In a perfectly competitive equilibrium with production and trade, which of the following results occur(s)? A) Pareto-efficiency is obtained. B) The First Welfare Theorem is satisfied. C) There is efficiency in production. D) All of the above. ANSWER D
A firm can minimize cost by A) picking the bundle of inputs where the lowest isocost line touches the isoquant. B) picking the bundle of inputs where the isoquant is tangent to the isocost line. C) picking the bundle of inputs where the last dollar spent on one input gives as much extra output as […]
The marginal cost curve intersects the average fixed cost curve at its minimum. Indicate whether the statement is true or false ANSWER False. Marginal cost intersects average variable cost (and average cost) at its minimum.
Every point on the joint production possibilities frontier represents A) an initial endowment. B) inefficient production. C) the marginal rate of substitution of goods for each producer. D) at least one producer specializing in production. ANSWER D
Suppose the current market wage rate (w) is $4. In the short run, a firm’s marginal cost at the current output level is $2. What is this firm’s marginal product of labor? A) MPL = 0.5 B) MPL = 1 C) MPL = 2 D) MPL = 8 ANSWER C
In the long run, fixed costs are A) sunk. B) avoidable. C) larger than in the short run. D) not included in production decisions. ANSWER B
Assume a government likes a particular equilibrium along the contract curve. It can achieve that equilibrium through competition and income redistribution. Indicate whether the statement is true or false ANSWER True . This statement is called the Second Welfare Theorem.
In the short run, a firm ‘s output level is 10 units. Its total cost is $4000 and its average fixed cost is $100. What is this firm’s average variable cost (AVC) of producing 10 units? A) AVC = $250 B) AVC = $275 C) AVC = $300 D) AVC = $400 ANSWER C […]
Consider a society consisting of just a farmer and a tailor. The farmer has 10 units of food but no clothing. The tailor has 20 units of clothing but no food. Suppose each has the utility function U = F C. The price of clothing is always $1. If the price of food is […]
What are the functions for MC and AC if TC = 40 + 10q + 5q2? A) MC = 10q; AC = 10 + 5q B) MC = 10 + 10q; AC = 40/q + 10 + 10q C) MC = 10 + 10q; AC = 40/q + 10q2 D) MC = 20 + 10q; […]