ECON 545 Business Economics DeVry

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ECON 545 Week 3 Imperfect Competition Quiz (2 Versions)
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Version 1
1. Question: (TCO A) There is an increase in the cost of labor for producing
bicycles. (4 pts.).........What happens to bicycle supply? (6 pts.) What happens to
bicycle demand? (Points : 10)
2. Question: (TCO A) Ceteris paribus, Brand A Plain potato chips and Brand B Plain
potato chips are substitutes in consumption. The price of Brand A Plain potato chips
increases. (4 pts.)................ a. What happens to the demand for Brand B Plain
potato chips? (6 pts.) b. What happens to the demand for Brand A Plain potato
chips? (Points : 10)
3. Question: (TCO A) The number of new home sellers in a given market
decreases...........(4 pts.) What happens to the supply of new homes?
(6 pts.) What happens to the demand for new homes? (Points : 10) 4
Question: (TCO A) A market is in equilibrium with equilibrium quantity MEQ and
equilibrium price MEP.(2 pts.) a. What happens to Market Equilibrium Quantity (MEQ)
if there is an increase in supply? (4 pts.) b. What happens to Marlet Equilibrium Price
(MEP) if there is a decrease in supply and a decrease in demand? (4 pts.) c. What
happens to MEP if there is an increase in demand followed by a decrease in supply
followed by another increase in demand? (Points : 10)
5. Question: The following table shows part of the demand function for tickets to
an outdoor summer concert by a popular singing group:
Price (P)...Quantity (Q)....................... a. (2 pts.) What is demand elasticity in the
$35 - $50 price range? Is demand elastic, inelastic, or of unitary elasticity? Calculate
the value and show all of your work. Be sure to use the midpoint equation to
determine elasticity. b. (4 pts.) Assume demand elasticity is 1.0 in the $20 - $35
price range. In this range of demand, by what percentage would quantity demanded
change if price decreases by 5 percent? Show your detailed calculations
c. (4 pts.) What is the effect of a price increase from $10 to $20 on total revenue
for the event? Does total revenue (TR) increase, decrease, or remain the same? By
how much? Show your detailed calculations. (Points : 10)
6. Question: (TCO B) For a given labor supply, would the potential unemployment
impact of an increase in the minimum wage be greater in the case of elastic or
inelastic demand for labor? Explain why, using hypothetical numbers to illustrate
your case. (Points : 10)
7. Question: TCO C) You have been hired to manage a small manufacturing facility
whose cost and production data are given in the table below................
(2 points) What is the marginal product of the sixth worker?
(2 points) What is the marginal revenue product of the second worker?
(2 points) What is the marginal cost of the fourth worker?
(4 points) Based on your knowledge of marginal analysis, how many workers should
you hire? Explain you answer. (Points : 10)
8. Question: (TCO C) Answer the next question on the basis of the following cost
data for a purely competitive seller:...............................
Refer to the above data. If the product price is $75 at its optimal output, exactly

how many units should be produced to maximize profits or minimize losses? How
much will the profit or loss be? Show all calculations. (Points : 10)
9. Question: (TCO C) Answer the next question on the basis of the following cost
data for a purely competitive seller:................................
Refer to the above data. If the product price is $175 at its optimal output, exactly
how many units should be produced to maximize profits or minimize losses? How
much will the profit or loss be? Show all calculations. (Points : 10)
10. Question: TCO C) A firm has Total Costs (TC) of $12,000 over the next three
months (TOTAL for the 3 months - not per month), of which $6,000 are fixed costs
(TFC) for rent on its lease that cannot be broken. If it stays in business over those
months, then the firm will collect only $4,000 in revenues (TR). So, considering only
this information, should they stay in business for those three months or should they
close down right now? Provide your reasoning. (Points : 10)
Version 2
1. Question: (TCO A) There is a decrease in the cost of labor for producing
bicycles.
(4 pts.) What happens to bicycle supply?
(6 pts.) What happens to bicycle demand?
2. Question: (TCO A) Ceteris paribus, Diet Cola Brand X and Diet Cola Brand Y are
substitutes in consumption. The price of Diet Cola Brand Y falls.
(4 pts.) a. What happens to the demand for Diet Cola Brand X?
(6 pts.) b. What happens to the demand for Diet Cola Brand Y? (Points : 10)
3. Question: (TCO A) The number of new home sellers in a given market
decreases.
(4 pts.) What happens to the supply of new homes?
(6 pts.) What happens to the demand for new homes?
4. Question: (TCO A) A market is in equilibrium with equilibrium Quantity of MEQ
and equilibrium Price of MEP.
(2 pts.) a. What happens to market equilibrium Price (MEP) if there is an increase in
Demand?
(4 pts.) b. What happens to market equilibrium Quantity (MEQ) if Supply decreases
as Demand increase?
(4 pts.) c. What happens to market equilibrium Price if there is an increase in Supply
followed by a decrease in Demand which if followed by another increase in Supply?
5. Question: The following table shows part of the demand function for tickets to
an outdoor summer concert by a popular singing group:
6. Question: (TCO B) Use a hypothetical example to illustrate whether you
agree or disagree with the following statement: "Unemployment will go up more if
the demand for labor is inelastic because the demand for labor will decrease more
when you have inelastic demand than if demand were elastic." Explain why, using
hypothetical numbers to illustrate your case.
7. Question: (7. TCO C) You have been hired to manage a small manufacturing
facility whose cost and production data are given in the table below.
(2 points) What is the marginal product of the fourth worker?
(2 points) What is the marginal revenue product of the fifth worker?
(2 points) What is the marginal cost of the second worker?
(4 points) Based on your knowledge of marginal analysis, how many workers should
you hire? Explain you answer. (Points : 10)
8. Question: (TCO C) Answer the next question on the basis of the following cost

