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Exam 1 Review
1) Economics is best defined as the study of how people, businesses, governments, and societies
A) choose abundance over scarcity.
B) make choices to cope with scarcity.
C) use their infinite resources.
D) attain wealth.
2) The problem of "scarcity" applies
A) only in industrially developed countries because resources are scarce in these countries.
B) only in underdeveloped countries because there are few productive resources in these countries.
C) only in economic systems that are just beginning to develop because specialized resources are scarce.
D) to all economic systems, regardless of their level of development.
3) Studying the determination of prices in individual markets is primarily a concern of
A) positive economics.
B) negative economics.
C) macroeconomics.
D) microeconomics.
4) Which of the following best defines capital as a factor of production?
A) The gifts of nature that businesses use to produce goods and services.
B) The knowledge and skills that people obtain from education and use in production of goods and services.
C) Financial assets used by businesses.
D) Instruments, machines, and buildings used in production.
5) The production possibilities frontier is the boundary between
A) those combinations of goods and services that can be produced and those that can be consumed.
B) those resources that are limited and those that are unlimited.
C) those combinations of goods and services that can be produced and those that cannot.
D) those wants that are limited and those that are unlimited.
6) The production possibilities frontier itself shows
A) the maximum amount of resources available at any given time.
B) combinations of goods and services that do not fully use available resources.
C) the maximum rate of growth of output possible for an economy.
D) the maximum levels of production that can be attained.
7) The production possibilities frontier separates ________.
A) the goods and services that people want from those that they do not want
B) the types of goods that can be attained from those that can't be attained
C) the quantities of goods and services that can be produced from those that cannot be produced
D) the combinations of goods that people value and those that they don't
8) When producing at a production efficient point, ________.
A) our choice of the goods can be either on or within the production possibilities frontier
B) we can satisfy our all wants
C) the opportunity cost of another good is zero
D) we face a tradeoff and incur an opportunity cost
Picture Not Working: point "a" inside the PPF
9) The figure above shows Roger's production possibilities frontier. Point a is an ________ point and at that point production is ________.
A) attainable; efficient
B) attainable; inefficient
C) unattainable; inefficient
D) unattainable; efficient
Picture NOT Working: Current 10 tons of clothing and 15 tons of food, Future 5 tons of clothing, 25 tons of food
10) The above figure illustrates that if this country wishes to move from its current production point (labeled "Current") and have 10 more tons of food, it can do this by producing
A) 10 more tons of clothing.
B) 10 fewer tons of clothing.
C) 5 more tons of clothing.
D) 5 fewer tons of clothing.
11) A country that must decrease production of one good in order to increase the production of another
A) must be using resources inefficiently.
B) must be producing on its production possibilities frontier.
C) must be producing beyond its production possibilities frontier.
D) must have private ownership of property.
Picture NOT Working: Point F inside PPF, Point G on PPF, Point H outside PPF, Point I bottom of PPF
12) Consider the PPF for office buildings and housing shown in the figure above. Which point in the diagram shows that resources to produce office buildings and housing are being misallocated, unused, or both?
A) Point F
B) Point G
C) Point H
D) Point I
13) A relative price is the
A) slope of the demand curve.
B) difference between one money price and another.
C) slope of the supply curve.
D) ratio of one money price to another.
14) The relative price of a good is
A) an opportunity cost.
B) equal to the money price of a good.
C) equal to the price of that good divided by the quantity demanded of the good.
D) what you get paid for babysitting your cousin.
15) If the price of a hot dog is $2 and the price of a hamburger is $4, then the
A) relative price of a hot dog is 1/2 of a hamburger per hot dog.
B) money price of a hot dog is 2 hamburgers per hot dog.
C) relative price of a hamburger is 1/2 of a hot dog per hamburger.
D) money price of a hamburger is 2 hot dogs per hamburger.
16) The opportunity cost of a good is the same as its
A) money price.
B) relative price.
C) price index.
D) none of the above
17) Wants, as opposed to demands,
A) are the unlimited desires of the consumer.
