Quiz 4

Question 1

Whenever the ratio of marginal products to input prices differs across inputs

Answer 1

the marginal products of inputs will adjust as input combinations change to correct for the inefficiency

Question 2

A firm that is trying to produce a given level of output at the lowest possible cost will

Answer 2

select the input combination at which an isocast line is tangent to the Qd isoquant

Question 3

In order to divide a given production quota between two production processes in such a way as to produce the quota at the lowest possible cost, one should produce the output where

Answer 3

marginal cost are equal in both processes

Question 4

Geometrically, marginal cost at any level of output may be interpreted as the slop of

Answer 4

the total cost curve at that level of output

Question 5

The vertical distance between the average total cost and the average variable cost curves at any level of output will always be

Answer 5

average fixed costs

Question 6

The output where MC=AVC is called the

Answer 6

shutdown point

Question 7

When the price is p1, in order to maximize profits this firm must produce a quantity equal to

Answer 7

q1

Question 8

At point A

Answer 8

MC=MR

Question 9

Ceteris paribus, in the long run, a tax placed on a perfectly competitive industry will

Answer 9

increase the price of the good by an amount equal to the tax

Question 10

In the long run for a competitive firm

Answer 10

the firm is at the bottom of its short run average cost curve

Question 11

Other things remaining the same, in the long-run as compared to the short-run

Answer 11

supply elasticity will increase

Question 12

You have a small business that makes $50,000 accounting and economic profit for you. As a disabled person , you must work at home and you did not have other opportunities until your neighbor offers you a job you like equally well for $50,000 and you can do do it at home. This means

Answer 12

your economic profit has gone down and your accounting profit has stayed the same

Question 13

Say a competitive firm is producing where ATC=$10, AVC=$2. If the firm charges $5 for its output, then in the short-run this firm should

Answer 13

continue to operate

Question 14

At the output where MC=ATC=P the firm

Answer 14

has no economic profit

Question 15

If firms are price takers this implies that

Answer 15

the demand curve facing the firm is perfectly elastic