ECN100 Final S09 Key Parman

ECN100 Final S09 Key Parman - Ecn 100 - Intermediate...

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Unformatted text preview: Ecn 100 - Intermediate Microeconomic Theory University of California - Davis June 11, 2009 Instructor: John Parman Final Exam - Solutions You have until 8pm to complete the exam, be certain to use your time wisely. For multiple choice questions, mark your answer on your scantron sheet. Choose only the single best answer for each multiple choice question; if more than one letter is filled in for a question it will be marked wrong. For the short answer questions, write your answers directly on the exam. Show your work clearly, place a box around final answers and be certain to label any graphs you draw. Final answers may be left as fractions. Non-graphing calculators may be used. Good luck! Name: ID Number: Section: SECTION I: MULTIPLE CHOICE (60 points) 1. If a firms cost function exhibits increasing returns to scale: (a) Total costs will be lower as the level of output gets larger. (b) Average costs will be lower as the level of output gets larger. (c) Both (a) and (b). (d) Neither (a) nor (b). (b) Total costs will continue to rise as output goes up (you need to use more inputs overall) but average costs will fall (you need to use smaller increases in inputs for each additional unit of output). 2. If AC (10) < AC (11), then (note: the numbers represent units of output): (a) MC (10) < AC (10). (b) MC (10) > AC (10). (c) MC (10) = AC (10). (d) MC (10) = MC (11). (b) If average cost is rising, it must be the case that marginal cost is greater than average cost (the costs from the next unit produced will pull up the average). 3. The slope of a consumers budget line depends on: (a) The prices of the goods and income. (b) Income only. (c) The marginal utilities of the goods. (d) The relative prices of the goods. (d) Income will shift the budget line but not affect the slope. The slope depends only on the prices of the goods. 4. If two inputs are perfect substitutes in production, a profit-maximizing firm will: (a) Use them in fixed proportions. (b) Use only the input with the larger marginal product relative to its price. 2 Final Exam - Solutions (c) Use only the input with the smaller marginal product relative to its price. (d) Use equal amounts of the inputs. (b) If the inputs are perfect substitutes, then a firm can minimize costs and maxi- mize profits by using only the input with a larger value for MP i p i . 5. Which of the following statements is true? (a) Profits for a competitive firm are positive in the long run. (b) Profits for a monopoly are always negative at the socially efficient price and quantity. (c) Profits for a monopoly are always positive at the socially efficient price and quantity. (d) None of the above. (d) In the long run, a competitive firm will earn zero profits. For a monopoly, whether profits are postive or negative at the socially efficient price and quantity depends on the monopolists minimum efficient scale....
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ECN100 Final S09 Key Parman - Ecn 100 - Intermediate...

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