Assignment
1. Explain the relationship between the price elasticity of demand and total revenue.
2. Is the price elasticity of gasoline more elastic over a shorter or a longer period of time? Explain.
3. Determine whether each of the following is an explicit cost or an implicit cost:
a) Payments for rented manufacturing equipment
b) A firm's use of a warehouse that it owns and could rent to another firm
c) Wages paid to the firm's workers
d) The wages the firm's owner could earn if he worked for another company
4. Consider the following information in the table for Pat's Pizza Restaurant and answer the questions below.
Marginal Product of Capital 4,000
Marginal Produce of Labor 100
Wage Rate $10
Rental Price of Pizza Ovens $500
a. Is the owner of Pat's Pizza Restaurant minimizing cost?
b. Should he rent more ovens and hire fewer workers or rent fewer ovens and hire more workers? Explain.
Using cross-sectional data from the two Housing Assistance Supply Experiment (HASE) sites--Brown County, Wisconsin, and St. Joseph County, Indiana, John Mulford of Rand Research, estimates that the long-run "permanent" income elasticity of housing expenditures to be 0.45 for owners. Using this information, what is likely to happen to housing expenditures if the government increases income transfers to recipients in HASE sites?
1. Housing expenditures will increase significantly.
2. Housing expenditures in HASE sites significantly will fall as recipients moved out of these areas to higher-income areas.
3. Housing expenditures will increase, but not significantly.
4. Housing expenditures will decrease by a small amount.
Question 2.
Suppose the value of the price elasticity of supply is 4. What does this mean?
1) A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent.
2) A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent.
3) A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent.
4) For every $1 increase in price, quantity supplied increases by 4 units.
Question 3.
The internet has made it easy for consumers to buy books online. As a result, many traditional booksellers like Barnes & Noble and Borders (starting in 2008) along with Amazon sell books on their websites. What effect will the internet have on the demand curve that any bookstore faces?
1. The demand facing a bookstore will become more elastic.
2. The demand facing a bookstore will become more inelastic.
3. The demand facing a bookstore becomes horizontal.
4. The price elasticity of demand remains unchanged; only the cross-price elasticity changes.
Question 4. Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products. If you expect that the economy is headed for a long recession, you would advise people to look for jobs in an industry with
1. a high positive income elasticity coefficient such as 5.
2. a low positive income elasticity coefficient such as 0.8.
3. a "high" negative income elasticity coefficient such as - 4
4. a "low" negative income elasticity coefficient such as - 0.2
Question 5. If diminishing marginal returns have already set in for Golden Lark Woodworks, and the marginal product of the 6th carpenter is 8 chairs, then the marginal product of the 7th carpenter is
1. negative.
2. less than 8 chairs.
3. 3more than 8 chairs.
4. zero.
Question 6. Which of the following is not a source of technological advancement for a producer?
1. better trained workers.
2. more efficient physical capital.
3. higher skill level of managers.
4. outsourcing some aspect of production.
Question 7. A firm has successfully adopted a positive technological change when
1.it can produce more output using the same inputs.
2. it produces less pollution in its production process.
3. can pay its workers less yet increase its output.
4. it sees an increase in worker productivity.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.