B) are the goods the consumer plans to acquire.
C) are the goods the consumer has acquired.
D) depend on the price.
18) The quantity demanded of a good or service is the amount that
A) a consumer would like to buy but might not be able to afford.
B) is actually bought during a given time period at a given price.
C) consumers plan to buy during a given time period at a given price.
D) firms are willing to sell during a given time period at a given price.
19) The quantity demanded is
A) always equal to the equilibrium quantity.
B) independent of the price of the good.
C) the amount of a good that consumers plan to purchase at a particular price.
D) independent of consumers' buying plans.
20) The law of demand states that, other things remaining the same, the higher the price of a good, the
A) smaller is the demand for the good.
B) larger is the demand for the good.
C) smaller is the quantity of the good demanded.
D) larger is the quantity of the good demanded.
21) The law of demand implies that demand curves
A) slope down.
B) slope up.
C) shift rightward whenever the price rises.
D) shift leftward whenever the price rises.
22) For normal goods which of the following explains why demand curves slope downward?
A) prices and income
B) substitutes and complements
C) resources and technology
D) substitution effect and income effect
23) Apples are a normal good, so if the price of an apple increases from 50¢ to 60¢, the quantity of apples demanded decrease because of
A) the substitution effect only.
B) the income effect only.
C) a change in income.
D) the substitution and income effects.
24) Each point on the demand curve reflects
A) all the wants of a given household.
B) the highest price consumers are willing and able to pay for that particular unit of a good.
C) the highest price sellers will accept for all units they are producing.
D) the lowest-cost technology available to produce a good.
25) A substitute is a good
A) that can be used in place of another good.
B) that is not used in place of another good.
C) of lower quality than another good.
D) of higher quality than another good.
26) A complement is a good
A) of lower quality than another good.
B) used in conjunction with another good.
C) used instead of another good.
D) of higher quality than another good.
27) Ham and eggs are complements. If the price of ham rises, the demand for eggs will
A) increase or decrease but the demand curve for ham will not change.
B) decrease and the demand curve for ham will shift rightward.
C) not change but there will be a movement along the demand curve for eggs.
D) decrease and the demand curve for eggs will shift leftward.
28) The price of a tomato increases and people buy more lettuce. You infer that lettuce and tomatoes are ________.
A) complements
B) normal goods
C) substitutes
D) inferior goods
29) Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the
A) price elasticity of demand.
B) the price elasticity of supply.
C) income elasticity of demand.
D) cross elasticity of demand.
30) The price elasticity of demand measures
A) how often the price of a good changes.
B) the slope of a budget curve.
C) how sensitive the quantity demanded is to changes in demand.
D) the responsiveness of the quantity demanded to changes in price.
31) The price elasticity of demand equals magnitude of the
A) change in the price divided by the change in quantity demanded.
B) change in the quantity demanded divided by the change in price.
C) percentage change in the price divided by the percentage change in the quantity demanded.
D) percentage change in the quantity demanded divided by the percentage change in the price.
32) The worst drought in over 50 years has decimated crops of soy beans and corn in the United States. (Source: New York Times, August 10, 2012). Because the production of corn has decreased, prices are expected to increase by 25 percent. These data are insufficient for calculating the elasticity of demand because we also need to know the
A) percentage increase in income.
B) percentage increase in quantity.
C) percentage decrease in quantity.
D) increase in bushels per acre.
33) The price elasticity of demand for new cars is 1.2. Hence, a 10 percent price increase will
A) decrease the quantity of new cars demanded by 1.2 percent.
B) increase consumer expenditure on new cars by 1.2 percent.
C) decrease the quantity of new cars demanded by 12 percent.
D) increase consumer expenditure on new cars by 12 percent.
34) The price elasticity of demand can range between
A) zero and one.
B) negative infinity and infinity.
C) zero and infinity.
D) negative one and one.
35) If the quantity demanded changes by a relatively small amount for a given change in price, then demand is
A) perfectly inelastic.
B) perfectly elastic.
C) elastic.
