Question

All of the following statements are true about marginal cost except

I. marginal cost increases as production expands.
II. when marginal cost is below average cost, average cost is falling.
III. when marginal cost is above average cost, average cost is constant.
IV. when marginal cost meets the average total cost, the average total cost is at its minimum point.

II and III I only

II only

III only

III and IV

IV only

Which of the following is an implicit cost of attending college full time?

Tuition expenses

Cost of text books

Lost income

Increased future income

Room and board costs at the college

Virtually all economists agree that sales taxes are regressive, and the burden of the sales tax falls most heavily on those with lower incomes. Most consider this to be unfair. Which of the following statements correctly explain why most states have a sales tax?

I. The sales tax gives the poor an incentive to work harder.
II. There are more poor people so to have them pay their fair share, they have to pay a higher percentage.
III. The sales tax is relatively easy for the state and local governments to collect.
IV. If the rich pay most of the income taxes in America, then the poor can pay the sales tax.
V. States without sales taxes tend to have the lowest average incomes.

All statements are correct.

Only statement III is correct.

Only statements II and V are correct.

Only statements I and IV are correct.

Only statements I and V are correct.

Price elasticity of demand refers to the ratio of the

percentage change in price of a product in response to the percentage change in quantity demanded of the good.

percentage change in price of a product in response to the percentage change in buyers income.

percentage change in quantity demanded of a product in response to the percentage change in the price of the good.

percentage change in quantity demanded of a product in response to the percentage change in price of another product.

None of the above.

A maximum sale price for lemons is set by the government. This represents ______________, and it will cause a ________________________

price ceiling, surplus.

price ceiling, shortage.

price floor, surplus.

price floor, shortage.

price ceiling, no change.

A severe draught causes the production of tomatoes to decrease. Which of the following outcomes is more likely to happen?

the demand and the price of tomatoes will increase

the quantity demanded of tomatoes will increase and the price of tomatoes will decrease

the supply of tomatoes will decrease and the price of tomatoes will increase

the quantity supplied of tomatoes will decrease and the price of tomatoes will increase

the supply and the price of tomatoes will decrease

Answer 1

Question: All of the following statements are true about marginal cost except

Answer: III only

III. When marginal cost is above average cost, average cost is constant.

The correct answer is , 'When marginal cost is above average cost, average cost is rising'.

In case of statement 'I.marginal cost increases as production expands', the marginal cost(MC) initially decreases with the increase of production, then it reaches its minimum, and then increases with the increase of production.

_______________________________________________________________

Question: Which of the following is an implicit cost of attending college full time?

Answer: Lost income.

The implicit cost is the indirect cost or the opportunity cost incurred for giving up one thing to get some other thing. Here when a student is attending college full time, she is giving up the income she could earn if she takes a full time job. So the lost income is an implicit cost here.

______________________________________________________________

Question: Virtually all economists agree that sales taxes are regressive, and the burden of the sales tax falls most heavily on those with lower incomes. Most consider this to be unfair. Which of the following statements correctly explain why most states have a sales tax?

Answer: Only statement III is correct. The sales tax is relatively easy for the state and local governments to collect.

The sales tax is an indirect tax and is imposed on goods and services people purchase. It is relatively easy to collect sales tax. This is the reason why most states have a sales tax.

_______________________________________________________________

Question: Price elasticity of demand refers to the ratio of the

Answer: Percentage change in quantity demanded of a product in response to the percentage change in the price of the good.

The price elasticity of demand measures the responsiveness of the change in quantity demanded of a good for the change in its price.

_________________________________________________________________

Question: A maximum sale price for lemons is set by the government. This represents price ceiling, and it will cause a shortage.

Answer: price ceiling, shortage.

When a maximum sale price for lemons is set by the government, then the government controls the lemon price by price ceiling which is below the equilibrium price. At this price, there will emerge an excess demand for lemon in the market. So the shortage of lemon will arise in the market.

________________________________________________________________

Question: A severe draught causes the production of tomatoes to decrease. Which of the following outcomes is more likely to happen?

Answer: The supply of tomatoes will decrease and the price of tomatoes will increase.

When a severe draught causes the production of tomatoes to decrease, the supply of tomatoes will also decrease. The decrease on supply of tomatoes will create a shortage of tomatoes in the market. The shortage will exist in the market until the price of tomatoes goes up so that the quantity demanded for tomatoes comes down.

_________________________________________________________________