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Unformatted text preview: Name Test Form A Economics 1 Quiz 3 November 19, 2008 True-False Questions: Fill in Bubble A for True, Bubble B for False. 1. A workers reservation wage is the opportunity cost of his or her time. 2. If the demand curve for a good slopes downward, its supply curve slopes upward, and the government sets a minimum for the price of the good that exceeds its competitive equilibrium price, the quantity of the good demanded will be greater than the quantity of the good supplied. 3. If the wage a firm pays does not depend on the number of workers it hires and the average product of labor falls as the firm hires more workers, the average cost of output will also fall as it produces more output. 4. A firms fixed cost is defined to be cost that does not vary with the firms output. 5. If a firms average variable cost does not change as it increases its output, the firms marginal cost equals its average variable cost. Multiple Choice Questions 6. Barbie-Doll makes womens dresses. It can sell its dresses for $50 a dress, no matter how many dresses it has to sell. If it hires one worker, it can make 10 dresses a day. With two workers, it can make 18 dresses a day. With three, 24 dresses a day; and with four, 28 dresses per day. What is the marginal value product of the third worker? (a) $50 per day (b) $200 per day (c) $300 per day (d) $400 per day (e) $1,200 per day Economics 1 2 7. Barbie-Doll is located in Fashion Center, New York. Nine other dressmakers are located in Fashion Center (10 in total including Barbie-Doll). For each dressmaker, the relationship between the workers it hires and the dresses it makes is the same as for Barbie-Doll described in the previous question. Each dressmaker can also sell as many dresses as it desires at the price of $50 per dress. Thirty residents of Fashion Center are willing to work for one of the towns dressmakers if the wage is high enough. Fifteen workers have a reservation wage of $250 per day, and fifteen have a reservation wage of $350 per day. What is the competitive equilibrium wage in the dressmaking industry in Fashion Center, and how many workers will...
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This note was uploaded on 03/20/2010 for the course ECON 1 taught by Professor Bergstrom during the Spring '07 term at UCSB.
- Spring '07
- Opportunity Cost