CLEP test Short Answer - Utility Elasticity Production

1. Which gives you a greater utility 12 gallons of water per day or 20 gallons of water per day?

2. At which level do you get a greater marginal utility: 12 gallons per day or 20 gallons per day?
3. A rise I the price of a certain commodity from $15 to $20 reduces quantity demanded from 20, 000 units to 5,000 units. Can you please explain how to calculate the price of elasticity?

4. If the price of elasticity of demand for gasoline is 0.3, and the current price is $1.20 per gallon, what rise in the price of gasoline will reduce its consumption by 10%.

5. A rise in the price of a product whose demand is elastic will reduce the total revenue of the firm. Can you please explain this concept in terms of relative percentage changes and concepts.

6. A firm's total fixed cost is $360,000. Construct a table of its total and average fixed costs for output levels varying from zero to 6 units.

7. With the following data, calculate the firm's AVC and MVC . Why is the MVC the same as the AVC for he 1st three units?

8. If the marginal revenue product of a gallon of oil used as input by a firm is $1.20 and the price of oil is $1.07 per gallon, what can the firm do to increase profits? Note: Average cost is total cost/output.

9. Labor costs $10 pr hour. Nine workers produce 180 bushels of product per hour, while ten workers produce 196 bushels. Land rents for $1,000 per acre per year. With ten acres worked by nine workers, the marginal physical product of an acre of land is 1,400 bushels per year. Does the farmer minimize costs by hiring nine workers and renting ten acres of land? If not, which input should be use in larger relative quantity?

Solution Preview

1. 20 gallons of water per day. More of a resource means more utility
2. At 12 gallons per day. The marginal utility diminishes as we have more of a particular good with us. So at 20 gallon marginal utility will be low
3. Price elasticity of demand [(q2-q1)/(q2+q1)] /[(p2+p1)/(p2-p1)]
=[(5000-20000)/(5000+20000)]/[(20+15)/(20-15)]=4.2

4. % Change in quantity = price elasticity * change in price
%Change in price required = ...

Solution Summary

Answers 9 short answer questions on different topics of macroeconomics. These are commonly asked questions (part of CLEP test) which are quite helpful for students preparing for exams.

Can you please help me with these. I can not get these and I am trying to study for the clep exam. Do not do the circled problems only the ones listed below. Thank you for help. Please show step so that I can understand better.
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1. a) 6, b) 12, c) 16, d) 20
2. a) 24, b) 26
3. a) 35, b) 36
4. a) 46, b) 48
P. 14

You are choosing between two goods, X and Y, and your marginal utility from each is as shown below. if your income is $9 and the price of X and Y are $2 and $1, respectively,
Units of X Marginal Utility for X
1 10

PART 1
Please answer the following question:
Bob values the utility of a single scoop of Baskin-Robbins ice cream at $1.50. A double scoop gives total utility of $2.25, while a triple scoop yields $2.60. Baskin-Robbins charges $1.35 for a single, $1.95 for a double, and $2.35 for a triple. How many scoops will Bob buy?

1. Currently, at a price of $1 each, 100 popsicles are sold per day in the perpetually hot town of Rostin. Consider the elasticity of supply. In the short run, a price increase from $1 to $2 is unit-elastic (Es=1.0). So how many popsicles will be sold each day in the short run if the price rises to $2 each? In the long run,

In the workplace you will often see diminishing marginal utility, where the utility (satisfaction experienced per hour of work) experienced by workers drops as they perform their jobs over time. As a manager, what are some practical things you could do to raise utility for employees that also benefit the firm? In your answer us

Assume Firm Y's production function is given by the following Cobb Douglas equation
Q = 0.5 x L^0.6 x K^0.5
where L denotes labor and K denotes capital.
The production function exhibits (increasing/decreasing/constant) returns to scale.
1. If labor hours increase by 10%, what is the percentage change in output (provi

A widget manufacturer sold 10,000 widgets for $2.50 each. Total fixed costs are $5,000 and variable costs per unit are $.80.
(a) Given this information, what is the total profit for this production run?
(b) Marketing research indicated that the price elasticity demand coefficient for the widgets is 2.5.
(c) The facto

The Pilot Pen Company has decided to use 15 test markets to examine the sensitivity of demand for its new product to various prices, as shown in the following table. Advertising effort was identical in each market. Each market had approximately the same level of business activity and population.
a. Using a linear regression

1. If you were to take $1 from a rich person and gave it to a poor person, the rich person looses less utility than the poor person gains. Would you agree or disagree, and why?
2. Please provide an example of personal transportation choices (1) for short distances (less than 400 miles) and longer distances (in excess of 800 m