data for a purely competitive seller:Refer to the above data. If the product price is
$75 at its optimal output, exactly how many units should be produced to maximize
profits or minimize losses? How much will the profit or loss be? Show all
calculations. (Points : 10)
9. Question: (TCO C) (TCO C) Answer the next question on the basis of the
following cost data for a purely competitive seller:..................Refer to the above
data. If the product price is $165 at its optimal output, exactly how many units
should be produced to maximize profits or minimize losses? How much will the
profit or loss be? Show all calculations. (Points : 10)
10. Question: (TCO C) A firm has Total Costs (TC) of $10,000 over the next three
months (TOTAL for the 3 months - not per month), of which $6,000 are fixed costs
(TFC) for rent on its lease that cannot be broken. If it stays in business over those
months, then the firm will collect only $5,000 in revenues (TR). So, considering only
this information, should they stay in business for those three months or should they
close down right now? Provide your reasoning.

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ECON 545 Week 6 Monetary and Fiscal Policy Quiz (2 Versions)
Price: $ 25

Version 1
1. Question: (TCO F) The size of the labor force in a community is 800, and 720 of
these folks are gainfully employed. In this community, 200 people over the age of
16 do not have a job, and are not looking for work. In addition, 100 people in the
community are under the age of 16. The unemployment rate is:
2. Question: (TCO F) Suppose nominal GDP in 2005 was $14 trillion, and in 2006
it was $15 trillion. The general price index in 2005 was 100, and in 2006 it was 103.
Between 2005 and 2006, real GDP rose by what percent? (Points : 20)
3. Question: (TCO F) The consumer price index was 185.2 in January of 2004, and
it was 190.7 in January of 2005. Therefore, the rate of inflation in 2004 was about
______. (Points : 15)
4. Question: (TCO E) (10 points) As the Euro appreciates in value relative to the
U.S. dollar, what happens to the price of U.S. goods in Europe? What happens to the
price of European goods in the U.S.?
(10 points) Why would a country (for example, China) choose to keep their currency
relatively pegged to the U.S. dollar? If the U.S. dollar were to appreciate
considerably against most currencies, what would be the effect on Chinese exports
to countries other than the United States? (Points : 20)
5. Question: (TCO E) Suppose the Indian rupee price of one British pound is
54.392 rupees for each pound. A hotel room in London costs 120 pounds, while a
similar hotel room in New Delhi costs 6,500 Indian rupees. In which city is the hotel
room cheaper, and by how much? (Points : 15)
6. Question: (TCO E) Answer the next question on the basis of the following
production possibilities data for Landia and Scandia:.............Refer to the above
data. What would be feasible terms of trade between Landia and Scandia? (Points :
20)
7. Question: (TCO E) Answer the next question on the basis of the following
production possibilities data for Landia and Scandia:....................Refer to the above
data. What would be feasible terms of trade between Landia and Scandia?

