Econ 330 hw practice probs

Suppose isoquant curves are smooth and bend in towards the origin and the cost minimization point is determined by the tangent of the isocost lines and the isoquant. Except ____, all the other options characterize the cost minimization input bundle. (If a condition characterizes the cost minimization input bundle, the condition holds only at the cost minimization input bundle.) - MPL/w = MPK/r - MRTS = w/r - MPL/MPK = w/r - MRTS = MPL /MPK

- MRTS = MPL /MPK - MRTS = MPL /MPK is the analytical definition of MRTS. It holds no matter the firm is minimizing cost or not. All the other expressions are cost minimizing condition.

Suppose the isoquants are right angles and the kinks are on the K=2L line. The expansion path will: - follow K=2L. - be a vertical line. - be a horizontal line. - be a curve but not a straight line.

- follow K=2L. - When the isoquants are L-shaped lines, the cost-minimizing input bundles always fall on the kinks. Hence, the expansion path is the increasing straight line that kinks are on.

At the profit-maximizing level of output q>0, which of the statement is wrong - marginal revenue is equal to marginal cost - the slope of the total revenue curve is the same with the slope of the total cost curve - marginal profit is maximized. - marginal profit is zero

- marginal profit is maximized. - Marginal profit is zero when total profit is maximized

Decreasing returns to scale" and "diminishing returns to a factor of production" are two phrases that mean the same thing. -True -False

-False -To determine returns to scale, all inputs have to change. However, diminishing return to a factor of product only describes the change in one input

Suppose an accountant offers personalized prices for different customers for the essentially the same tax preparation service. The price is based on each customer's income level, family situation, asset level, etc, so that the price is close to the customer's willingness to pay. This can be viewed as a practice of ______. Fourth-degree price discrimination Fifth-degree price discrimination Second-degree price discrimination Third-degree price discrimination Correct! First-degree price discrimination

-First-degree price discrimination - Such a practice charges each individual his/her willingness to pay. It is a first-degree price discrimination

Ronny's Pizza House operates in the perfectly competitive local pizza market. If the price of cheese increases, what is the expected impact on Ronny's profit-maximizing output decision? -Output decreases because the price of pizza must also increase. -Output decreases because the marginal cost curve shifts upward -Output increases to cover the higher input cost. -Output increases because the marginal cost curve shifts upward.

-Output decreases because the marginal cost curve shifts upward -An increase in the price of input changes the cost lines. In particular, the marginal cost line shifts up. Hence, the q such that MC(q)=p decreases.

In a local grocery store, avocado is priced "$1 each, 3 for $2". This can be viewed as a practice of ______. -Imperfect first-degree price discrimination -Perfect first-degree price discrimination -Third-degree price discrimination -Second-degree price discrimination

-Second-degree price discrimination -Such a practice charges different prices for different quantities of the same good. It is a practice of second-price discrimination.

A tennis coach charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. This can be viewed as a practice of ______. -Perfect first-degree price discrimination -Second-degree price discrimination -Third-degree price discrimination -None of the above -Imperfect first-degree price discrimination

-Third-degree price discrimination -charges different prices for groups of consumers with different demand, and thus is a practice of third-price discrimination.

Which of the following statements is WRONG? -Under the first-degree price discrimination, consumer surplus is equal to zero. -Under the first-degree price discrimination, the total welfare is higher than that under the profit-maximizing single price scheme. -Under the first-degree price discrimination, producer surplus is maximized. -Under the first-degree price discrimination, the dead-weight loss is zero. -Under the first-degree price discrimination, social welfare is minimized.

-Under the first-degree price discrimination, social welfare is minimized. -Under the first-degree price discrimination, CS=0, PS is maximized, DWL=0, and social welfare is maximized.

A firm's expansion path is: -a curve that shows the profit maximizing output level as one input price changes -a curve that shows the least-cost combination of inputs needed to produce each level of output for given input prices. -a curve that makes the marginal product of the last unit of each input equal for each output. -the firm's production function.

-a curve that shows the least-cost combination of inputs needed to produce each level of output for given input prices. -A expansion path traces the cost-minimizing input combinations needed to produce each level of output for given input prices.

When marginal product of labor increases first and then decreases, the marginal product curve cuts average product from _____, at the _____ point of average product. -above, minimum -below, minimum -below, maximum -above, maximum

-above, maximum -When marginal product is higher than average product, AP is increasing. When marginal product is lower than average product, AP is decreasing. Hence, MP curves cuts AP curve from above and at the maximal level of the AP curve.

