# ECON 103, ANSWERS TO HOME WORK ASSIGNMENTS

Size: px
Start display at page:

Transcription

1 ECON 103, ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of July 14 Chapter 11 WRITE: [2] Complete the following labour demand table for a firm that is hiring labour competitively and selling its product in a competitive market. Labour Total MPP Price TR MRP 0 0 \$2 \$0 17 \$ \$2 \$34 14 \$ \$2 \$62 12 \$ \$2 \$86 10 \$ \$2 \$106 7 \$ \$2 \$120 5 \$ \$2 \$130 a. How many workers will the firm hire if the going wage rate is \$27.95? \$19.95? Explain why the firm will not hire a larger or smaller number of workers at each of these wage rates. b. Show in schedule form and graphically the labour demand curve of this firm. c. Now redetermine the firm s demand curve for labour, assuming that it is selling in an imperfectly competitive market and that, although it can sell 17 units at \$2.20 per unit, it must lower product price by 5 cents in order to sell the marginal product of each successive labour unit. Compare this demand curve with that derived in question 2b. Which curve is more elastic? Explain. ANS: See table for marginal product data, total revenue data, and marginal revenue product data. (a) Two workers at \$27.95 because the MRP of the first worker is \$34 and the MRP of the second worker is \$28, both exceeding the \$ wage. Four workers at \$19.95 because workers 1 through 4 have MRPs exceeding the \$19.95 wage. The fifth worker s MRP is only \$14 so he or she will not be hired. (b) The demand schedule consists of the first and last columns of the table: page 1

2 Question 2-b Question 11-2b Quantity of labour demanded (plotted at the halfway points along the horizontal axis) (c) Reconstruct the table. Labour Total MPP Price TR MRP 0 0 \$ \$ \$2.20 \$ \$ \$2.15 \$ \$ \$2.10 \$ \$ \$2.05 \$ \$ \$2.00 \$ \$ \$1.95 \$ The new labour demand is less elastic. Here, MRP falls because of diminishing returns and because product price declines as output increases. A decrease in the wage rate will produce less of an increase in the quantity of labour demanded, because the output from the added labour will reduce product price and thus MRP. page 2

3 WRITE [3] Suppose that marginal product tripled while product price fell by one-half in Table What would be the new MRP values in Table 11-1? What would be the net impact on the location of the factor demand curve in Figure 11-1? ANS: New MRP values (top to bottom): \$21, 18, 15, 12, 9, 6, 3. The factor demand curve would shift up, with the MRP fifty percent greater for each quantity of factor demanded. Resource TP MPP Price TR MRP 0 0 \$ \$ \$ \$ \$ \$ \$ \$ \$ \$ \$ \$ \$ \$ \$1 84 WRITE [5] What are the determinants of the elasticity of factor demand? What effect will each of the following have on the elasticity or the location of the demand for factor C, which is being used to produce commodity X? Where there is any uncertainty as to the outcome, specify the causes of that uncertainty. a. An increase in the demand for product X. b. An increase in the price of substitute factor D. c. An increase in the number of factors substitutable for C in producing X. d. A technological improvement in the capital equipment with which factor C is combined. e. A decline in the price of complementary factor E. f. A decline in the elasticity of demand for product X due to a decline in the competitiveness of the product market. page 3

4 ANS: Four factors determine elasticity: 1. the rate at which the factor s MP declines; 2. the ease of substituting other factors; 3. elasticity of product demand; 4. the ratio of the factor cost to the total cost of production. (a) Increase in demand C. (b) The price increase for D will increase the demand for C through the substitution effect, but decrease the demand for all factors including C through the output effect. The net effect is uncertain; it depends on which effect outweighs the other. (c) Increases the elasticity of demand for C. (d) Increases the demand for C. (e) Increases the demand for C through the output effect. There is no substitution effect. (f) Reduces the elasticity of demand for C. WRITE [6] Suppose the productivity of labour and capital are as shown below. The output of these factors sells in a purely competitive market for \$1 per unit. Both capital and labour are hired under purely competitive conditions at \$3 and \$1 respectively. capital MP of capital labour MP of labour a. What is the least-cost combination of labour and capital to employ in producing 80 units of output? Explain. b. What is the profit maximizing combination of labour and capital the firm should use? Explain. What is the resulting level of output? What is the economic profit? Is this the least costly way of producing the profit-maximizing output? page 4

