The state legislature has cut Gigan tic State University\'s appropriations. GSU\

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The state legislature has cut Gigan tic State University's appropriations. GSU's Board of 29. ts decides to increase tuition fees to compensate for the loss of revenue. The board is assun and for education at GSU is elastic. b. demand for education at GSU is inelasti fici ent of price elasticity of demand for education at GSU is unity Cco ricient of price elasticity of demand for education at GSU is greater than unity. necessity whose cost is a small portion of one's total income is ) 30. The demand for a a. perfectly price inelastic. b. perfectly price elastic. c. relatively price inelastic. d. relatively price elastic. 31. Economic profits are calculated by subtracting a explicit costs from total revenue. b. implicit costs from total revenue. c. implicit costs from normal profits d. explicit and implicit costs from total revenue. 32. The long run is characterized by a. the relevance of the law of diminishing returns. b. at least one fixed input. c. insufficient time for firms to enter or leave the industry. d. the ability of the firm to change its plant size. Practicum I. Suppose the price of widgets rises from $7 to $9 and consumption of widgets falls from 25 widgets a month to 15 widgets. a. Compute the percentage change in quantity and the percentage change in price b. Compute the price elasticity of demand of widgets c. What can you say about your price elasticity of demand of widgets? ls it Elastic, Inelastic, or Unitary Elastic? d. Is it a sound plan for the firm to raise its price? Il. The following cost data are for a firm in the short run Total Output Total Total Fixed Cost Total Variable Cost Average Variable Cost Marginal Cost Cost $200 300 350 375 440 500 Using the above information, compute TFC, TVC, AVC and MC b What is he firm maximizing production level when the unit selling price is 68? Why?

Explanation / Answer

29) Answer (b)-Demand for education at GSU is inelastic. This is beacuse the university assumes that even with a rise in fees, there would be nom drop in the deamnd of education at GSU.

30) Answer (c): Relatively Price Inelastic.

31) Answer (d) Explicit and implicit costs from total revenue.

32) Answer (d)-the ability of the firm to change its plant size.
The law of diminishing returns applies to the short run, which has at least one fixed input, but not the long run, which has all inputs variable.

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