diagram of the total product curve for medical care as a function of nurse labor.

b. Explain how the productivity of nurse labor influences the shape of the curve. Be sure to refer to points on the curve in your explanation.

c. Graph the marginal and average products for nurse labor.

d. Explain how the two values relate to each.

Which of the following statements about the total debt to total assets ratio is NOT true?

A bank's balance sheet equates the value of total assets to the sum of total liabilities and equity capital. (T/F)

Negotiable certificates of deposit (CDs) do not have an active secondary market. (T/F)

In a bankruptcy situation, the Federal Reserve acts as the liquidator of the bank. (T/F)

International expansion for financial institutions coming from highly integrated countries maximizes the risk diversification. (T/F)

The financial crisis of 2008, demonstrated that activities such as trading in financial futures and interest-rate swaps have low risk. (T/F)

Determine the effect of the following errors on a company's total revenue, total expenses, and net income. Indicate the effect by selecting Overstated (too much), Understated (too little),or Not Affected.