answer3 - BUAD 351 - Economic Analysis for Business...

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BUAD 351 - Economic Analysis for Business Decisions Homework 3 due: Thu 03/05/2009 PART (i): multiple choice question 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 answer b b c d d d c d d d d c c a b PART (ii): Shorter questions 1. The short-run supply curve of a ±rm operating in a competitive industry is always upward-sloping True. The short-run supply is SMC above SAVC. If MC were decreasing for P = MC; the ±rm could increase its pro±ts by producing more output 2. The long-run supply curve of a ±rm is the portion of the long-run marginal cost curve above the average variable cost curve False. In the long-run, the ±rm needs to cover all its costs of production and the supply is LMC above LATC. 3. If the marginal cost of production is below the average variable cost, then the average vari- able cost is decreasing True. Marginal cost measures the incremental contribution of the last unit to the overall cost of production. If it is lower than the average cost, it will bring the average cost down. 4. By purchasing a coal plant, an electric company is able to lower its costs of production be- cause it doesn²t need to pay the market price for the coal by producing the coal itself. False. The opportunity cost of coal is the price at which the ±rm could sell it on the open market.
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This note was uploaded on 04/14/2009 for the course BUAD 351 taught by Professor Eastin during the Spring '07 term at USC.

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answer3 - BUAD 351 - Economic Analysis for Business...

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