Unit 2 Practice Exam

# Unit 2 Practice Exam - Name Date 1 To economists the main...

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Name: __________________________ Date: _____________ 1. To economists the main difference between the short run and the long run is that: A) the law of diminishing returns applies in the long run, but not in the short run. B) in the long run all resources are variable, while in the short run at least one resource is fixed. C) fixed costs are more important to decision making in the long run than they are in the short run. D) in the short run all resources are fixed, while in the long run all resources are variable. Use the following to answer question 2: Answer the next question(s) on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed. N u m b e r U n i t s o f o f w o r k e r s o u t p u t 0 0 1 4 0 2 9 0 3 1 2 6 4 1 5 0 5 1 6 5 6 1 8 0 2. Refer to the above data. Average product is at a maximum when: A) five workers are hired. B) four workers are hired. C) three workers are hired. D) two workers are hired. 3. If the marginal-cost curve lies below the average-variable-cost curve, the average- variable-cost curve must be falling. A) True B) False Page 1

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Use the following to answer question 4: 4. Refer to the above diagram. If labor is the only variable input, the average product of labor is at a: A) minimum at point b . B) maximum at point b . C) maximum at point a . D) maximum at point c . Use the following to answer question 5: 5. Refer to the above diagram. For output level Q , per unit costs of B are: A) unobtainable and imply the inefficient use of resources. B) unobtainable, given resource prices and the current state of technology. C) obtainable, but imply the inefficient use of resources. D) obtainable and imply least-cost production of this output. 6. A firm's economic profit is usually higher than its accounting profit. A) True Page 2
B) False 7. A natural monopoly exists when: A) unit costs are minimized by having one firm produce an industry's entire output. B) several formerly competing producers merge to become the only firm in an industry. C) short-run average total cost curves are tangent to long-run average total cost curves. D) minimum efficient scale is attained at a small level of output. 8. Because the equilibrium position of a purely competitive seller entails an equality of price and marginal costs, competition produces up to an efficient allocation of economic resources. A)

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## This note was uploaded on 04/07/2008 for the course ECON 101 taught by Professor Rissell during the Fall '08 term at Villanova.

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Unit 2 Practice Exam - Name Date 1 To economists the main...

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