Assume the quantity of bananas is measured on the horizontal axis and the quantity of oranges is measured on the vertical axis. If John likes both bananas and oranges then his marginal rate of substitution along the indifference curve indicates:

Answer

how many oranges he is willing to give up to obtain one more banana.

how many additional oranges he wants to give up two bananas.

how many oranges he is willing to give up to get rid of one banana.

how many bananas he is willing to give up to get rid of one orange.

If a local bar increased the price of a pint of the local beer by 20%, it estimates the number of customers purchasing the local beer would decrease by 4%. Based on this data,

Answer

total revenue would increase because demand is elastic.

total revenue would decrease because demand is elastic.

total revenue would remain the same.

total revenue would increase because demand is inelastic.

ABC Inc has captured the market for school glue. It is preferred by both students and parents alike. It takes very little capitalization to enter the market but nobody successfully does. The glue clearly needs no patents or secret formulas. This type of market is called:

Answer

pure or perfect competition.

monopolistic competition.

oligopoly.

monopoly.

Raymond pays $80 for tickets to see his favorite sports team play. With 12 minutes left in the game, his team is losing heavily and has no chance of winning the game. Raymond chooses to stay until the end of game because he wants to get the full value for his admission price. If Raymond were thinking as an economist, he should:

Answer

leave the game now since the line to exit the stadium is shorter now

leave the game now if his marginal benefit of leaving is greater than marginal cost, since the admission price is a sunk cost

stay until the end of the game since he might be heckled on the way out

stay until the end of the game since his intuition is correct

If the demand for good X displays high and positive cross-price elasticity with respect to the price of good Y, then:

Answer

the demand for good X is likely to have a low price elasticity

goods X and Y are complements

goods X and Y are substitutes

the demand for good B is likely to have a low price elasticity

Janet owns an auto parts firm. She uses a combination of steel and aluminum to produce her auto parts. All of the following combinations will finish the task on time. Steel costs $15 per unit and the aluminum costs $50 per unit. What combination of steel and aluminum should she use?

Answer

10 units of steel and 10 units of aluminum

12 units of steel and 8 units of aluminum

15 units of steel and 7 units of aluminum

20 units of steel and 6 units of aluminum