1) Suppose a firm has a fixed proportion productio

ECON303Fall2001Midterm2Dr.CaryDeckThisexamconsistsof25multiple-choicequestionseachworth2.5pointsand2writtenproblemsthatcountfor42points.Yourexamshouldcontain7pages.Pleasewriteyournameonthetopofeachpage.Answereachquestionasbestyoucan.Whereappropriateyoumustshowworkinordertoreceivefullcredit.Theexamisclosedbook.Ifyouhaveanyquestionspleaseraiseyourhandandsomeonewillcometoyou.Thereisnotalkingallowedduringtheexam.Theuseofelectronicdevicesotherthancalculatorscapableofonlythebasicarithmeticoperationsisprohibited.Youhaveonehourandtwentyminutestocompletethisexam.Examswillnotbeacceptedaftertheendoftheexamhasbeenannounced.Name:___________Score:____________D1.Themarginalphysicalproductofaninputisa.theadditionalamountoftheinputrequiredtoincreaseoutputbyoneunit.b.therateatwhichoneinputcanbereplacedbyanotherinputwhilemaintainingthesamelevelofoutput.c.theportionofoutputduetoaninput.d.theadditionalamountofoutputproducedwithanadditionalunitoftheinput.D2.IfTC=q2-q+3thena.AVC=q-1+3/qandMC=2q-1b.MC=2q-1andVC=q2c.FC=-q+3andAVC=qd.AVC=q-1andFC=3C3.WhichofthefollowingwouldnotcauseashiftinSupply?a.changesininputpricesb.changesintechnologyc.attainingeconomiesofscaled.attainingeconomiesofscopeD4.Supposeamarketisinequilibrium.Ifthepriceofasubstituteforthegooddecreases,whichofthefollowingwouldoccur?a.PeincreasesandQeincreasesb.PedecreasesandQeincreasesc.PeincreasesandQedecreasesd.PedecreasesandQedecreasesB5.Ifagoodisproduceaccordingtotheproductionfunctionf(L,K)=L+2Kthenwhichofthefollowing(L,K)bundlescouldminimizecostsgiventheinputprices?a.(0,8)whenwage=1andv=3b.(5,5)whenwage=1andv=2c.(8,0)whenwage=3andv=1d.cannotdeterminewithoutmoreinformationC6.IfMCAVCthena.MCisrisingb.MCisfallingc.AVCisrisingd.AVCisfallingA7.Inthelongrunacompetitivefirmwilla.producewhereMR=LRATC.b.onlyoperatesifitearnspositiveeconomicprofits.c.haveaconstantmarginalcost.d.havelargeroutputthanintheshortrun.C8.Allofthefollowingaretrueexcepta.Opportunitycostisthevalueofthebestforgonealternative.b.Accountingcostistheamountpaidforanitem.c.Economiccostisthepriceatwhichtheowneriswillingtosell.d.Sunkcostsarecoststhatarenotrecoverable.D9.Ifthetotalcostforqunitsis3q2andthefirmisapricetakerthentheoptimalquantity,q*,equalsa.6b.6/Pc.6Pd.P/6B10.Whichofthefollowingtotalcostcurvesexhibitsincreasingreturnstoscale?a.b.c.d.C11.Marketsupplya.isthesumoftheindividualfirm’sAVCcurves.b.thelevelofprofitafirmrequirestoprovideaparticularquantity.c.therelationbetweenpriceandthetotalquantitythatfirmsarewillingtosell.d.definedonlywhenthefirmfacestheentiredemandcurve.C12.IfacompetitivefirmhasTC=q3-40q2+430q+100,whatistheminimumpricethatthefirmmustreceiveforitsoutputinorderforittobewillingtoproduce?a.10b.20c.30d.40A13.Aproductionfunctionwithgreaterreturnstoscalewillhaveisoquantcurvesthatare_____spacedthanafunctionwithlowerreturnstoscale.a.morecloselyb.identicallyc.lesscloselyd.indeterminatelyA14.TheRTSoff(L,K)=L.5K.25isa.2K/L.b.K/2L.c.2L/K.d.L/2K.QTCQTCQTCQTCC15.Iff(L,K)=L1/2K1/2,w=1,andv=1thentheamountoflaborthatthefirmwouldusetoproduceanoutputof16isa.4b.8c.16d.32C16.Theisoquantcurveisa.thesetofallbundlesthathavethesamecost.b.thesetofallbundlesthatgeneratethesameutility.c.thesetofallbundlesthatcanproducethesamelevelofoutput.d.positivelysloped.C17.Considerafirmwiththecostslistedinthefollowingtable:Q01234TC100120140180220Whichofthefollowingisnottrue?a.MCatthe1stunitis20.b.FCatthe2ndunitis100.c.AVCatthe2ndunitis40.d.Alloftheabovearetrue.C18.IfDemandisgivenbyP=75-3QandSupplyisgivenbyP=12+4Qthentheequilibrium,(Qe,Pe),isa.(7,54)b.(8,44)c.(9,48)d.(11,55)A19.Ifthewagerateis7andtherentalrateofcapitalis4thencostofusingtheinputbundleL=3andK=2isa.29b.26c.21d.12C20.Thelongrunisthelengthoftimesuchthata.allinputsarefixed.b.someinputsarefixedandsomeinputscanvary.c.allinputscanvary.d.thefirmcanshutdown.A21.Marginalrevenueisa.theadditionalrevenuecollectedfromsellinganadditionalunitofoutput.b.theadditionalrevenuegeneratedbyhiringanadditionalunitofaninput.c.theadditionalcostfromhiringanadditionalunitofinput.d.belowaveragefixedcostwhenAFCisfalling.C22.Iff(L,K)=max(2L,3K),w=11andv=20thenthefirmwilla.produceusing2workersforevery3machines.b.produceusing3workersforevery2machines.c.produceusingonlylabor.d.produceusingonlycapital.D23.IfFC=7andAVC=q2-3thenMCisa.0b.7qc.q3-3d.3q2-3B24.ApricetakingfirmthathasTC=2q2+10andfacesamarketpriceofPe=8willproducewhatquantity?a.0b.2c.4d.6B25.Ifacompetitivemarketisinequilibriumandthenthepriceofaninputincreasesandatthesametimethepriceofacomplimentforthegooddecreasesthenwecanpredictwhichofthefollowing?a.Pedecreasesb.Peincreasesc.Qedecreasesd.QeincreasesWP#1.(20pointstotal)SupposethatdemandisP-12=(Q-200)(-3/40)andsupplyisgivenbyP-12=(Q-200)(9/200).Thegraphofatypicalfirmispresentedbelow,shownaretheMC,ATCandAVCcurves.Onthisgraphdrawthemarginalrevenuecurvethatthefirmfacesintheshortrun(2points).Alsoindicatethefirm’sprofitorlossesatthisprice(2points)aswellasthetotalcost(2points)ofproduction?{HINT:boththesupplyanddemandequationsarewritteninpointslopeform:P-P1=(Q-Q1)m.}Howmanyunitswillthefirmproduc