Question 1
A toy manufacturer is experiencing quality problems on its assembly line. Every defective toy that leaves the factory costs the firm $20. The firm has decided to hire quality inspectors to catch defective toys before they leave the factory.
|
Number of
Inspectors
|
|
Number of Defective
Toys (per day)
|
|
0
|
|
40
|
|
1
|
|
24
|
|
2
|
|
16
|
|
3
|
|
10
|
|
4
|
|
6
|
|
5
|
|
2
|
|
6
|
|
0
|
If each inspector is paid $100 a day, how many inspectors should the firm hire to minimize the total cost of defective toys?
1) 3
2) 4
3) 5
4) 6
Question 2
If the demand for umbrellas is price inelastic,
1) changes in price do not affect the number of umbrellas demanded.
2) if more umbrellas are sold as the result of a price decrease, total expenditures by consumers on umbrellas will decrease.
3) the percentage change in price is less than the percentage change in quantity demanded.
4) the percentage change in quantity demanded is greater than the percentage change in price.
5) none of the above
Question 3
Whenever the additional revenue from the last unit of output exceeds the additional cost of that unit, a profit-maximizing firm should
1) do nothing, the firm is making profits.
2) produce less in order to increase profits.
3) produce more in order to increase profits.
4) think about investing in another industry.
Question 4
The Interior Department recently announced that it will increase the entrance fees at Yellowstone National Park in order to increase park revenues. The Interior Department must believe that
1) park goers are very responsive to price changes.
2) the demand for park services is elastic.
3) the percentage increase in fees will be greater than the percentage decrease in the number of park visitors.
4) demand is unitary elastic, and thus the number of visitors will NOT decrease.