Assume that average product for six workers is fifteen. If the marginal product of the seventh worker is eighteen, -marginal product will rise between six and seven workers. -marginal product will fall between between six and seven workers. -average product will rise between between six and seven workers. -average product will fall between between six and seven workers.

-average product will rise between between six and seven workers. -When marginal product is higher than average product, AP is increasing.

A monopolist maximizes profits by -by setting marginal profit equal to marginal cost. -by charging price equal to average cost. -by setting MR(q)=MC(q) at a q for which p(q) is at least AVC(q) -by setting marginal revenue equal to marginal profit at a q for which p(q) is at least AVC(q) -charging price equal to marginal cost

-by setting MR(q)=MC(q) at a q for which p(q) is at least AVC(q) -The monopolist maximizes profits by setting marginal profit equal to 0 (equivalent to setting MR=MC) and then make sure that at this output level p is weakly higher than AVC.

When a firm charges each customer the maximum price that the customer is willing to pay, the firm: engages in first-degree price discrimination. charges the average reservation price. engages in second-degree price discrimination. engages in a discrete pricing strategy

-engages in first-degree price discrimination. -Charging each consumer his/her willingness to pay is the definition of first-degree price discrimination.

Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. This ______. -is attempting to convert producer surplus into consumer surplus. -is trying to reduce the firm's costs and therefore increase its profit. -is engaging in an illegal activity that is prohibited by the Sherman Antitrust Act. -is a practice of price discrimination.

-is a practice of price discrimination. -Charging different consumers differently is a practice of price discrimination. The purpose of this practice is to turn CS into PS.

Suppose isoquant curves are smooth and bend in towards the origin. When an isocost line is just tangent to an isoquant, we know that: -the two products are being produced at the highest input cost to the firm. -the two products are being produced at the least input cost to the firm. -output is not being produced at minimum cost. -output is being produced at minimum cost.

-output is being produced at minimum cost. -This is the condition for cost minimization. There is only one output but two inputs.

The demand curve facing a perfectly competitive firm is ___________. the same as the market demand curve -perfectly vertical -perfectly horizontal -downward-sloping and steeper than the market demand curve -downward-sloping and flatter than the market demand curve

-perfectly horizontal -The demand curve facing a perfectly competitive firm is perfectly elastic, so flat. This is because each firm is too small to affect the market price and can only treat the price as given.

The demand curve facing a perfectly competitive firm is - the same as the market demand curve. - not the same as its marginal revenue curve. - not the same as its average revenue curve. - perfectly horizontal.

-perfectly horizontal.

A monopolist -has the same profits as what would have in a competitive market. -produces less than the competitive outcome. has zero profits. -produces the same units as the competitive outcome. -produces more than the competitive outcome.

-produces less than the competitive outcome. has zero profits.

A monopolist -sells at a price lower than its marginal cost at q*. -sells at a price higher than its marginal cost at q*. -sells at a price lower than the competitive price. -sells at the same price as the competitive price. -sells at a price the same as its marginal cost at q*.

-sells at a price higher than its marginal cost at q*.

A monopolist ___. -sells at a price higher than the competitive price. -has the same profits as what would have in a competitive market. -produces the same units as the competitive outcome -sells at the same price as the competitive price. -sells at a price lower than the competitive price.

-sells at a price higher than the competitive price.

For a monopoly, marginal revenue is less than price because: -the firm must lower price if it wishes to sell more output. -the firm is a price taker. -the firm has no supply curve. -the demand for the firm's output is perfectly elastic. -the firm can sell all of its output at any price.

-the firm must lower price if it wishes to sell more output. -Marginal revenue is less than price because a monopolist faces a downward-sloping demand function. Hence, to sell one extra unit of output, the monopolist has to decrease price

When labor (L) is on the horizontal axis and capital (K) is on the vertical axis, which is NOT a correct definition/description of the marginal rate of technical substitution: -the ratio of the marginal products of the inputs. -the absolute value of the slope of an isoquant -the ratio of the prices of the inputs. -the amount of K can be reduced when L increases by 1, so that output remains constant.

-the ratio of the prices of the inputs.

When the marginal product drops to zero (and never goes up again), -diminishing returns set in. -average product is maximized. -output per worker reaches a maximum. -total product is maximized.

-total product is maximized. -When marginal product crosses the horizontal axis, the incremental in total product is decreasing to zero. This means that adding input does not increase product anymore. Hence, total product is maximized.

The short run is: -however long it takes to produce the planned output. -a time period in which at least one input is fixed. -a time period in which at least one set of outputs has been decided upon. -less than a year

a time period in which at least one input is fixed.

what satisfies the law of diminishing marginal return?

the slope of the total product curve F(K,L) is eventually becoming flatter and flatter.