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KEY911F - BUSINESS 802 FIRST EXAM KEY FALL 1991 MANAGERIAL...

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Sheet1 Page 1 BUSINESS 802 FIRST EXAM KEY FALL 1991 MANAGERIAL ECONOMICS SHORT QUESTIONS (30 pts, 10ts each) 1. Marginal Analysis. Characterize each of the following statements as true or false, and explain your answer. A. If marginal revenue is less than average revenue, the demand curve will be downward sloping. B. Profits will be maximized when total revenue equals total cost. C. Given a downward-sloping demand curve and positive marginal costs, profit-maximizing firms will always sell less output D. Marginal cost must be falling for average cost to decline as output expands. E. Marginal profit is the difference between marginal revenue and marginal cost and will always equal zero at the profit-maximizing activity level. 1. SOLUTION 2. Demand and Supply Curves. Demand and supply conditions in the market for unskilled labor are important concerns to business and government decision makers. Consider the case of a federally mandated minimum wage set above the equilibrium or market-clearing wage level. Some of the following factors have the potential to influence the demand or quantity demanded of unskilled labor. Influences on the supply or quantity supplied may also result. Holding all else equal, describe these influences as increasing or decreasing, and indicate the direction of the resulting movement along or shift in the relevant curve(s). A. An increase in the quality of secondary education
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Sheet1 Page 2 B. A rise in welfare benefits C. An increase in the popularity of self-service gas stations, car washes, and so on D. A fall in interest rates E. An increase in the minimum wage.
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