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Homework4(A)
Economics (I), 2014
Due Date: 2014.1.3
Part I. Multiple Choices (50 points: 5 points of each )
Please fill your answers in below blanks.
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1. When a firm produces more output using the same inputs or the same output
using fewer inputs we say that the firm
A) is operating in the short run.
B) experiences positive technological change.
C) will hire more workers in order to produce more output.
D) experiences an increase in demand.
Answer: B
Figure 1
Fancy Footwear manufactures shoes.
Figure 1 shows Fancy Footwear's marginal product of
labor and average product of labor curves in the short run.
2. Refer to Figure 1. Which of the following statements correctly describes the
curves in the figure?
A) The marginal product of labor curve is represented by curve B and the
average product of labor curve is represented by curve A.
B) The marginal product of labor curve is represented by curve A and the
average product of labor curve is represented by curve B.
C) Curve B could represent either the average product curve or the marginal
product curve. Curve A represents the total product curve.
D) Curve A could represent either the average product curve or the marginal
product and curve. Curve B represents the total product curve.
Answer: A
3. Which of the following is true at the output level where average total cost is at its
minimum?
A) Marginal cost equals average total cost.
B) Average variable cost equals fixed cost.
C) Average total cost equals average fixed cost.
D) Marginal cost equals average variable cost.
Answer: A
Figure 3
Figure 3 illustrates the long-run average cost curve for a firm that produces picture frames. The graph
also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc
4. Refer to Figure 3. In the short run, if the firm sells fewer than 5,000 picture
frames per month
A) it should produce with the scale of operation associated with ATCa.
B) it should produce with the scale of operation associated with ATCb.
C) it will experience constant returns to scale.
D) it should produce with the scale of operation associated with ATCc.
Answer: A
Figure 4
5. Refer to Figure 4. Starting from point E, a movement along the isocost to point F
A) decreases output but not the total cost of production.
B) decreases both the total cost of production and output.
C) decreases the total cost of production but not output.
D) increases the total cost of production and decreases output.
Answer: A
6. If a perfectly competitive firm raises the price it charges to consumers, which of
the following is the most likely outcome?
A) The firm's total revenue will increase only if the demand for its product is
elastic.
B) The firm will not sell any output.
C) The firm's revenue will not change because some consumers will refuse to
pay the higher price.
D) The firm's total revenue will increase only if the demand for its product is
inelastic.
Answer: B
Figure 5 shows the demand, marginal cost (MC) and average total cost (ATC) curves
for Jason's House of Apples.
7. Refer to Figure 5. To maximize his profit, Jason should produce the rate of output
indicated by point
A) a.
B) d.
C) b.
D) e.
Answer: B
8. The supply curve of a perfectly competitive firm in the short run is
A) the firm's average variable cost curve.
B) the portion of the firm's marginal cost curve above the minimum point of the
average variable cost curve.
C) the portion of the firm's marginal cost curve below the minimum point of the
average variable cost curve.
D) the portion of the firm's marginal cost curve above the minimum point of the
average total cost curve.
Answer: B
Figure 6
9. Refer to Figure 6. Which panel best represents the perfectly competitive organic
produce market's transition to the long run when some firms in the market are
earning economic profits?
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.
Answer: B
10. A firm could continue to operate for years without ever earning a profit as long as
it is producing an output where
A) AFC < AVC.
B) MR > AVC.
C) MR < ATC.
D) ATC > AVC.
Answer: B