5 ANS: (a) 2 capital; 4labour. labor. MP /P 7/ 1; MP /P 21/ 3 7/ 1. 2 C C 7 capital and 7 labor. MRP L / L MRP C/PC 1 3/ (b) 7 capital and 7 labour. / 3. Output is 142 (= 96 from capital + 46 from labour). Economic profit is \$114 (= \$142 - \$28) assuming there are no fixed costs. Yes, least-cost production is part of maximizing profits; the profit-maximizing rule includes the leastcost rule. WRITE [7] In each of the following four cases, MRP L and MRP C refer to the marginal revenue products of labour and capital, respectively, and P L and P C refer to their prices. Indicate in each case whether the conditions are consistent with maximum profits for the firm. If not, state which factor(s) should be used in larger amounts and which factor(s) should be used in smaller amounts. a. MRP \$8; P \$4; MRP \$8; P \$ 4 C C. b. MRP \$ 10; P \$ 12; MRP \$ 14; P 9. C C \$ c. MRP \$ 6; P \$ 6; MRP \$12; P 12. C C \$ d. MRP \$ 22; P \$26; MRP 16; P \$19. C \$ C ANS: (a) Use more of both. (b) Use less labour and more capital. (c) Maximum profits obtained. (d) Use less of both. CONSIDER: [1] What is the significance of factor pricing? Explain in detail how the factors determining factor demand differ from those underlying product demand. Explain the meaning and significance of the notion that the demand for a factor is a derived demand. Why do factor demand curves slope downward? ANS: All factors that enter into production are owned by someone, including the most important factor of all for most people, self-owned labour. The most basic significance of factor pricing is that it largely determines people s incomes. Factor pricing allocates scarce factors among alternative uses. Firms take account of the prices of factors in deciding how best to attain least-cost production. Finally, factor pricing has a great deal to do with income inequality and the debate as to what government should or should not do to lessen this inequality. It is here that the factors that determine factor demand are most different from those that determine demand for products. Demand for products is a question of income and tastes. But factor demand is more passive in the sense that it is derived from the demand for the products the factor can produce. If a factor can t be used in production of a desired product, there will not be any demand for it. Additionally, factors are often less mobile than products, so their geographic location relative to demand for the output they produce may be an important factor determining demand for factors in particular geographic areas. Factors of production are not hired or bought because their employer or buyer desires them for themselves. The demand for factors is entirely derived from what the firm believes the factors can produce. If there were no demand for output, there would be no demand for input. The demand for a factor depends, then, on how productive it is in producing output and on the price of the output. The demand for a factor is downsloping because of the diminishing marginal product of the factor page 5

6 (because of the law of diminishing returns) and, in imperfectly competitive markets, also because the greater the output, the lower its price. WRITE: During the 1980s Fraser Valley raspberry growers found it increasingly difficult to find people to pick their crops. Students were no longer willing to do the work and recent immigrants were finding better paid jobs. Many farmers purchased mechanical harvesting machines that cost upwards of \$125,000. What impact did this have on the demand for human berry pickers? What does that imply about the relative strengths of the substitution and output effects? Currently some farmers are hiring Mexican pickers under the Seasonal Agricultural Workers Program (SAWP). What will happen to the demand for mechanical harvesters if this programme expands? ANS: Since farmers could not hire workers to manually pick raspberries it is likely that the machines substituted for labour. In this case the substitution effect likely dominated the output effect. Also, machine operators have a higher level of skill than hand pickers, and clearly their MRP was higher. Ceteris paribus that would mean they would earn higher wages. If the SAWP programme expands, it is likely that labour will be substituted for capital. This will depend in part on the wages paid to that labour. page 6

