exam 3 microeconomics

If the level of technology used in the production of a good improves:

A) given amount of inputs will yield more output B) the total product curve will rotate upward C) total variable cost and average variable cost will be reduced at all positive levels of output D) a given amount of output may be produced with fewer inputs E) all of the above**

The 1st, 2nd, and 3rd workers employed by a firm add 12, 6, and 3 units to total product, respectively. Therefore

Both A and B are Correct (marginal product of the 3rd work is 3, average product of the 3 workers is 7)

Suppose that a monopolist is producing a level of output (Q) such that AVC = $8, AFC = $2, P = $12, MC = $10, and MR = $8. Based on this information, the firm is realizing:

Can say the firm is maximizing profit in the short run

Under which of the following situations would a monopolist increase profits by lowering price (and increasing output):

If it discovered that it was producing where MC < MR

Suppose a perfectly competitive firm is producing at a level of output where MR=$8.50; ATC=$6.00; AVC=$4.00; MC=$7.50. In order to maximize profit, the firm should _________________.

Increase the output but not the price

Which of the following is characteristic of a purely competitive seller's demand curve?

It is equal to the firm's marginal revenue and average revenue curves

Suppose that at 100 units of output a firm is producing such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $4 per unit and is incurring average total costs of $6 per unit and average variable costs of $1 per unit. On the basis of this information we can conclude that in the short run a purely competitive firm:

It is operating at a loss that is less than the loss incurred by shutting down

Suppose a firm's lease agreement (rental contract) on its facility has expired and it is free to move to a new location or to stay in its current location (i.e., it can change both its level of capital and labor).The firm expects to have a monthly budget of $2000, and the price of labor is expected to be PL= $8 per unit and the price of capital is expected to be PK = $20 per unit. Given this information, the firm's monthly budget constraint is:

L=250-2.5K

Suppose a firms production function is Q = 2K0.5 L0.5. Its level of capital is fixed at 4 units, the price of labor is PL = $8 per unit, and the price of capital is PK = $10 per unit. Given this information, the firms total cost (TC = TFC + TVC) function is:

TC = 40 + Q2/2

Assume that in the short run a firm which is producing 100 units of output (Q) per-period has average total costs (ATC) of $5 and average fixed costs (AFC) of $2. It may be concluded that

TFC=$200 TVC= $300 TC= $500

The law of diminishing marginal product (or returns) states that:

as more and more of a variable input, such as labor, is employed to a short-run production process, beyond a point output will increase at a decreasing rate

If a firm's total fixed costs increase

average fixed costs and average total costs would rise

If a monopolist successfully engages in perfect (first-degree) price discrimination, then:

both profits and outputs will increase

Suppose that at 500 units of output a firm is producing such that marginal revenue is equal to marginal cost. The firm is selling its output at $6 per unit and average total cost at 500 units of output is $5. On the basis of this information we:

can say the firm is maximizing profit in the short run

Firms confront a variety of costs in producing units of output to sell in the marketplace. Marginal cost (MC) references the:

change in total cost that results from producing each additional unit of output

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that:

demand is elastic at this point

In which of the following would a perfectly competitive firm increase profits by reducing output

if it discovered that it was producing where MC>MR

Which of the following is correct regarding the relationship between the marginal product of labor and the average product of labor?

if marginal product is greater than average product, then average product will be increasing, if marginal product is less than average product, then average product will be decreasing

The distinction between the long run and the short run for a firm is that:

in the long run no inputs are fixed whereas in the short run at least one input is fixed

If the price of one of the firm's variable inputs decreases, such as the hourly wage rate, then

marginal cost, average variable cost, and average total cost would all fall

For a pure monopolist the relationship between total revenue and marginal revenue is such that:

marginal revenue is positive when total revenue is increasing but turns negative when total revenue begins to decrease

Similar to a firm operating in a purely competitive industry, a monopolist that chooses to produce in the short-run

may incur losses

The law of diminishing marginal product (or returns) describes the

relationship between resource inputs and product inputs in the short run

The short-run market supply curve for a purely competitive industry can be found by

summing horizontally the segments of the MC curve lying above the AVC curve for all firms comprising in the industry

Consider a local bakery that rents a facility at which it bakes loaves of bread using machinery (ovens, etc.) and labor. Which of the following best describes one of its short run variable inputs?

the baking supplies

The average product of labor (APL) is:

total output divided by the number of workers employed

Consider a firms per-period (e.g., hourly) production process. If it employs 1 unit of labor, then 4 units of output will be produced; if it employs 2 units of labor, then 10 units of output will be produced; and if it employs 3 units of labor, then 18 units of output will be produced. It follows that:

total output is increasing at an increasing rate and the marginal product of labor is increasing

The law of diminishing marginal product (or returns) describes the relationship between inputs and outputs in the short run. The shapes of which cost curves can be attributed to the law of diminishing marginal product (or returns)?

total variable cost, total cost, average variable cost, average total cost, and marginal cost