D) inelastic.
36) Demand is inelastic if
A) a large change in quantity demanded results in a small change in price.
B) the quantity demanded is very responsive to changes in price.
C) the price elasticity of demand is less than 1.
D) the price elasticity of demand is greater than 1.
37) In the United States, resources are most often allocated by
A) market price.
B) command system.
C) lottery.
D) contest.
38) Which of the following is true?
A) Lotteries work best when a resource can serve just one user at a time in a sequence.
B) A market price always allocates resources better than a command system.
C) In the United States, how tax dollars are allocated among competing uses is an example of how resources are allocated by majority rule.
D) Force has never played an important role in allocating scarce resources.
39) As a method of resource allocation, market price
A) means those who are willing and able to pay get a particular good or service.
B) works well when self-interest must be suppressed.
C) works best inside firms and government departments.
D) is efficient when there is no effective way to distinguish among potential users of a scarce resource.
40) When scarce resources can serve only one user at a time in sequence, which method works well for allocating the scarce resources?
A) first come, first served
B) lottery
C) contest
D) command system
41) Allocating resources by the order of someone in authority is a ________ allocation method.
A) first-come, first-served
B) market price
C) majority rule
D) command
42) The value of one more unit of a good or service is the
A) marginal benefit.
B) minimum price that people are willing to pay for another unit of the good or service.
C) marginal cost.
D) opportunity cost of producing one more unit of a good or service.
43) A market demand curve measures
A) how much a consumer is willing to pay for an additional unit of the good.
B) the marginal social benefit of an additional unit of the good.
C) the marginal social cost of an additional unit of the good.
D) Both answers A and B are correct.
44) A price ceiling is a price
A) below which a seller cannot legally sell.
B) above which a seller cannot legally sell.
C) that creates a surplus of the good.
D) Both answers A and C are correct.
45) A rent ceiling set above the equilibrium rent
A) decreases the quantity demanded but not the quantity supplied.
B) decreases the quantity supplied but not the quantity demanded.
C) decreases both the quantity demanded and the quantity supplied.
D) has no effect on the market outcome.
46) Suppose the government imposes a price ceiling on gasoline that is less than the equilibrium price. As a result,
A) the price of gasoline rises to the equilibrium price.
B) there is incentive for buyers to undertake search activity.
C) the supply of gasoline will increase and the supply curve will shift rightward.
D) the demand for gasoline will decrease and the demand curve will shift leftward.
47) A price ceiling can result in which of the following?
A) inefficiency
B) black markets
C) increased search activities
D) All of the above answers are correct.
IGNORE Q48 AND Q49
48) The above figure shows the apartment rental market in Bigtown. At what rent will there be neither a shortage nor a surplus of apartments?
A) $1250 per month
B) $1000 per month
C) $750 per month
D) $500 per month
49) A price floor
A) always results in a surplus.
B) always results in a shortage.
C) results in a surplus if the floor price is higher than the equilibrium price.
D) results in a shortage if the floor price is higher than the equilibrium price.
50) A minimum wage set above the equilibrium wage rate is a price ________ that ________ the quantity of low-skilled labor demanded.
A) ceiling; decreases
B) ceiling; increases
C) floor; decreases
D) floor; increases
In: Economics
Take a look at this financial plan for an EcoFriendly cleaning product. Do these financial assumptions make sense? If not, what financial assumptions would you make?
