Question

1. The long run ATC is flatter in shape because
A. all inputs are fixed
B. there is a greater degree of substitution between inputs
C. input elasticity is limited
D. the long run is undefined

2. The R2 of an estimated Regression equation indicates
A. goodness of fit
B. the per cent of variance explained
C. both first and second choice
D. second choice only

3. Which of the following is known as multicillinearity
A. low R2
B. high R2
C. too many explanatory variables
D. high degree of correlation among two or more explanatory variables

4. In the short run, a monopolistically competitive firm
A. always earns profit
B. earns profit higher than an oligopolistic firm
C. earns profit higher than a perfectly competitive firm
D. may or may not earn profit

Answer 1

1. The long run ATC is flatter in shape because the long run is undefined

Explanation

The long run average total cost curve is flatter because of the economies of scale that accrue in the long run. In long run there are no fixed costs and all costs are variable. Hence, in the long run the total costs can be varied which results in flatter average cost curve.

2. . The R2 of an estimated Regression equation indicates both first and second choice. ie It is goodness of fit and the percent of variance explained.

Explanation

The R2 is a measure of how good the regression model is in terms of explaining the variance in the dependent variable.

3. Multicillinearity is high degree of correlation among two or more explanatory variables

Explanation

When two or more of the independent or explanatory variables have high degree of correlation amongst them, then they are said to give rise to the problem of multicollinearity

4. In the short run, a monopolistically competitive firm always earns profit.

Explanation

In the short run the monopolistic firm always earns profit by equating MR=MC. However, in the long run the firms only earn normal profits.