White (1) - Economics 304k: White Midterm 2 November 2,...

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Economics 304k: White Midterm 2 November 2, 2011 Professor Sibley Directions: 1. Observe the Honor Code 2. Do not open the test until told to do so.
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3. Do any 5 questions. YOU MUST DO QUESTION 3!!! 1. Definitions and short answer questions. Use a diagram if it helps and explain your answers. At what output is AVC = SMC? What is interesting about it? True or False: price-taking behavior leads to zero profit in the short run. True or False: if the LRAC curve is flat, then so are the SMC and AVC curves. True or False: a profit maximizing firm should pick the output at which short run marginal cost is minimized. True or False: If fixed cost rises, then a profit-maximizing firm should increase output so as to lower ATC. 2
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Suppose that the TPL curve is given by the equation: q = 4L. a. Draw the MPL and APL curves, labeling important parts, as well as the axes. b. Assume that the wage rate is $6 and the fixed costs are $5. Draw AVC, ATC and SMC. 3
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White (1) - Economics 304k: White Midterm 2 November 2,...

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