Financial Plan. According to Gallup News website 39% of people are buying green products in east coast of America. We are assuming that 39% in Boston are interested buying green products. The total population in Boston is 673,184, which means that 262,541 are buying green products. We want to reach 1% of the customers within 6 months. We are assuming that we can sell 1000 units in the first month and we will sell 15,249 units by year one as a short term objective. The total start cost is $56,500 and the total funds are $81,000 ending with $24,500 cash. We get $60,000 loan from one member's father and we contribute $7,000 each. Total fixed cost in the first year is $9,550 each month, and $17,470 each month in the second year. We are assuming that we will sell 1000 units in the first month because there are some cleaning companies in Boston that use green products only, and they will try our products. The total revenue in the first month is $4255 with $1000 product cost. By the end of the first month we end up with a negative net income of ($-6,759). We start making profit when the sales unit increases in month six. By the end of the year we are assuming that we will sell 15,249 units with $171,963 revenue, and total cost of good sold of $40,199. Our net income will be $11,596 in first year. Second year, we increase marketing budget and hire more employees to reach $331,614 total revenue. By the end of year 2 our net income will be $39,063 and $72,322 on year 3. We maintain a positive cash flow to service during the first six months where our net income is negative. After six month our cash flow increases because we assuming that we will have a positive net income by six month. There are money companies in the market selling the same products we have and that means that the demand for green products is increasing. Our business makes sense because there are customers buying cleaning products and we are adding the value to customers by providing green cleaning products at a competitive price.
In: Finance
Answer the following 20 True or False questions by filling in your answers in the table provided at the end of this section. Each correct answer will be awarded 2 marks.
In: Finance
Dazzle Jewelry Company is a new startup merchandising company with the goal of offering fine jewelry at reasonable prices. This goal has been made possible by securing manufactures that have agreed to offer wholesale prices to Dazzle Jewelry Company. Dazzle's jewelry supplier's act in good faith is based on the hopes that this will be a long term relationship, and Dazzle's orders will increase considerably with the next 18 months. However, in order for Dazzle Jewelry Company to achieve this it must increase its sales. Dazzle Jewelry company just completed its first month of operations, the brother/sister owned startup inventory includes fresh water pearls, sterling silver, stainless steel watches and quality stone pieces. Each of the inventory category includes earrings, necklaces, rings and bracelets, except the stainless steel watches. The average cost of earrings per unit is $10 with an average selling price of $55, 20 units have been sold. The average cost of the necklace is $15 with a selling price of $65, 25 units have been sold. The bracelets have an average cost of $12 and a selling price of $45, 15 units have been sold. The rings on an average sell for $35, but cost $11 per unit, 30 units have been sold. The stainless steel watches average cost per unit is $35 with a selling price average of $85, and 50 units have been sold. Dazzle Jewelry Company plans to start their business online before setting up a physical store location to keep their overhead cost low. However, since this is Dazzle Jewelry's first year of operations the owners have decided to employed your firm to help them determine how many jewelry units they need to sell in the current operating year to reach their targeted profit of $300,000. The owners realize that this information is vital in helping them develop their sales and marketing strategy. Dazzle Jewelry Company owners noted in a follow-up e-mail that fixed cost for the year totaled $76,320, however this cost is likely to increase in the coming months by 20% based on a marketing proposal that was submitted by Bosch Advertising. The owners also noted in the e-mail that fixed cost is the same amount each month.
Based on your analysis, how many units will Dazzle Jewelry need to break-even? What recommendation do you have for the owners related to break-even?
In: Accounting
Jeb is the owner of a small-scale chocolate factory operated in South Burnaby area. Jeb sells a variety of chocolate products via Sam Foods (a food distributor) to local food retailers in the Burnaby area.
Jeb recently added a new line of premium Hazelnut chocolates to his existing Milk chocolate product line. After some initial research, Jeb is planning to sell a pack of Hazelnut chocolates to Sam Foods at an introductory price of $12 a pack (for the first year of its launch). During the first six months after the launch, Jeb sold 2400 packs of Hazelnut chocolates to Sam Foods.
[1] Jeb’s target is to make a 28% gross mark-up
(on Jeb’s selling price) on all new products that he sells to Sam
Foods. If Jeb is to make this profit target %, what is the maximum
cost Jeb should incur in manufacturing a pack of Hazelnut
chocolates.
[2] Calculate Jeb’s gross margin % for a Hazelnut
chocolate pack. Is there a difference between the margin and the
mark up %? Why? Explain.
[3] Sam Foods makes profits by adding a 25% margin
to the price he pays to Jeb. Local food retailers usually
mark-up chocolate products by 32% in setting
retail prices. Considering the above, calculate the final price
paid by the end consumers for a pack of Hazelnut chocolates. Show
your work clearly.
