lab5 - October 25-29 2010 Economics 203 Intermediate...

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October 25-29, 2010 Economics 203: Intermediate Microeconomics I Lab Exercise #5 Section 1: Test Your Understanding True or False? 1) The long run refers to a period when all inputs are variable and none is fixed. 2) The average product of an input is the addition to the total output due to the addition of the last unit of input used, the quantity of other inputs used being held constant. 3) The law of diminishing marginal returns is not applicable to cases in which there is a proportional increase in all inputs. Section 2: Discussion: As the electronics industry has grown more mature and new technologies have been developed, the costs of many electronic products have fallen dramatically. Is this evidence that the long-run average cost curve slopes downward to the right? Section 3: Applications 1) Suppose that a firm’s short-run total cost function is as follows: Output (number of units per year) Total Cost per Year ($) 0 20,000 1 20,100 2 20,200 3 20,300 4 20,500 5 20,800 a) What are the firm’s total fixed costs?
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lab5 - October 25-29 2010 Economics 203 Intermediate...

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