211-1 F14 Practice Exam 2 Questions w Key

# 211-1 F14 Practice Exam 2 Questions w Key - MMSS 211-1...

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• bsw258
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MMSS 211-1 Practice Exam 2 Questions, Part I 1. A PC firm must sell its output at a market price of \$2. Its present operating figures are: AC = \$4 MC = \$2,TFC = \$1,750, Q = 1,000. To earn maximum profit this firm should A. increase the output level. B. reduce the output level. C. shut down. D. keep the output unchanged. 2. A bakery that specializes in wedding cakes employs 5 workers. The bakery is currently producing 500 cakes per week. Assuming that labor is the only variable factor of production, that the weekly wage is \$700 per worker, and that the firm’s fixed cost is \$1,000, the average variable cost is __________. 3. Which of the following is false? 4. Fill in the blank: All firms in a competitive industry have LRTC curves given by C = Q 3 – 10Q 2 + 50Q. The industry’s long run equilibrium price is __________. 5. Suppose the TFC of a competitive firm increases due to an increase in the firm’s property tax. The price at which the firm will optimally decide to shut down is _________ before the TFC change. 6. If C = 200 + 2Q + 4Q 2 , what is the minimum level of average variable cost? 7. Roma Ronnie’s uses labor and capital to produce pizzas. One more unit of labor will increase production by 200 pizzas. An additional unit of capital will increase output by 250 pizzas. The price of labor is \$5 and the price of capital is \$10. A. Roma Ronnie’s is using the correct amount of capital and labor. B. Roma Ronnie’s should increase the amount of capital it is using and decrease the amount of labor. C. Roma Ronnie’s should increase the amount of labor it is using and decrease the amount of capital. D. None of the above. 8. A firm produces output using labor as its only variable factor of production. By using 100 workers, the firm is able to produce 200 units of output at an average variable cost of \$4 per unit. What wage is the firm paying its workers?

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9. For a particular firm, SRTC = 100 + 20Q + Q 2 . If the market price is \$40, at what level of output should the firm operate to maximize profit?
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• Spring '14
• EricSchulz
• Economics, Economics of production, Firm, tc

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