Question

1)     In the short run, the:

a. firm has complete flexibility with respect to input use.

b.availability of all inputs is fixed.

c.operating period is longer than the planning period.

d.availability of at least one input is fixed.

2)     Point elasticity measures elasticity:

a. over a given range of a function.

b. at a spot on a function.

c. over a given range along a function.

d.before non-price effects.

3)     If the slope of a long-run total cost function decreases as output increases, the firm's underlying production    function exhibits:

a. constant returns to scale.

b. decreasing returns to scale.

c. decreasing returns to a factor input.

d. increasing returns to scale.        

4)     The vigor of competition always decreases with a fall in:

a. product differentiation.

b. barriers to entry.

c. the level of available information.

d. the number of competitors.

5)     In the short run, a monopolist will:

a. shut down if price equals average total cost.

b. shut down if price is less than average total cost.

c. shut down if price is less than average variable cost.

d. never shut down.

6)     With elastic demand, a price increase will:

a. decrease marginal revenue.

b. decrease total revenue.

c. increase total revenue.

d. decrease marginal revenue and total revenue.

7)     In competitive market equilibrium, the firm's:

a. MR = MC and P > AR

b. MR = MC and P > AC

c. AR = AC and MR > MC

d. P = MR = AR = AC = MC

8)     A government policy that addresses market failures caused by positive externalities is:

a. patent grants.

b. subsidies for pollution reduction.

c. tax policy.

d. the establishment of operating controls.

9)     A production function describes the relation between output and:

a. technical progress.

b. one input.

c. total cost.

d. all inputs.

          

10) When the cross-price elasticity = 3:

a. demand rises by 3% with a 1% increase in the price of X.

b. the quantity demanded rises by 3% with a 1% increase in the price of X.

c. the quantity demanded rises by 1% with a 3% increase in the price of X.

d. demand rises by 1% with a 3% increase in the price of X.

         

          

11) Marginal profit equals average profit when:

a. marginal profit is maximized.

b. average profit is maximized.

c. marginal profit equals marginal cost.

d. the profit minimizing output is produced.

12) When the cross-price elasticity = 3:

a. demand rises by 3% with a 1% increase in the price of X.

b. the quantity demanded rises by 3% with a 1% increase in the price of X.

c. the quantity demanded rises by 1% with a 3% increase in the price of X.

d. demand rises by 1% with a 3% increase in the price of X.

13) A firm will maximize profits by employing the quantity of each input where the marginal:

a. revenue product of each input equals its price.

b. revenue equals the price of each input.

c. product of each input is equal.

d. product of each input equals its price.

Answer 1

1) Solution: availability of at least one input is fixed.

Explanation: At least one input is fixed in the short run

2) Solution: at a spot on a function

Explanation: Point elasticity considers elasticity on a function at a spot

3) Solution: increasing returns to scale

Explanation: The firm's underlying production function exhibits increasing returns to scale when with fall in output the slope of a long-run total cost function falls.

4) Solution: the level of available information.

Explanation: The vigor of competition falls with the reduction in information available.

5) Solution: shut down if price is less than average variable cost

Explanation: When variable cost exceeds the total revenue at all output levels monopolist will shut down in short run.

6) Solution: decrease total revenue

Explanation: When price increases causes a fall in total revenue, then demand can is elastic

I have answered more than 4 parts