### Pre-Test Chapter 25 ed17

Pre-Test Chapter 25 ed17 Multiple Choice Questions 1. Refer to the above graph. An increase in the quantity of labor demanded (as distinct from an increase in demand) is shown by the: A. shift from labor

### AP Microeconomics Chapter 12 Outline

I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.

### INTRODUCTION THE LABOR MARKET LABOR SUPPLY INCOME VS. LEISURE THE SUPPLY OF LABOR

INTRODUCTION Chapter 15 THE LBOR MRKET This chapter covers why there are differences in wages: How do people decide how much time to spend working? What determines the wage rate an employer is willing

### ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 23 Chapter 8 WRITE [4] Use the demand schedule that follows to calculate total revenue and marginal revenue at each quantity. Plot

1 The Market for Factors of Production Factors of Production are the inputs used to produce goods and services. The markets for these factors of production are similar to the markets for goods and services

### Problem Set #5-Key. Economics 305-Intermediate Microeconomic Theory

Problem Set #5-Key Sonoma State University Economics 305-Intermediate Microeconomic Theory Dr Cuellar (1) Suppose that you are paying your for your own education and that your college tuition is \$200 per

### Microeconomics Instructor Miller Practice Problems Labor Market

Microeconomics Instructor Miller Practice Problems Labor Market 1. What is a factor market? A) It is a market where financial instruments are traded. B) It is a market where stocks and bonds are traded.

### For instance between 1960 and 2000 the average hourly output produced by US workers rose by 140 percent.

Causes of shifts in labor demand curve The labor demand curve shows the value of the marginal product of labor as a function of quantity of labor hired. Using this fact, it can be seen that the following

### Pre Test Chapter 3. 8.. DVD players and DVDs are: A. complementary goods. B. substitute goods. C. independent goods. D. inferior goods.

1. Graphically, the market demand curve is: A. steeper than any individual demand curve that is part of it. B. greater than the sum of the individual demand curves. C. the horizontal sum of individual

### 4 THE MARKET FORCES OF SUPPLY AND DEMAND

4 THE MARKET FORCES OF SUPPLY AND DEMAND IN THIS CHAPTER YOU WILL Learn what a competitive market is Examine what determines the demand for a good in a competitive market Chapter Overview Examine what

### Learning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to:

Learning Objectives After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Discuss three characteristics of perfectly competitive

### Productioin OVERVIEW. WSG5 7/7/03 4:35 PM Page 63. Copyright 2003 by Academic Press. All rights of reproduction in any form reserved.

WSG5 7/7/03 4:35 PM Page 63 5 Productioin OVERVIEW This chapter reviews the general problem of transforming productive resources in goods and services for sale in the market. A production function is the

ANSWERS TO END-OF-CHAPTER QUESTIONS 23-1 Briefly indicate the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Firms that survive in the long run are usually those that A) remain small. B) strive for the largest

### Chapter 6 MULTIPLE-CHOICE QUESTIONS

Chapter 6 MULTIPLE-CHOICE QUETION 1. Which one of the following is generally considered a characteristic of a perfectly competitive labor market? a. A few workers of varying skills and capabilities b.

### Profit and Revenue Maximization

WSG7 7/7/03 4:36 PM Page 95 7 Profit and Revenue Maximization OVERVIEW The purpose of this chapter is to develop a general framework for finding optimal solutions to managerial decision-making problems.

