Question 1
Lasting Toys is experiencing quality problems on its assembly line. Every defective toy that leaves the factory costs the firm $50. 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 inspectors are paid $150 a day, how many inspectors should the firm hire?
1) 3
2) 4
3) 5
4) 6
Question 2
Scientists have developed a bacterium that they believe will lower the freezing point of agricultural products. This innovation could save farmers $1 billion a year in crops now lost to frost damage. If this technology becomes widely used, what will happen to the equilibrium price and quantity in, for example, the potato market?
1) price will decrease, quantity will decrease
2) price will decrease, quantity will increase
3) price will increase, quantity will decrease
4) price will increase, quantity will increase
5) The change in equilibrium price and quantity is indeterminate.
Question 3
When Sonoma Vineyards reduces the price of its Cabernet Sauvignon from $15 a bottle to $12 a bottle, the result is an increase in
1) the demand for this wine.
2) the supply of this wine.
3) the quantity of this wine demanded.
4) the quantity of this wine supplied.
Question 4
In which of the following cases must price always fall?
1) Demand increases and supply increases.
2) Demand decreases and supply decreases.
3) Supply increases and demand remains constant.
4) Demand decreases and supply increases.