Problem_set7_-_solutions

Problem_set7_-_solutions - EC201 Introduction to...

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Spring 2008 1 Name:_______________________ Student Number:_______________ Problem set # 7 (Due on Tuesday 03/11/2008, by 12:40pm) Please staple all the pages together. Circle the most appropriate answer to the following questions (each question is worth 1 point): 1) Refer to the Figure above. When price rises from P2 to P3, the competitive firm finds that a. marginal cost exceeds marginal revenue at a production level of Q2. b. if it produces at output level Q3 it will earn a positive profit. c. expanding output to Q4 would leave the firm with losses. d. it could increase profits by lowering output from Q3 to Q2. ANS: C 2) Refer to the Figure above. When price falls from P3 to P1, the competitive firm finds that a. fixed cost is higher at a production level of Q1 than it is at Q3. b. it should produce Q1 units of output in the short run. c. it should produce Q3 units of output in the short run. d.
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This note was uploaded on 03/30/2008 for the course ECON 201 taught by Professor C.liedholm during the Spring '07 term at Michigan State University.

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Problem_set7_-_solutions - EC201 Introduction to...

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