Topics: Supply and demand, Price elasticity of demand, Economics Pages: 3 (1183 words) Published: October 7, 2014
MBA 525 Exam 1 Question set – answers to short questions 1. Assume that the price of pizza is $2.00 per slice. The marginal cost of the 3rd slice of pizza is: $2.00

2. Which of the following best describes the concept of opportunity cost for a particular decision? The value of the next best (but not chosen) alternative.

3. If the quantity demanded of tea increases by 10% when the price of tea decreases by 2%, the price elasticity of demand for tea is: +10 / -2 = - 5.00

4. An increase in your income causes your demand for pinto beans to increase. It must be true that: Pinto beans are a normal good for you

5. Assume that Chicken and Beef are substitutes. Following an increase in the price of Chicken, all other things equal, we should expect to see: The demand for Beef will increase.

6. Which of the following goods will have the most inelastic demand? Food (fewest substitutes)

7. Which of the following will cause the supply of bagels to increase? An increase in the number of bagel sellers in the market and An advancement in the technology used to produce bagels

8. Agricultural price supports and minimum wages are examples of price floors. An effective price floor is one that is set (above, below) the equilibrium price, is intended to help (suppliers, demanders), and results in a market (surplus, shortage). above, suppliers, surplus

9. Consider the following data describing the benefits Tiffany receives from trips to the gym per month. Assume that each trip to the gym costs Tiffany $10.00 and this price accurately represents the marginal costs to Tiffany. If Tiffany is rational, how many trips to the gym will she take per month? 5 (where MB = MC)

10. Referring to problem #9 above, the marginal cost of the second trip to the gym is: $10.00

11. Suppose that instead of paying per visit, Tiffany bought a membership that allowed her unlimited use for $60 per month. If this were the case, Tiffany’s marginal cost per trip would be: $0...
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