Mid2F07 - v1 Name November 7, 2007 Second Midterm...

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v1 Name _ November 7, 2007 Second Midterm Examination Economics 101 This exam has 33 questions. Unless a question explicitly says otherwise, assume that all supply curves slope upward and demand downward. True/False. Mark box A for True box B False. Each correct answer adds 2 points to your score. blank gives you 1 point. 1. Marginal product is the increase in output results when costs are increased by one dollar. 2. If average of an input greater than its marginal product, then increasing more used. 3. The U-shaped variable cost curve cuts through bottom point on curve. 4. A firm in a competitive industry can profit charging a price lower current market price, allowing it produce sell more. 5. Competitive markets desirable since they both efficient equitable. 6. A should if revenue from selling a unit exceeds producing it.
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2 Page # 7. If the market price is greater than a competitive firm's average total cost, then its revenue must be than cost. 8. A profit-maximizing firm should always produce in short-run if fixed costs. 9. In a industry, input costs do not change when factories are duplicated to increase output, long-run industry supply curve is a horizontal line at minimum of firms' cost curve. 10. An ln a will shift marginal Multiple Choice. Mark box corresponding best answer. Each correct answer adds 5 points your score. blank gives you 1 point. A curves given below. Use this graph questions 11 and 12. $/unit MC ATC a Pl AVC b c d e f o h x 9 Quantity
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3 Page # 11. If the market price is PI' then firm's profit (when it maximizes profit) equal to area: (a) aj kb (b) amvc (c) bkio (d) arte (e) bkld 12. total revenue ajiO (b) cvhO awxO ajkb dliO 13. For a firm with typical U-shaped cost curves, which of following statements correct? marginal increasing, average increasing. (b) variable fixed More than one above correct. 14. Suppose competitive for ethanol in long-run equilibrium and government decides subsidize production. When there are more producers, demand corn increases. Corn an essential input production ethanol. Define A as original equilibrium, B suppliers get new short-run equilbrium resulting from subsidy, and C the new subsidy. Which correctly orders these prices? A>B>C (b) B>C>A (c) C>B>A C>A>B B>A>C
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4 Page # 15. The reason a per-unit subsidy in a competitive market results in an inefficient outcome is: (a) Units are produced for which the marginal benefit exceeds cost of producing them. (b) is less than (c) not when their would exceed (d) be (e) Demand and supply equal at a low price that hurts producers. 16. What does it mean to say that a long-run curve perfectly elastic with constant costs? In long run, firms set a at minimum average total curve. can sell infinite amount. produce always quantity demanded single price. (e) only demanded.
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5 Page # 17. Which of the following labeled points in graph below depicts a long-run equilibrium for a competitive firm?
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Mid2F07 - v1 Name November 7, 2007 Second Midterm...

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