Sophia Learning ECON 101 Unit 2 Practice Milestone

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ECON 101: MICROECONOMICS SOPHIA UNIT 2 PRACTICE MILESTONE Question 1 The flat portion of the long-run cost curve from about 400 to 500 units reflects output levels where the average cost of production does not change as scale rises or falls. This is referred to as __________.  constant returns to scale  decreasing returns to scale  minimum efficiency scale  increasing returns to scale

Question 2 Since his recent pay raise, Daniel spends $50 per week on gas to fill up his car. If the income elasticity for this expense is 0.5, which type of good is the gas?  Normal  Inferior  Luxury  Substitute Question 3 Behavioral economics combines elements of traditional economics with __________.  psychology  neoclassical economics  rational choice theory  logical assumptions

Question 4 Consider the indifference curve graph below. The slope between points B and C is __________ and is known as the __________.  +0.8; marginal rate of substitution (MRS)  +1.67; marginal rate of transformation (MRT)  −0.8; marginal rate of substitution (MRS)  −1.67; marginal rate of substitution (MRT)

Question 5 Consider the total product curve below. Which of the following statements is correct?  The firm should always try to produce at a point below the curve.  The firm can produce at any point above the curve.  Physical output is minimized by choosing a point along the curve.  Producing at any point under the curve is productively inefficient.

Question 6 Pet’s Plus has produced 350 bags of their signature dog food. It costs them $6 to produce each bag, and they just sold 350 bags to a local vet’s office for $12 per bag. What is the accounting profit for Pet’s Plus?  $1,800  $3,300  $150  $2,100 Question 7 What is the average product for three workers? Number of Workers Total Product Average Product 0 0 --- 1 150 150 2 320 160 3 400 ? 4 440 110 5 475 95  140  120.6  150  133.3

Question 8 Both a Chinese restaurant and a Thai restaurant sold buffet meals at the price of $15 per person. When the Thai restaurant reduced their price by 20%, the number of dinners sold at the Chinese restaurant decreased by 25%. The cross-price elasticity for the meals at the Chinese restaurant calculated using the cross-price elasticity formula is __________ and the goods are __________.  -1.25; complements  1.25; substitutes  -0.28; complements  1.00; substitutes Question 9 Calculate the total cost and average total cost based on the following amounts: Variable costs = $15,000 Fixed costs = $8,000 Quantity sold = 125  Total cost = $15,000; Average total cost = $184  Total cost = $8,000; Average total cost = $64  Total cost = $23,000; Average total cost = $120  Total cost = $23,000; Average total cost = $184

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