8. Question: (TCO F) Country A produces two goods, elephants and saddles. In the
year 2006, the 100 units of elephants produced sold for $2,500 per unit and the 30
units of saddles produced sold for $200 per unit. In 2007, the 120 units of
elephants produced sold for $3,000 per unit, and the 50 units of saddles produced
sold for $300 per unit. Real GDP for 2007, assuming that 2006 is the base year, is
______. (Points : 15)
9. Question: (TCO E) A Honda Accord sells for $24,000 in the United States and for
SF29,500 in Switzerland. Given an exchange rate of SF1.25 = $1, how do the car
prices of both countries compare? (Points : 15)
Version 2
1. Question: (TCO F) The size of the labor force in a community is 1,000, and 850
of these folks are gainfully employed. In this community, 50 people over the age of
16 do not have a job and are not looking for work. In addition, 80 people in the
community are under the age of 16. The unemployment rate is ______. (Points : 15)
2. Question: TCO F) Suppose nominal GDP in 2005 was $11 trillion, and in 2006
it was $14 trillion. The general price index in 2005 was 100, and in 2006 it was 102.
Between 2005 and 2006, real GDP rose by what percent? (Points : 20)
3. Question: (TCO F) The consumer price index was 190.7 in January of 2005, and
it was 198.3 in January of 2006. Therefore, the rate of inflation in 2005 was about
______. (Points : 15)
4. Question: (TCO E) (10 points) As the Euro appreciates in value relative to the
U.S. dollar, what happens to the price of U.S. goods in Europe? What happens to the
price of European goods in the U.S.?
(10 points) Why would a country (for example, China) choose to keep their currency
relatively pegged to the U.S. dollar? If the U.S. dollar were to appreciate
considerably against most currencies, what would be the effect on Chinese exports
to countries other than the United States? (Points : 20)
5. Question: (TCO E) Suppose the Canadian dollar (C$) price of one British pound
is C$2.12. A hotel room in London costs 120 pounds, while a similar hotel room in
Toronto costs C$250. In which city is the hotel room cheaper, and by how much?
(Points : 15)
6. Question: (TCO E) Answer the next question on the basis of the following
production possibilities data for Egypt and Greece: Egypt production possibilities:...
Greece production possibilities:.................Refer to the above data. What would be
feasible terms of trade between Egypt and Greece? (Points : 20)
7. Question: (TCO F) The Republic of Republic produces two goods/services, fish
(F) and chips (C). In 2006, the 1000 units of F produced sold for $8 per unit and the
5000 units of C produced sold for $1 per unit. In 2007, the 1500 units of F produced
sold for $10 per unit, and the 6,000 units of C produced sold for $2 per unit.
Calculate Real GDP for 2007, assuming that 2006 is the base year. (Points : 15)
8. Question: TCO F) Country A produces two goods, elephants and saddles. In the
year 2006, the 100 units of elephants produced sold for $2,500 per unit and the 30
units of saddles produced sold for $200 per unit. In 2007, the 120 units of elephants
produced sold for $3,000 per unit, and the 50 units of saddles produced sold for
$300 per unit. Real GDP for 2007, assuming that 2006 is the base year, is ______.
(Points : 15)
9. Question: (TCO E) A Honda Accord sells for $24,000 in the United States and for
SF28,500 in Switzerland. Given an exchange rate of SF1.20 = $1, how do the car
prices of both countries compare? (Points : 15)

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ECON 545 Week 8 Final Exam Solutions (Version 1)
Price: $ 29

1. (TCO A) Suppose you are hired to manage a small manufacturing facility that
produces Widgets. (a.) (15 points) You know from data collected on the Widget
Market that market demand and market supply have both increased recently. As
manager of the facility, what decisions should you make regarding production levels
and pricing for your Widget facility? Remember that supply and demand are about
the market supply and market demand, which is bigger than your own company. You
are being given data on supply and demand for the whole market and are being
asked what effect that has on you as a small part of that market. (b.) (15 points)
Now, suppose that following the supply and demand changes in (a), a substitute
good goes up in price, and your costs of production increase. What new decisions
will you make regarding production levels and pricing for your Widget facility?
2. (TCO B) Here is some data on the demand for marshmallows:.........(a.) (15
points) Is demand elastic or inelastic in the $6-$8 price range? How do you
know? (b.) (15 points) If the table represents the demand faced by a monopoly firm,
then what is that firms marginal revenue as it increases output from 1300 units to
2200 units? Show all work. (Be careful here!)
3. (TCO C) You have been hired to manage a small manufacturing facility whose
cost and production data are given in the table below..............(a.) (6 points) What is
the marginal product of the second worker? (b.) (6 points) What is the marginal
revenue product of the fourth worker? (c.) (6 points) What is the marginal cost of
the first worker? (d.) (12 points) Based on your knowledge of marginal analysis, how
many workers should you hire? Explain you answer.
4. (TCO C) Answer the next questions on the basis of the following cost data for a
firm in pure competition:...........(a.) (15 points) Refer to the above data. If the
product price is $45 at its optimal output, will the firm realize an economic profit,
break even, or incur an economic loss? How much will the profit or loss be? Show all
calculations. (b.) (15 points) Refer to the above data. If the product price is $75 at
its optimal output, will the firm realize an economic profit, break even, or incur an
economic loss? How much will the profit or loss be? Show all calculations.
5. (TCO D) A software producer has fixed costs of $18,000 per month and her Total
Variable Costs (TVC) as a function of output Q are given below:.........(a.) (15 points)
If software can only be produced in the quantities above, what should be the
production level if the producer operates in a monopolistic competitive market
where the price of software at each possible quantity is also listed above? Why?
(Show all work). (b.) (15 points) What should be the production level if fixed costs
rose to $48,000 per month? Explain.
6. (TCO F) (a.) (20 points) Suppose nominal GDP in 1999 was $200 billion, and in
2001, it was $270 billion. The general price index in 1999 was 100 and in 2001 it
was 150. Between 1999 and 2001, the real GDP rose by what percent? (b.) Use the
following scenario to answer questions (b1) and (b2). In a given year in the United
States, the total number of residents is 270 million, the number of residents under
the age of 16 is 38 million, the number of institutionalized adults is 15 million, the
number of adults who are not looking for work is 17 million, and the number of
unemployed is 10 million. (b1.) (5 points) Refer to the data in the above scenario.

