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
Date: September 9th, 2020
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 […]
Date: September 9th, 2020
In the short run, a firm’s output level is 5 units. Its average cost is $40 and its fixed cost is $50. What is this firm’s variable cost of producing 5 units? A) VC = $50 B) VC = $100 C) VC = $150 D) VC = $175 ANSWER C
Date: September 9th, 2020
Explain why the marginal cost curve intersects a U-shaped average cost curve at its minimum point. What will be an ideal response? ANSWER At low quantities, the average cost curve declines as the quantity increases. The marginal cost is below the average cost. The marginal cost represents the cost of an additional unit of […]
Date: September 9th, 2020
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.
Date: September 9th, 2020
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
Date: September 9th, 2020
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
Date: September 9th, 2020
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
Date: September 9th, 2020
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.
Date: September 9th, 2020
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 […]
Date: September 9th, 2020
