Question

1.

Which of the following statements is false about a binding price ceiling?

		-A binding price ceiling will lower the price of a good
		-A binding price ceiling will always increase surplus for all consumers.
		-A binding price ceiling leads to a shortage of goods
		-A binding price ceiling can create deadweight loss

2.

Which of the following is the explicit cost?

		-Interest foregone on the capital invested in business
		-Interest received on an investment
		-Interest paid on loan taken for business
		-Rental income foregone on the building business is operated

3.

An increase in the labor force that can produce all goods would be reflected in a society’s production possibilities frontier (PPF) by an:

		-Both the x-intercept and the y-intercept of the PPF increasing
		-The y-intercept of the PPF increasing but the x-intercept staying the same
		-Both the x-intercept and the y-intercept of the PPF decreasing
		-The x-intercept of the PPF increasing but the y-intercept staying the same

4.

If marginal cost is equal to average total cost at a given level of output, then we know that at that level of output

		-average variable cost is minimized
		-marginal cost is minimized
		-average total cost is minimized
		-average total cost is zero
		-marginal cost is zero

5.

Should a firm always produce the level of output where marginal cost is lowest?

		-No. Profit is maximized where marginal cost equals average variable cost.
		-Yes. Any other level of output will have higher marginal cost.
		-No. Profit is maximized where marginal cost equals marginal revenue.
		-Yes. That is the level of output where costs are lowest.
		-Yes. That is the level of output where employees are most efficient.

6. Mac Laptops and Windows Computers are subsitutes. If the price of Mac Laptops decreases, we will see that the demand for Windows Computers will ______ because the cross price elasticity between the two goods is _____.

		-increase; positive
		-decrease; positive
		-increase; negative
		-decrease; negative

7. At a production level of Q=10, the average total cost for a firm is $20 with an average variable cost of $14. What is the average fixed cost for this firm?

		-$6
		-$30
		-$32
		-$60

Answer 1

1) Binding price ceiling always lead to increase in consumer surplus.

Because binding price ceiling lead to Shortage of good ,so it's not necessarily Increase CONSUMERs surplus.

2) Interest paid on loan taken for business

3)Both the x-intercept and the y-intercept of the PPF increasing

4)average total cost is minimized

5)No. Profit is maximized where marginal cost equals marginal revenue

6)decrease; positive

7)AFC=(ATC-AVC)=20-14=6