micro test 2 - Econ 1123/ 100 Name Dr. Holmes Exam 11...

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Unformatted text preview: Econ 1123/ 100 Name Dr. Holmes Exam 11 Summer 1996 Short Answer/Essay Questions (15 pt: each) Give a brief explanation for each question. 1. A firm is at equilibrium where average revenue per unit is equal to average cost per unit. This means that there are no profits. Why would any producer stay in business if there are no profits to be gained by doing so? Derive the three product curves and explain their shape. Be sure to explain the relevant assumptions. 3. Explain the concept of economic cfl‘iciency. Show that a firm under perfect competition, in the long run, achieves economic efficiency MUDTIPLE CHOICE 1. a. bl cl d. a. b. 9: o p The long run is distinguished from the short run in that, in the long run, output prices can vary. input prices can vary. the quantities of all inputs can vary. :35 the ratio of capital to labor can vary. The average product of labor is the inverse of the average product of capital. the slope of the curve showing the marginal product of labor. the slope of the curve showing the total product of labor. total product divided by the quantity of labor. 3:; 3. A firm has fixed costs al in the short run and the long run. "5. in the short run but not in the long run. c. in the long run but not in the short run. d. neither in the long run nor in the short run. 4. The range over which a firm's average variable cost is decreasing is the same as the range over which its a. marginal cost is increasing. b. average fixed cost is decreasing. c. average product is increasing. d. average product is decreasing. 5. The elasticity of demand that a price-taking firm faces for its output is a. less than 1. b. ll c. equal to the price level. d. infinite. 6. Economic profit is a. the difference between revenue and cost, including all opportunity costs. b. the difference between revenue and cost, excluding all opportunity costs. c. zero when opportunity costs just begin to increase. 6. zero when opportunity costs just begin to decrease. 7. For a perfectly competitive firm, marginal revenue a. is zero. b. is positive but less than the price. c. equals the price. d. exceeds the price. 8. A firm maximizes profit by producing the output at which marginal cost equals a. marginal revenue. b. average total cost. c. average variable cost. d. average fixed cost. 9. A firm should expand output as long as its a. average total revenue exceeds its average total cost. b. average total revenue exceeds its average variable cost. c. marginal cost exceeds its marginal revenue. d. marginal revenue exceeds its marginal cost. 10. At a firm's shutdown point, its average revenue equals its a. marginal cost. b. average total cost. c. average variable cost. d. average fixed cost. 11. Refer to Fig. 11.5. Given the market price of P1, in the long run market a. demand will increase. b. demand will decrease. c. supply will increase. d. supply will decrease. FIgmH5 Pncemdcosttdoh'sperwm '0 I I I I I I I I I I I l I I I I I I I Ouamty (units per day) 12. Refer to Fig. 11.5. In the short run, the firm maximizes its profit by producing a. nothing. b. where MC equals ATC. c. where MC equals P1. d. where ATC equals P1 13. Refer to Fig. 11.5. If the firm increases its output from Q: to 02, in the short run it will a. reduce its marginal revenue. h. increase its marginal revenue. c. reduce its profit. d. increase its profit. 14. When long-run average costs are decreasing, there are a. increasing returns to scale. b. decreasing returns to scale. c. constant returns to scale. d. constant marginal costs. 15. A normal LRAC curve is tangent to 16. 17. 18. a. b. c. d. every short-run ATC curve's minimum point. no short-run ATC curve's minimum point. one short-run ATC curve's minimum point. every short-run ATC curve's maximum points. The most common source of decreasing returns to scale is the application of the law of diminishing returns to capital. the application of the law of diminishing returns to labor. the application of the law of diminishing returns to land. growing complexity of management and organizational structure. Diminishing marginal returns refer to a situation in which the a. b. c. d. marginal cost of the last worker hired is less than the marginal cost of the previous worker hired. average cost of the last worker hired is less than the average cost of the previous worker hired. marginal product of the last worker hired is less than the marginal product of the previous worker hired. average product of the last worker hired is less than the average product of the previoUS worker hired. Total cost is the sum of fixed costs and a. b. C. d. accounting costs. explicit costs. implicit costs. variable costs. Answers to multiple choice questions: 1 _____ 2 _____ 3.__“__ 4 _____ 5 ___fl_ 6 ‘___fl 7 “___‘ 8.‘____ 9 _fl___ 10 _____ ll. 12 l3 14. 15. 16. 17 18 ...
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micro test 2 - Econ 1123/ 100 Name Dr. Holmes Exam 11...

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