for Preparation Exam #2
ECO 323 Microeconomics A. Mayer
These are some voluntary exercises, in a format similar to Exam #2.
Multiple choice
1)
If firms in a competitive market are not identical, then the long-run market supply curve will be (a) (b) (c) (d) horizontal. upward sloping. downward sloping. undetermined.
2)
If the demand curve for a good is horizontal and the price is positive, then a leftward shift of the supply curve results in (a) (b) (c) (d) a price of zero. an increase in price. a decrease in price. no change in price.
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3)
The above figure shows a graph of the market for pizzas in a large town. No pizzas will be supplied unless the price is above (a) (b) (c) (d) $0. $5. $12. $14.
4)
Consider the same graph of the market for pizzas in a large town. No pizzas will be demanded unless price is less than (a) (b) (c) (d) $0. $5. $12. $14.
5)
Same graph of the market for pizzas in a large town. What are the equilibrium price and quantity? (a) (b) (c) (d) p = 8, Q = 60 p = 60, Q = 8 p = 14, Q = 140 p = 5, Q = 60
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6)
Same graph of a market for pizzas in a large town. At a price of $7, what is the amount of excess demand? (a) (b) (c) (d) 0; there is excess supply at $7. 20 units 30 units 10 units
7)
If a profit-maximizing firm finds that, at its current level of production, MR > MC, it will (a) (b) (c) (d) earn greater profits than if MR = MC. increase output. decrease output. shut down.
8)
Suppose there are 100 identical firms in the rag industry, and each firm is willing to supply 10 rags at any price. The market supply curve will be a(n) (a) (b) (c) (d) vertical line where Q = 10. vertical line where Q = 100. vertical line where Q = 1000. upward sloping line.
9)
A change in relative factor prices will always result in (a) (b) (c) (d) a change in the slope of the isoquants. a tangency between the new isocost line and a new isoquant. a rotation of the isocost lines. all of the above.
10) Which of the following characterizes long-run equilibrium in perfect competition with free entry and identical firms? (b) (a) (c) (d) P=MC=AC P=MC<AC P>MC=AC P=MC>AC
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Open Answer
1. Consider the production function q = AL K .
a) Calculate the marginal product of capital and the marginal product of labor. b) Is the marginal product of labor increasing, decreasing or constant? c) Does the marginal product of labor depend on the amount of capital used? If so describe this relationship. d) Read Solved Problem 6.2 in the book (on page 172 in the 5the edition).
2. Suppose a firm has the following total cost function: TC = 100 + 4q2. What is the minimum price
necessary for the firm to earn a profit?
3.
The Sharperframe Co. frames pictures. Its production function is given by: Number of framed pictures = q = 10 K .5 L.25 . Where K captures capital inputs and L stands for labor. The price of one unit of labor is w = $10 the price of one unit of capital is r = $5 . (a) (b) (c) (d) Calculate the marginal product of labor and the marginal product of capital. Find the ratio between capital and labor that minimizes cost. Calculate the cost of producing 10 picture frames Calculate the marginal cost of producing one more picture frame.
4. The Jenny and Blake cooperation (J&B co.) produces romantic poems. Their capital stock i...