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Econ 306 S10 Exam MCQs

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Question;Econ 306;Spring 2010;EXAM;The following group of questions all refer to the Figures 1A;1B, and 1C below. These figures show the;production and cost functions of a single firm which produces output (Q) using;one input, labor (L). There is no;capital and thus no fixed cost. Total;cost is therefore just the cost of hiring labor.;1. If production is efficient, how much labor is;needed to produce 80 units;of output?;a. 30;c. 100;b. 60 d. NOTA ("None of the Above");2. The marginal product of labor (MPL) is at a;maximum at which point on;the production;function Figure 1A?;a. A c. C;b. B d. NOTA;3. The point B in Figure 1A is equivalent to;which point in Figure 1C?;a. I c. M;b. J d. NOTA;4. The average cost (AC) of producing 80 units;of output is how large (i.e.;what is its numerical;value)?;a.;10 c. 12.5;b. 25 d. NOTA;5. Marginal cost equals average cost at what;level of labor input?;a. 30 c. 100;b. 60 d. NOTA;6. When the price of output is $25.00 per unit;how much output would be;produced by a profit;maximizing firm?;a. 24;c. 80;b. 60 d.;NOTA;9. When the price of output is $25.00 per unit;how much profit would a;profit maximizing;firm earn by operating at the optimal level of output?;a. $0 c.;$2000;b. $900;d. NOTA (1000);10. The firm's supply;curve of output is determined by which of the;following curve segments?;a. the marginal cost curve above the point J;b. the marginal cost curve above the point I;c. the average cost curve above the point J;d. NOTA;11. If the price were to;fall from $25.00 to $10.00 per unit, how much;profit would the;profit maximizing firm earn?;a. $0 c.;$600;b. $150 d.;NOTA;12. If a technological;innovation were to shift the production function in;Figure 1A upward, the;cost functions in Figure 1C would shift;a. upward c.;become flat;b. downward d.;NOTA;Figure 1A Figure 1B;Figure 1C;Question Group II;The following set of questions refer to the figure and table;below. A firm makes VCRs using the;technology represented by the isoquant map in the figure. This figure indicates the amounts of capital;and labor needed produced various amounts of VCR. The return to capital, r, is $20 per unit of;capital and the wage, w, is $10 per unit of labor. The firm selects the point a in the;figure, and the data relevant for this point are shown in the first line of;Table 1.;TABLE;r w K;L Q TC;AC P;Point a 20;10 10 36;200 560 2.8;2.8;Point b 20;20 20 20;200 800 4.0;4.0;Point c 20;20 10 10;100??;?;1. You can tell by looking at table or figure;above that production takes;place under;a. decreasing returns to scale;b. constant returns to scale;c. increasing returns to scale;d. average cost is U-shaped;2. Points a and b in the figure;are points at which;a. profit is equal;b. cost is equal;c. output is equal;d. NOTA;3. Long-run marginal cost at point a is;a. greater than average cost;b. equal to average cost;c. less than average cost;d. indeterminate;Suppose, now, that the firm's work force becomes unionized, and;that the wage rate rises to $20. The;wage increase causes the firm's costs to rise and the price of VCRs rises to;$4. At the new price and wage, the firm;selects the point c in Figure 3.;4. After the wage increase, the firm's average;cost is;a.;$2.00 c. $4.00;b. $2.80 d.;NOTA;5. After the wage increase, the firm uses how;much labor?;a. 10 c. 36;b. 20 d. NOTA;Question Group III;The figure below shows the cost functions of U.S. wine;producing firms (Panel A) and;German wine producers (Panel B). The U.S. firms are;initially excluded from the German wine market.;1. With U.S. firms excluded from the German;market, competition among;German producers in the wine industry will cause the long-run price;of wines in Germany;to be;a. 10;c. 20;b. 14 d. NOTA;2. With U.S. firms excluded from the German market;competition among;German;producers in the wine industry will cause the long-run profit earned by each;individual German firm to be;a. 0 c. 144;b. 36 d.;NOTA;3. With U.S. firms excluded from the German;market, competition among;German;producers in the wine industry will lead to a long-run supply curve of the wine;in Germany;that is;a. upward sloping;b. flat;c. U-shaped;d.;NOTA;Suppose, now, that Germany;signs a limited free-trade agreement with the U.S.;allows just one U.S.;wine producer to enter the German wine market.;The tariff on U.S.;wines is abolished for this one U.S.;producer. The cost structure of this U.S.;firm is shown in Panel A of Figure 4.;4. Suppose that the U.S. firm sets a price for its wine;is equal to 14.;Each;German wine producer will respond to this price in the short run by;producing how many units of wine?;a.;0 c. 24;b. 20 d.;NOTA;5. Suppose that the U.S. firm sets a price for its wine;is equal to 14.;Each German wine;producer will respond to this price in the long run by;producing how many units of wine?;a. 0 c. 24;b. 20 d.;NOTA;6. If German firms restructure themselves and;lower their costs to meet the;price (14) set by the;U.S.;firm. By how much must the German;average;cost be reduced in order to make the German;wine producers competitive;with the U.S. firm?;a. 7 per unit;c. 14 per unit;b. 8 per unit;d. NOTA (6);7. If German firms restructure themselves and lower;their costs to meet the;price (14) set by the;U.S.;firm. How much total profit will the U.S.;producer earn in;the long run at this price?;a. 0;c. 800;b. 300;d. NOTA;8. If German firms restructure themselves and;lower their costs to meet the price;(14) set by the U.S.;firm. How much total profit will each;German producer earn in the long run at this price?;a. 0;c. 800;b. 300;d. NOTA;Question Group IV;The following two figures;shown the Edgeworth Box and Contract Curve (Panel A) and the Utility;Possibility Frontier and Social Welfare Function (Panel B) of the following;situation: Adam has an endowment of 5;apples and no honey, and Eve an endowment of has 9 units of honey and no;apples. The two have to decide how much;(if any) of their endowments to trade with each other. Society has to decide of the trades are;satisfy social values about poverty.;Panel A Panel B;1. At;which point in Panel A and B are Adam and Eve initially located;before any trades are made?;a. e c. d;b. b d. NOTA;2. Both;Adam and Eve are better off at points;a. a c. c;b. b d. d;3. If Adam were able to drive his best bargain;she would propose which;point to Tony?;a. a c. c;b. b d. d;4.;Which point in Panel B corresponds to the point d in Panel A?;a. a c. c;b. b d. NOTA (e);5. Which;point in Panels A and B corresponds are a competitive equilibrium?;a. a c. c;b. b d. NOTA;6.;Which points in Panels A and B are a social optimum?;a. a c. c;b. b;d. NOTA;7. The;point b in Panel A is;a.;Pareto Optimal and socially optimal;b.;Pareto Optimal but not socially optimal;c.;Not Pareto Optimal and not socially optimal;d.;NOTA;Question Group V;The figure below depicts the;situation of an industry that becomes monopolized by a single producer.;1. A competitive industry would operate at which;point in the figure?;a. A c. C;b. B d. NOTA;2. The monopolist produces at which quantity of;output in the figure?;a. 4 c. 16;b. 8 d. NOTA;3. The monopolist charges what price?;a. 8 c. 16;b. 12 d. NOTA;4. The monopolist product makes how much profit?;a. 0 c. 16;b. 8;d.;NOTA;5. What is consumer surplus at the monopoly;price and quantity of output?;a. 0 c. 32;b. 16;d.;NOTA (8);6. What is the dead weight loss at the monopoly;price and quantity of;output?;a. 4 c. 16;b. 8;d. NOTA

 

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