What is the size of the labor force in the United States for the given year? (b2.) (5
points) Refer to the data in the above scenario. What is the unemployment rate in
the United States for the given year?
7. (TCO G and H) (a.) (15 points) Suppose your local Congress representative
suggests that the federal government intervenes in the gasoline market to stop
runaway price increases. Would you say that this view basically supports the
Keynesian or the Monetarist school of thought? Why? What position would the
opposing school of thought take on this issue? (Be brief -- you can answer this in 2
or 3 brief paragraphs). (b.) (10 points) Any change in the economys total
expenditures would be expected to translate into a change in GDP that was larger
than the initial change in spending. This phenomenon is known as the multiplier
effect. Explain how the multiplier effect works. (c.) (15 points) You are told that 90
cents out of every extra dollar pumped into the economy goes toward consumption
(as opposed to saving). Estimate the GDP impact of a positive change in
government spending that equals $20 billion.
8. (TCO G) (a.) (20 points) Third National Bank is fully loaned up with reserves of
$20,000 and demand deposits equal to $100,000. The reserve ratio is 20%.
Households deposit $5,000 in currency into the bank. How much excess reserves
does the bank now have, and what is the maximum amount of new money that can
be created in the banking system as a result of this deposit? Show all work. (b.) (20
points) What is thediscount rate in the banking system? Explain how the Fed
manipulates this rate to achieve macroeconomic objectives.
9. (TCO E and I) Let the exchange rate be defined as the number of dollars per
British pound. Assume there is a decrease in U.S. interest rates relative to that of
Britain. (a.) (10 points) Would this event cause the demand for the dollar to increase
or decrease relative to the demand for the pound? Why? (b.) (10 points) Has the
dollar appreciated or depreciated in value relative to the pound? (c.) (10 points)
Does this change in the value of the dollar make imports cheaper or more expensive
for Americans? Are American exports cheaper or more expensive for importers of
U.S. goods in Great Britain? Illustrate by showing the price of a U.S. cell phone in
Britain before and after the change in the exchange rate. (d.) (10 points) If you had
a business exporting goods to Britain, and U.S. interest rates fell as they have in this
example, would you plan to expand production or cut back? Why?

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ECON 545 Week 8 Final Exam Solutions (Version 2)
Price: $ 29

1. (TCO A) Suppose you are hired to manage a small manufacturing facility that
produces Widgets.(a.) (15 points) You know from data collected on the Widget
Market that market demand has recently increased and market supply has recently
decreased. As manager of the facility, what decisions should you make regarding
production levels and pricing for your Widget facility? Remember that supply and
demand are about the market supply and market demand, which is bigger than your
own company. You are being given data on supply and demand for the whole market
and are being asked what effect that has on you as a small part of that market. (b.)
(15 points) Now, suppose that following the supply and demand changes in (a), a
substitute good goes up in price, and your costs of production decrease. What new
decisions will you make regarding production levels and pricing for your Widget

facility? (Points : 30)