Jeb noticed Hazelnut chocolates were cannibalizing 40% of their regular Milk chocolate packs purchased by Sam Foods during this same period. Jeb sells regular Milk chocolates to Sam Foods at $10 a pack with a 35% margin. The cost structure of milk chocolates is the same the Hazelnut chocolates.
Jeb is interested to calculate his breakeven sales volume for the Hazelnut chocolate product line. 65% of the total cost of the Hazelnut chocolates (answer to Q1) were variable costs. The fixed costs to set up and launch Hazelnut chocolates were $15,000.
[4] What is Jeb’s break-even volume for Hazelnut chocolates? What is Jeb’s profit or loss from Hazelnut chocolates based on his current level of sales (six months)?
[5] Using the DIKW model, should jeb continue sell Hazelnut
chocolates at the expenses of his milk chocolate product line? What
is your advice to Jeb?
In: Accounting
13 Refer to the following table:
|
Number of workers |
Output |
Marginal Product of Labor |
Value of Marginal Product of Labor |
Wage |
Marginal Profit |
|
0 |
0 |
-- |
-- |
$300 |
-- |
|
1 |
300 |
300 |
$600 |
$300 |
$300 |
|
2 |
500 |
200 |
AA |
$300 |
$100 |
|
3 |
600 |
100 |
$200 |
$300 |
BB |
|
4 |
650 |
CC |
DD |
$300 |
- $200 |
| 13.1. |
Problem Set #7 - Part II - 13.1 (A) What is the value for the cell labeled AA? |
| A. $300 | ||
| B. $600 | ||
| C. $400 | ||
| D. $500 | ||
| E. $200 |
| 13.2. |
Problem Set #7 - Part II - 13.2 (B) What is the value for the cell labeled BB? |
| A. $300 | ||
| B. $-100 | ||
| C. $0 | ||
| D. $100 | ||
| E. $200 |
| 13.3. |
Problem Set #7 - Part II - 13.3 (C) What is the value for the cell labeled CC? |
| A. 650 | ||
| B. 0 | ||
| C. 600 | ||
| D. 50 | ||
| E. 100 |
| 13.4. |
Problem Set #7 - Part II - 13.4 (D) What is the value for the cell labeled DD? |
| A. $0 | ||
| B. $100 | ||
| C. $50 | ||
| D. -$100 | ||
| E. $300 |
In: Economics
You are building a bus stop shelter and have been working on it for 20 days. Your boss has asked for a status report for the project after 20 days.
a) Fill in the missing values in the following Status Report.
b) For the entire project, what is the current
a. Cost Performance Index, CPI = ________,
b. Schedule Performance Index, SPI = _________,
c. Cost Variance, CV = _________,
d. Schedule Variance, SV = __________.
c) Suppose that the work from this date forward will progress at planned rates whether or not these rates have prevailed to date. What is the forecasted cost at completion (FAC) for the entire project?
| item | total budget($) | planned progress | BCWS($) | ACWP($) | ACTUAL PROGRESS | BCWP($) | CV | SV | FAC($) |
| excavation | 9600 | 100% | 9000 | 100% | |||||
| cast slab | 1800 | 100% | 2000 | 100% | |||||
| curb | 1500 | 100% | 1500 | 100% | |||||
| walls | 2700 | 80% | 2500 | 100% | |||||
| paving | 1200 | 40% | 300 | 20% | |||||
| roof trusses | 1000 | 40% | 500 | 60% | |||||
| roofing | 600 | 10% | 0 | 0% | |||||
| lights | 500 | 20% | 250 | 40% | |||||
| seating | 500 | 0% | 0 | 0% | |||||
| paint | 1000 | 0% | 0 | 0% |
In: Operations Management
Barlow Company manufactures three products—A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow:
|
Product |
|||||||||||
| A | B | C | |||||||||
| Selling price | $ | 180 | $ | 270 | $ | 240 | |||||
| Variable expenses: | |||||||||||
| Direct materials | 24 | 80 | 32 | ||||||||
| Other variable expenses | 102 | 90 | 148 | ||||||||
| Total variable expenses | 126 | 170 | 180 | ||||||||
| Contribution margin | $ | 54 | $ | 100 | $ | 60 | |||||
| Contribution margin ratio | 30 | % | 37 | % | 25 | % | |||||
The same raw material is used in all three products. Barlow Company has only 6,600 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier’s plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $8 per pound.
