Question 1 (7.5 points)

Saved

Suppose that adding a new disc drive to your computer increases its value by $100. The disc drive costs $75 and takes you 2 hours to install. If you value your time at $6 per hour then the net benefit of installing the disc drive is:

Question 1 options:

$13.

$19.

$25.

$88.

Question 2 (7.5 points)

Saved

In deciding on how to spend their resources, consumers try to

Question 2 options:

maximize expenditures.

choose the combination of goods that yield the highest level of personal satisfaction.

choose the combination of goods that costs the least.

maximize profit.

Question 3 (7.5 points)

The Law of Supply states that when the market price ______, the profit-maximizing sales quantity for a price taking-firm never ______.

Question 3 options:

increases; increases

increases; decreases

decreases; decreases

decreases; stays the same

Question 4 (7.5 points)

Total expenditures on a company's product will be largest when it is priced such that the elasticity of demand:

Question 4 options:

equals -1.

is greater than -1.

is less than -1.

equals 0.

Question 5 (7.5 points)

Oil is an input used to produce gasoline. An increase in the price of oil would be represented by:

Question 5 options:

a leftward shift of the supply curve for gasoline.

a rightward shift of the supply curve for gasoline.

a movement up and to the right along the supply curve for gasoline.

a movement down and to the left along the supply curve for gasoline.

Question 6 (7.5 points)

If the demand for a good increases at the same time the supply of the good decreases, what happens to equilibrium price and quantity?

Question 6 options:

Equilibrium quantity increases, but the effect on equilibrium price is ambiguous.

Equilibrium quantity decreases, but the effect on equilibrium price is ambiguous.

Equilibrium price increases, but the effect on equilibrium quantity is ambiguous.

Equilibrium price decreases, but the effect on equilibrium quantity is ambiguous.

Question 7 (7.5 points)

Which of the following is a normative question?

Question 7 options:

	Should the government require cars to be fuel efficient?
	Does legalized abortion lead to lower crime rates?
	Will moving a plant overseas reduce production costs?
	Will an increase in the minimum wage reduce poverty?