question
Use the production function: Q= 4L^1/2K^1/2.
Which of the following combinations of inputs is on the isoquant to produce 400 units of output?
Which of the following combinations of inputs is on the isoquant to produce 400 units of output?
answer
L= 100, K = 100
question
shows a short-run situation is evident from
answer
the presence of positive costs at Q = 0.
question
That the firm is perfectly competitive is evident from its
answer
constant marginal revenue
question
If the demand for high definition televisions increases and the supply of high definition televisions increases, then
answer
it is clear that quantity sold will increase, the change in the price of televisions is ambiguous
question
If the utility for two goods "x" and "y" can be measured as U = x, then it can be concluded that
answer
the indifference curves on the x,y graph are vertical where "x" is measured on the horizontal axis.
question
The demand curve facing a perfectly competitive firm is
answer
the same as its average revenue curve and its marginal revenue curve.
question
If a graph of a perfectly competitive firm shows that the MR= MC point occurs where MR is above AVC but below ATC,
answer
the firm is earning negative profit, but will continue to produce where MR= MC in the short run.
question
Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p. If the long-run supply curve is horizontal, then how many firms will this industry sustain in the long run?
answer
100
question
In the relevant price range a demand curve for a Giffen good would be
answer
upward sloping
question
Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q. The average cost of the 5th T-shirt is
answer
12
question
If current output is less than the profit-maximizing output, which must be true?
answer
Marginal revenue is greater than marginal cost.
question
At the profit-maximizing level of output, what is relationship between the total revenue (TR) and total cost (TC) curves?
answer
They must have the same slope.
question
If two bundles are on the same indifference curve, then
answer
the consumer derives the same level of utility from each.
question
The supply curve for a competitive firm is
answer
its MC curve above the minimum point of the AVC curve.
question
If we take the production function and hold the level of output constant, allowing the amounts of capital and labor to vary, the curve that is traced out is called:
answer
an isoquant
question
Suppose that the competitive market for rice in Japan was suddenly monopolized. The effect of such a change would be:
answer
to decrease the consumer surplus of Japanese rice consumers
question
Bette's Breakfast, a perfectly competitive eatery, sells its "Breakfast Special" (the only item on the menu) for $5.00. The variable costs of waiters, cooks, power, food etc. average out to $3.95 per meal; the fixed costs of the lease, insurance and other such expenses average out to $1.25 per meal. Bette should
answer
continue producing in the short run but plan to go out of business in the long run
question
When TR and TC have the same slope,
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profit is at its largest
question
Consider the following two statements
I. Whenever a firm's average variable costs are falling as output rises, marginal costs must be falling too.
II. Whenever a firm's average total costs are rising as output rises, average variable costs must be rising too.
I. Whenever a firm's average variable costs are falling as output rises, marginal costs must be falling too.
II. Whenever a firm's average total costs are rising as output rises, average variable costs must be rising too.
answer
I is false, II is true
question
Suppose the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis,
answer
the slope of the budget line will not change
question
The demand curve facing a perfectly competitive firm is
answer
perfectly horizontal
question
As long as the actual market price exceeds the equilibrium market price, there will be:
answer
downward pressure on the market price
question
Bill currently uses his entire budget to purchase 5 cans of pepsi and 3 hamburgers per week. The price of pepsi is $1 per can, the price of a hamburger is $2, Bill's marginal utility from pepsi is 4, and his marginal utility from hamburgers is 6. Bill could increase his utility by:
answer
increasing pepsi consumption and reducing hamburger consumption
question
An increasing-cost industry is so named because of the positive slope of which curve?
answer
The industry's long run supply curve
question
As the manager of a firm you calculate that marginal revenue is $152 and marginal cost is $200. You should
answer
reduce output until marginal revenue equals marginal cost
question
A Giffen good
answer
is the special subset of inferior goods in which the income effect dominates the substitution effect
question
The long-run supply curve in a competitive constant-cost industry is linear and
answer
horizontal
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