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
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 […]
Date: September 9th, 2020
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; […]
Date: September 9th, 2020
In the short run, average variable costs are minimized when A) MPL equals APL. B) APL is maximized. C) MPL is maximized and APL is increasing. D) Both A and B. ANSWER D
Date: September 9th, 2020
Explain the logic behind the First Theorem of Welfare Economics. What will be an ideal response? ANSWER A competitive market allows all the voluntary trades desired by people who face the same price. No additional voluntary trades can occur so there is no way to make someone better off. Thus, a competitive equilibrium is […]
Date: September 9th, 2020
The “Law of Diminishing Marginal Returns” could also be termed the “Law of Increasing Marginal Costs.” Indicate whether the statement is true or false ANSWER True . Since MC = w/MPL in the short run, the fact that MPL eventually declines means that MC must eventually increase.
Date: September 9th, 2020
Explain why Robin Hood’s practice of stealing from the rich to give to the poor is never Pareto efficient. What will be an ideal response? ANSWER When Robin steals from the rich, those people are made worse off. This cannot be Pareto efficient.
Date: September 9th, 2020
A consumer purchases a book by driving across town to a bookstore, standing in line for five minutes to pay the cashier, and then pays $5. The same book is purchased by another consumer who spends 2 minutes placing the order over the Internet for $10. The book necessarily cost the first consumer less. Indicate […]
Date: September 9th, 2020
True or false? The Edgeworth box version of interpersonal trade requires the individuals to be in close proximity of one another. A) True, that way they can see each other’s endowments and prices. B) False, being in close proximity is not required for mutually beneficial trade to occur in the Edgeworth box. C) True, the […]
Date: September 9th, 2020
A firm’s cost curve is determined by A) congressional laws. B) whether the firm hires engineers or not. C) natural laws. D) the firm’s production function. ANSWER D
Date: September 9th, 2020