2. (TCO B) Here is some data on the demand for lettuce:...........(a.) (15 points) Is
demand elastic or inelastic in the $6-$8 price range? How do you know? (b.) (15
points) If the table represents the demand faced by a monopoly firm, then what is
that firms marginal revenue as it increases output from 160 units to 180 units?
Show all work. (Be careful here!) (Points : 30)
3. (TCO C) You have been hired to manage a small manufacturing facility whose
cost and production data are given in the table below..........(a.) (6 points) What is
the marginal product of the second worker? (b.) (6 points) What is the marginal
revenue product of the fourth worker? (c.) (6 points) What is the marginal cost of
the first worker? (d.) (12 points) Based on your knowledge of marginal analysis, how
many workers should you hire? Explain you answer. (Points : 30)
4. (TCO C) John operates a small business out of his home and has very little in
terms of fixed costs. Answer the next questions (Parts A and B) on the basis of the
following cost data for Johns firm operating in pure competition:...........(a.) (15
points) Refer to the above data. If the product price is $60, at its optimal output, will
the firm realize an economic profit, break even, or incur an economic loss? How
much will the profit or loss be? Show all calculations.(b.) (15 points) Refer to the
above data. If the product price is $55 at its optimal output, will the firm realize an
economic profit, break even, or incur an economic loss? How much will the profit or
loss be? Show all calculations. (Points : 30)
5. (TCO D) A software producer has fixed costs of $30,000 per month and her Total
Variable Costs (TVC) as a function of output Q are given below:..........a.) (15 points)
If software can only be produced in the quantities above, what should be the
production level if the producer operates in a monopolistic competitive market
where the price of software at each possible quantity is also listed above? Why?
(Show all work.) (b.) (15 points) What should be the production level if fixed costs
rose to $50,000 per month? Explain.(Points : 30)
6. (TCO F) (a.) (20 points) Suppose nominal GDP in 1999 was $200 billion, and in
2001, it was $270 billion. The general price index in 1999 was 100 and in 2001 it
was 150. Between 1999 and 2001, the real GDP rose by what percent? (b.) Use the
following scenario to answer questions (b1) and (b2).In a given year in the United
States, the total number of residents is 270 million, the number of residents under
the age of 16 is 38 million, the number of institutionalized adults is 15 million, the
number of adults who are not looking for work is 17 million, and the number of
unemployed is 10 million.(b1.) (5 points) Refer to the data in the above scenario.
What is the size of the labor force in the United States for the given year? (b2.) (5
points) Refer to the data in the above scenario. What is the unemployment rate in
the United States for the given year?(Points : 30)
7. (TCO G and H) (a.) (15 points) Suppose your local Congress representative
suggests that the federal government intervenes in the gasoline market to stop
runaway price increases. Would you say that this view basically supports the
Keynesian or the Monetarist school of thought? Why? What position would the
opposing school of thought take on this issue? (Be brief -- you can answer this in 2
or 3 brief paragraphs).(b.) (10 points) Any change in the economys total
expenditures would be expected to translate into a change in GDP that was larger
than the initial change in spending. This phenomenon is known as the multiplier
effect. Explain how the multiplier effect works. (c.) (15 points) You are told that 90
cents out of every extra dollar pumped into the economy goes toward consumption

(as opposed to saving). Estimate the GDP impact of a positive change in

government spending that equals $20 billion.(Points : 40)
8. (TCO G) (a.) Reserve requirement for banks is set at 5%. Your firm deposits its
profits of $28,000 into the Third National Bank. (10 points) How much excess
reserve does your deposit generate for the bank?(10 points) What is the maximum
amount of new money that can be created in the banking system as a result of this
deposit? Show all work. (b.) (10 points) What is the Federal Funds Rate in the
banking system? (10 points) Explain how the Fed manipulates this rate in order to
achieve macroeconomic objectives. (Points : 40)
9. (TCOs E and I) Let the exchange rate be defined as the number of dollars per
Japanese yen. Assume that there is a relatively lower rate of inflation in the U.S.
relative to that of Japan.(a.) (10 points) Would this event cause the demand for the
dollar to increase or decrease relative to the demand for the yen? Why? (b.) (10
points) Has the dollar appreciated or depreciated in value relative to the yen? (c.)
(10 points) Does this change in the value of the dollar make imports cheaper or
more expensive for Americans? Are American exports cheaper or more expensive
for importers of U.S. goods in Japan? Illustrate by showing the price of a U.S. ereader in Japan, before and after the change in the exchange rate. (d.) (10 points) If
you had a business exporting goods to Japan, and U.S. inflation fell as discussed
above in this example, would you plan to expand production or cut back? Why?
(Points : 40)

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