Economics 2150A/B Lecture Notes - John Wiley & Sons, Average Cost, Isocost

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ECON 2150A/B Full Course Notes

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A long-run total cost curve a) b) c) d) always has a constant slope. is always upward sloping. never has a constant slope. is always downward sloping. The cost of producing a good in a single-product firm is e) f) g) h) additional cost stand-alone cost variable cost average cost. Besanko & braeutigam microeconomics, 4th editiontest bank t) cross through (bisect) the average cost curve at its minimum. Suppose for a particular production function, the cost-minimizing level of labor is. 2l long-run total cost curve is cc) dd) ee) ff) Suppose for a particular production function, the cost-minimizing levels of labor and capital are. Fc stands for fixed cost, vc stands for variable cost, and ac stands for average cost, below. kk) ll) mm) , where l and k are chosen to minimize cost, and w and r are input.

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1. In oligopoly markets, firms maximize their profits when:

a. at point on the short-run marginal cost curve.

b. marginal revenue equals marginal cost.

c. long-run average cost of production starts to decline

d. the short-run average cost curve is at its minimum level.

2. Graphically, competitive market supply is measured by the:

a. vertical difference of competitor demand curves.

b. vertical sum of competitor demand curves.

c. horizontal difference of competitor MC curves.

d. horizontal sum of competitor MC curves.

3. 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.

4. In oligopoly markets, the market demand curve is:

a. upward sloping.

b. downward sloping.

c. horizontal.

d. vertical.

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5. Increasing returns to scale for a firm is shown graphically by (A) a horizontal long-run average cost curve. (B) a vertical long-run average cost curve. (C) an upward-sloping long-run average cost curve. (D) a downward-sloping long-run average cost curve. (E) none of the above; returns to scale have nothing to do with the shape of the long-run average cost curve. Answer:

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30. Economies of scale refer to:

a. the minimum point on the short-run average total cost curve.

b. the flat portion of the long-run average total cost curve.

c. a decrease in the long-run average total cost of production as output increases.

d. a and b.

31. With a natural monopoly, the price a single firm must charge to make a profit:

a. is lower than the price two or more firms would have to charge.

b. is always higher than the price two or more firms would have to charge.

c. is equal to the price of two or more firms would have to charge.

d. is half the price two or more firms would have to charge.

32. The long-run average cost curve is typically:

a. downward-sloping at first but then upward-sloping.

b. upward-sloping at first but then downward-sloping.

c. always downward-sloping.

d. always upward-sloping.

33. According to the contestable market model, if there are no barriers to entry or exit, the price an oligopolist sets will be equivalent to the competitive price.
True or False?

34. In the theory of perfect competition:

a. the market demand curve is horizontal (i.e. elastic).

b. the single firm's demand curve is horizontal (i.e. elastic).

c. the single firm's demand curve is downward sloping.

d. a and b.

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Economics 2150A/B Lecture Notes - John Wiley & Sons, Average Cost, Isocost

ECON 2150A/B Full Course Notes

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