Ilsia is driving home from work. She needs to buy gas and notices an Exxon-Mobil station on one side of the street and a Shell station on the other side of the street. Although run by different companies, the two stations sell gasoline at the same price.

1.The most likely reason that the price is the same is that:

a. consumers view gasoline from different gas stations as perfect substitutes.

b. drivers need gas and are willing to pay whatever price a gas station charges.

c. gas stations always make a profit, so they can charge any price they want.

d. government regulation requires both gas stations to charge the same price.

2.If one station increases its price,

a. it will sell more gasoline.

b. it will lose customers to the cheaper station across the street.

c. it will be fined by the government.

d. it will make a higher profit.

3.Maria is an industrial engineer at a Nissan plant. Indicate how Maria should change her production plans in response to each change in market conditions.

a.An engine supplier decreases the price it charges Nissan by 50%.

As a result, Nissan Cost of production will: Decrease/Increase, and Nissan should: Decrease/ Increase its apply

b. Workers unionize and demand a 12% across-the-board raise.

As a result, the cost of production will: Decrease/ Increase, and Nissan should: Increase/ Decrease its apply.

4.Edith is the owner and manager of a small coffee shop that employs three workers who use the shop's one coffee machine to make and serve coffee to paying customers. Business has begun to pick up; lines are getting longer every day in her shop. On a busy morning, she sees her baristas scrambling to take orders, get cups, fill coffee from the coffee machine, add cream and sugar, and serve customers in a timely manner.

-Do you think she's likely to be right? Why or why not?

a. Yes, more workers will increase the supply and make more coffee available for sale.

b. Yes, hiring more workers will mean more customers can be served.

c. No, the current workers just need better training to work more efficiently.

d. No, more workers will just create more chaos behind the counter as the additional workers still have to wait to fill from the coffee machine.

-Adding more and more workers does not constantly increase production because of

a. diminishing marginal product of labor.

b. different productivity levels between various laborers.

c. substitutes in production.

d. diminishing marginal costs.ee more baristas she'll be able to sell twice as much coffee.

5.a.The manufacturing plant used to produce aircraft is a: Fixed/ Variablecost for Boeing. The cost of the manufacturing plant: Should/ Should Not

be included in the opportunity cost of producing an additional aircraft.

b.The labor used to produce the aircraft is a: Fixed/Variable cost for Boeing. Labor costs: Should/Should not be included in the opportunity cost of producing an additional aircraft.

c.The cost of the seats that are installed in each aircraft is a: Fixed/ Variablecost for Boeing. The cost of the seats: Should/ Should Not

be included in the opportunity cost of producing an additional aircraft.