Answered: 1. A farmer is deciding whether or not…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than

A. $100 per pound.

B. $20 per pound.

C. $80 per pound.

D. $40 per pound.

E. $60 per pound.

2. If a firm is currently producing zero output, total costs equals

A. average variable costs.

B. marginal costs.

C. zero.

D. total variable costs.

E. total fixed costs.

3. Here are three things that you could do if you do not attend your next-door neighbor's barbecue: watch television with some friends (you value this at $8), read a good novel (you value this at $4), or go in to work (you could earn $6 during the barbecue). The opportunity cost of going to your neighbor's barbecue is

A. $6, because this is the only alternative of the three where you actually receive a monetary payment.

B. $4, because this is the lowest dollar figure.

C. $8, because this is the highest valued alternative forfeited.

D. $18, because this is the total dollar sum of all the alternatives forfeited.

4. If the price elasticity of demand for a good is elastic, then if a firm wants to increase their total revenues from selling that good, it should

A. increase the price of the good.

B. decrease the price of the good.

5. If the real interest rate is 11% and the rate of inflation is 3%, then if a firm can invest in a piece of machinery for $7,500 that will provide a profit stream of $3,000 per year for the next 3 years, what should the firm do?

A. Invest in the machine.

B. Do not invest in the machine.

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