Economics MBA Assessment Questions Fall 2017 1. Economic profit is A. the differ

ID: 1102632 • Letter: E

Question

Economics MBA Assessment Questions Fall 2017 1. Economic profit is A. the difference between total revenue and the opportunity cost of all of the resource:s used in production. B. the difference between total revenue and the implicit costs of using owner-supplied resources C. the difference between accounting profit and the opportunity cost of the market- supplied resources used by the firm. D. the difference between accounting profit and explicit costs. A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll. The last doctor hired treated 1,600 extra patients in a year, while the last nurse hired treated 1,000 extra patients in a year. If doctors make $80,000 a year and nurses make $40,000 a year, then A. the clinic could serve more patients by hiring more doctors and fewer nurses. 2. B. the clinic could serve more patients by hiring fewer doctors and more nurses C. the clinic is making the correct decision because doctors are more productive than nurses. D. the clinic is not making the correct decision because the additional patients per dollar spent on doctors is greater than the additional patients per dollar spent on nurses E. both a and d. 3. The fact that the cross-price elasticity of natural gas with respect to the price of fuel oil is 0.4 implies that A. natural gas and fuel oil are substitutes. B. natural gas is a normal good. C. the quantity of natural gas demanded will decrease by 1.6% when the price of fuel oil decreases by 4%. D. both a and c. 4. A news magazine offers students a discount on the regular subscription rate. The total number of subscriptions is optimal, and, at the current prices, the marginal revenue from the last subscription sold to a student is $6, while the marginal revenue from the last subscription sold to a regular customer is $10. If the magazine sells one more subscription to a regular customer and one less subscription to a student A. profit will increase $4 B. profit will increase $16 C. profit will decrease $6 D. profit will decrease $10 E. none of the above

Explanation / Answer

1. Option A

It takes into account of total revenue minus opportunity cost of the inputs used in the production process

2. Option c

Since per patient the productivity of doctors=50 (80000/1600) is more than nurses=40(40000/1000)

3. Option A

4. Option A

Earlier Q

After Q

Price

Total profit Before

Total profit After

Student

Customer

100

110

Difference

$ 4.00