102-SP-08-Exam-3-key-full

# 102-SP-08-Exam-3-key-full - ECON 102 Exam-2 ECON 102...

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ECON 102 FORM A Exam-2 1 ECON 102 Name:_________________ Professor Jose J. Vazquez Section:_______ TA ______ Multiple Choice : in each question there is only one correct answer. Select the answer you believe to be MOST correct (2 pts each). USE THE FOLLOWING INFORMATION TO ANSWER QUESTIONS 1- 8. Say the production function for your firm was given table 1 below. The cost of your labor is \$100 per employee, while the cost of your capital is \$2,000 (for the time being, assume capital is a fixed input). Finally, assume that the firm operates in a perfectly competitive market and sells each unit of output for \$4.00 Labor (# of employees) Output Total Costs Average Variable Costs Average Fixed Costs Average Total Costs Marginal Costs Total Revenue Total Profits 0 0 1 100 2 250 3 375 4 400 5 420 6 430 1. The marginal product of the 4 th employee is equal to: a. 100 b. 150 c. 85 d. 25 e. None of the above. 2. The marginal product of labor begins to decrease with the __________ employee. a. first b. second c. third d. sixth e. None of the above. 3. What are the average total costs of production when the firm produces 400 units of output? a. \$1.00 b. \$2.50 c. \$3.50 d. \$4.00 e. None of the above.

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ECON 102 FORM A Exam-2 2 4. When the firms produces 375 units of output the marginal cost of the last unit produced is equal to: a. \$0.80 b. \$4.00 c. \$0.00 d. \$1.00 e. None of the above. 5. How many units of output should this firm produce in order to maximize profits? a. 0 b. 250 c. 375 d. 400 e. None of the above. 6. The correct short-run decision for the owner of this firm will be to: a. continue to operate b. Stop operating c. Exit the industry. d. Increase output. e. None of the above. 7. The correct long-run decision for the owner of this firm will be to: a. Exit the industry. b. Enter the industry. c. Stop operating. d. Remain in the industry. e. None of the above. 8. We know that in the long-run the market price (of \$4.00) for this industry will: a. increase b. decrease c. stay the same d. both (a) and (b) are correct. e. None of the above. 9. Micah’s Coffee Shop is a small coffee shop. If Micah’s produces 4,000 cups of coffee in the first hour of business and incurs a total cost of \$10,000, his average total costs are: a. \$2.50 b. \$5.00. c. \$6.00 d. \$8.00 e. None of the above 10. When a firm produces an output of 400 its total costs are \$3,000. If its fixed costs are \$1,000, then the average variable costs of producing the 400 units of output are: a. \$7.50 b. \$5.00. c. \$2.50 d. \$1.00 e. It is impossible to determine without specific information on variable cost.
ECON 102 FORM A Exam-2 3 11. When a firm produces an output of 100 units, its average total costs are \$20. At the same time, the marginal cost of the 100th hot dog was \$30. Given this, we know that if the firm produces another unit of output: a. the marginal cost of that unit of output will be more than \$30. b.

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## This note was uploaded on 05/05/2008 for the course ECON 102 taught by Professor Fredgottheil during the Spring '04 term at University of Illinois at Urbana–Champaign.

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102-SP-08-Exam-3-key-full - ECON 102 Exam-2 ECON 102...

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