HW6_Soln - Homework 6 Solution (Chapter 11) DUE : IN CLASS...

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Homework 6 Solution (Chapter 11) DUE : IN CLASS 20 th MARCH 2009 (Friday) ECON 80A Professor: Paroma Sanyal Microeconomic Theory 126 Sachar Bldg. Brandeis University (781) 736-2268 Spring 2009 psanyal@brandeis.edu Total 100 points Section 1: Multiple Choice Questions (2 points each) (20 points) 1.The demand curve facing a perfectly competitive firm is A) infinitely elastic. B) perfectly inelastic. C) downward sloping. D) none of the above. Answer: A 2.In general, economists assume that firms A) maximize accounting profit. C) maximize sales. B) maximize economic profit. D) none of the above. Answer: B Use the following to answer questions 3-6: A F C A V C M C P r i c e Q u a n t i t y P * Q * 3.In the graph above at a price of P*, in the above graph, the profit maximizing level of output is A) Q*. B) above Q*. C) below Q* but above zero. D) zero. Answer: A 4.In the graph above at P*, the firm is making __________economic profits. A) positive B) negative C) zero D) an indeterminate level of 1
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Answer: B 5.Which statement is true of the graph shown? A) The marginal cost curve should not cross the AFC while it is falling. B) If an ATC curve was drawn in the graph it would intersect the MC curve but not any other curve. C) The shut down point of the firm would be at an output less than Q*. D) Both b and c are correct. E) None of the above are correct. Answer: D 6.In the graph above if the price persists at P*, the profit maximizing firm will A) shut down immediately. B) shut down in the long run. C) operate indefinitely. D) has a strategy that can not be predicted without an ATC curve. Answer: B 7.Some people advocate price ceilings in certain markets because they seek to A) expand the total of consumer and producer surplus which the market generates. B) redistribute welfare from the producer to the consumer even if overall welfare is sacrificed. C) redistribute welfare from the consumer to the producer even if welfare is sacrificed.
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HW6_Soln - Homework 6 Solution (Chapter 11) DUE : IN CLASS...

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