Question

1. Which of the following is not an example of a capital resource?

1. 		the expertise of a computer programmer
   		a pitch fork
   		a commercial sewing machine
   		100 acres of farmland in central California

2. Consider the market for argyle socks. Suppose there is an unsuccessful ad campaign (staring Pee Wee Herman) that decreases the popularity of wearing argyle socks significantly. What effect will the decrease in popularity have on the equilibrium price and quantity of argyle socks, ceteris paribus?

   		Price and quantity will fall
   		Price and quantity will rise
   		Price will rise and quantity will fall
   		Price will fall and quantity will rise

3. A firm raises the price of its product, but its total revenue decreases as a result of the price increase. This is evidence that demand is

   		price elastic
   		price inelastic
   		unit elastic with respect to price
   		perfectly elastic

4. Successful advertising by a monopolistically competitive firm will:

   		Lower profit because it will increase cost.
   		Foster brand loyalty, increase demand and make demand more inelastic.
   		Reduce demand and make it more elastic.
   		lower the marginal cost of production.

5. If an additional worker increases output from 5 to 10 units, and the product price is $10, the marginal revenue product (MRP) from an additional worker is:

   		$150.
   		$200.
   		$50
   		$80.

6. Goods that are prone to the “free rider problem” because they can be freely consumed by anyone whether they pay for them or not are called

   		impossible since resources are limited.
   		examples of negative externalities.
   		provided adequately by free markets.
   		public goods.

7. QUESTION 35

8. The marginal propensity to consume (MPC) is:

   		Total consumption in a given period divided by total disposable income.
   		The percentage of total disposable income spent on consumption.
   		That part of the average consumer dollar that goes to the purchase of final goods.
   		The fraction of each additional dollar of disposable income spent on consumption

Answer 1

Ans.1- the expertise of a computer programmer

Ans.2- Price and quantity will fall

It will shift Demand curve to the left.

Ans.3- price elastic

If demand is price elastic then an increase in price leads to a fall in revenue.

Ans.4- Foster brand loyalty, increase demand and make demand more inelastic

Ans.5- 50

MRP = MR* Price = 5*10 = 5p

Ans.6- public goods.

Ans.7- The fraction of each additional dollar of disposable income spent on consumption