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chs 2226
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1.
Suppose that Dent Carr’s longrun total cost of repairing s cars per week is
c
(
s
) = 2
s
2
+ 50. If the price he re
ceives for repairing a car is $8, then in the long run, how many cars will he fix per week if he maximize
profits?
a.
2
b.
0
c.
4
d.
3
e.
6
____
2.
A firm has a longrun cost function,
C
(
q
) = 9
q
2
+ 9. In the long run, this firm will supply a positive amount of
output, as long as the price is greater than
a.
$36.
b.
$44.
c.
$9.
d.
$18.
e.
$23.
____
3.
A profitmaximizing firm continues to operate even though it is losing money. It sells its product at a price of
$100.
a.
Average total cost is less than $100.
b.
Average fixed cost is less than $100.
c.
Marginal cost is increasing.
d.
Average variable cost is less than $100.
e.
Marginal cost is decreasing.
____
4.
Marge Costa produces plastic dog dishes using a process that requires only labor and plastic as inputs and has
constant returns to scale. With the process she is currently using, a laborer can turn out 30 dog dishes an hour.
The wage rate is $9 per hour. The plastic in a dog dish costs Marge $.10. She has no other costs besides labor
and plastic. Marge faces a perfectly competitive market for plastic dog dishes, and she decides that she is
maximizing profits when she makes 300 dog dishes an hour. What is the market price of dog dishes?
a.
$.21
b.
$.32
c.
$.40
d.
$.27
e.
$.28
____
5.
A competitive firm uses two variable factors to produce its output, with a production function
q
= min{
x
1,
x
2}.The price of factor 1 is $8 and the price of factor 2 is $5. Due to a lack of warehouse space, the company
cannot use more than 10 units of
x
1. The firm must pay a fixed cost of $80 if it produces any positive amount
but doesn’t have to pay this cost if it produces no output. What is the smallest integer price that would make a
firm willing to produce a positive amount?
a.
$44
b.
$41
c.
$29
d.
$13
e.
$21
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6.
A competitive firm has a single factory with the cost function
c
(
y
) = 4
y
2 + 89 and produces 28 units in order
to maximize profits. Although the price of output does not change, the firm decides to build a second factory
with the cost function
c
(
y
) = 8
y
2 + 39. To maximize its profits, how many units should it produce in the
second factory?
a.
14
b.
21
c.
9
d.
13
e.
None of the above.
____
7.
A competitive firm has a longrun total cost function
c
(
y
) = 3
y
2 + 675 for
y
> 0 and
c
(0) = 0. Its longrun sup
ply function is described as
a.
y
=
if
p
> 90,
y
= 0 if
p
< 90.
b.
y
=
if
p
> 88,
y
= 0 if
p
< 88.
c.
y
=
if p > 93,
y
= 0 if
p
< 99.
d.
y
=
if
p
> 93,
y
= 0 if
p
< 93.
e.
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 Spring '09
 AVRINRAD

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