Required:
1. Calculate the contribution margin per pound of the constraining resource for each product.
2. Assuming that Barlow has unlimited demand for each of its three products, what is the maximum contribution margin the company can earn when using the 6,600 pounds of raw material on hand?
3. Assuming that Barlow’s estimated customer demand is 500 units per product line, what is the maximum contribution margin the company can earn when using the 6,600 pounds of raw material on hand?
4. A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. Assuming Barlow’s estimated customer demand is 500 units per product line and that the company has used its 6,600 pounds of raw material in an optimal fashion, what is the highest price Barlow Company should be willing to pay for an additional pound of materials?
In: Accounting
Barlow Company manufactures three products—A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow:
|
Product |
|||||||||||
| A | B | C | |||||||||
| Selling price | $ | 160 | $ | 270 | $ | 230 | |||||
| Variable expenses: | |||||||||||
| Direct materials | 16 | 80 | 24 | ||||||||
| Other variable expenses | 108 | 90 | 152 | ||||||||
| Total variable expenses | 124 | 170 | 176 | ||||||||
| Contribution margin | $ | 36 | $ | 100 | $ | 54 | |||||
| Contribution margin ratio | 23 | % | 37 | % | 23 | % | |||||
The same raw material is used in all three products. Barlow Company has only 6,000 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier’s plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $8 per pound.
Required:
1. Calculate the contribution margin per pound of the constraining resource for each product.
2. Assuming that Barlow has unlimited demand for each of its three products, what is the maximum contribution margin the company can earn when using the 6,000 pounds of raw material on hand?
3. Assuming that Barlow’s estimated customer demand is 500 units per product line, what is the maximum contribution margin the company can earn when using the 6,000 pounds of raw material on hand?
4. A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. Assuming Barlow’s estimated customer demand is 500 units per product line and that the company has used its 6,000 pounds of raw material in an optimal fashion, what is the highest price Barlow Company should be willing to pay for an additional pound of materials?
In: Accounting
The company was established with authorized capital 300 000$, of which 200 000$ were in cash, 60 000$ was in Building, 40 000$ was in equipment. The company has employees with salary 15 000$. During the week the company acquired a car for company needs, by the price 20 000$ and paid in cash the full amount. Then it obtained office supplies from Intellect LLC by the price 2000$, but paid 20% in cash. In order to get familiar to the publicity, the company arranged several interviews with one of the channels, and for this cause preliminary rented a room (which included snack and service) in PLAZA, and paid in advance in cash the amount 8000$ for the whole month. The company was supplied with goods from Craft LLC by the price 100 000$, plus freight-in charges in the amount of 3000$. During the check, there were found out that some goods are damaged, and some are provided incorrectly against the invoice. The damaged goods amounting to 6000$ were returned to Craft LLC, and despite of fact that there was incorrectness in provision of some goods, the company considered them still eligible for sale, but claimed allowance for them in the amount of 4000$. Craft LLC agrees and states that if our company makes the payment for the goods in 15 days, it will get an additional 10% discount on the price. Our company makes the payment during the discounting period. During the month company makes sales amounting to 220 000$ to Barnes LLC and send them invoice. During the transportation some of the goods were damaged and Barnes LLC returned to us 6000$ worth of damaged goods that costed 2500$, and paid in cash just 110 000$. Ending inventory at the end of the month was 15 000$. The utility expenses were 500$, commissions to staff were 10 000$. Al the expenses were paid out. Prepare relevant transactions, Balance and Income statement.
In: Accounting