### Economics 10: Problem Set 3 (With Answers)

Economics 1: Problem Set 3 (With Answers) 1. Assume you own a bookstore that has the following cost and revenue information for last year: - gross revenue from sales \$1, - cost of inventory 4, - wages

### POTENTIAL OUTPUT and LONG RUN AGGREGATE SUPPLY

POTENTIAL OUTPUT and LONG RUN AGGREGATE SUPPLY Aggregate Supply represents the ability of an economy to produce goods and services. In the Long-run this ability to produce is based on the level of production

### MATH MODULE 5. Total, Average, and Marginal Functions. 1. Discussion M5-1

MATH MODULE Total, Average, and Marginal Functions 1. Discussion A very important skill for economists is the ability to relate total, average, and marginal curves. Much of standard microeconomics involves

### AP Microeconomics Unit V: The Factor (Resource) Market Problem Set #5

1. /15 2. /20 3. /15 4. /25 Total: /75 Name: Team: AP Microeconomics Unit V: The Factor (Resource) Market Problem Set #5 1. ( /15) Define the term and explain a situation that demonstrates the real world

### Pre-Test Chapter 21 ed17

Pre-Test Chapter 21 ed17 Multiple Choice Questions 1. Which of the following is not a basic characteristic of pure competition? A. considerable nonprice competition B. no barriers to the entry or exodus

### THIRD EDITION. ECONOMICS and. MICROECONOMICS Paul Krugman Robin Wells. Chapter 19. Factor Markets and Distribution of Income

THIRD EDITION ECONOMICS and MICROECONOMICS Paul Krugman Robin Wells Chapter 19 Factor Markets and Distribution of Income WHAT YOU WILL LEARN IN THIS CHAPTER How factors of production resources like land,

### Employment and Pricing of Inputs

Employment and Pricing of Inputs Previously we studied the factors that determine the output and price of goods. In chapters 16 and 17, we will focus on the factors that determine the employment level

### Market for cream: P 1 P 2 D 1 D 2 Q 2 Q 1. Individual firm: W Market for labor: W, S MRP w 1 w 2 D 1 D 1 D 2 D 2

Factor Markets Problem 1 (APT 93, P2) Two goods, coffee and cream, are complements. Due to a natural disaster in Brazil that drastically reduces the supply of coffee in the world market the price of coffee

### LABOR UNIONS. Appendix. Key Concepts

Appendix LABOR UNION Key Concepts Market Power in the Labor Market A labor union is an organized group of workers that aims to increase wages and influence other job conditions. Craft union a group of

### Demand, Supply, and Market Equilibrium

3 Demand, Supply, and Market Equilibrium The price of vanilla is bouncing. A kilogram (2.2 pounds) of vanilla beans sold for \$50 in 2000, but by 2003 the price had risen to \$500 per kilogram. The price

### Practice Questions Week 8 Day 1

Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants

### Agenda. Productivity, Output, and Employment, Part 1. The Production Function. The Production Function. The Production Function. The Demand for Labor

Agenda Productivity, Output, and Employment, Part 1 3-1 3-2 A production function shows how businesses transform factors of production into output of goods and services through the applications of technology.

### The Central Idea CHAPTER 1 CHAPTER OVERVIEW CHAPTER REVIEW

CHAPTER 1 The Central Idea CHAPTER OVERVIEW Economic interactions involve scarcity and choice. Time and income are limited, and people choose among alternatives every day. In this chapter, we study the

### CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY

CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY EXERCISES 3. A monopolist firm faces a demand with constant elasticity of -.0. It has a constant marginal cost of \$0 per unit and sets a price to maximize

### Prot Maximization and Cost Minimization

Simon Fraser University Prof. Karaivanov Department of Economics Econ 0 COST MINIMIZATION Prot Maximization and Cost Minimization Remember that the rm's problem is maximizing prots by choosing the optimal

### NAME: INTERMEDIATE MICROECONOMIC THEORY SPRING 2008 ECONOMICS 300/010 & 011 Midterm II April 30, 2008

NAME: INTERMEDIATE MICROECONOMIC THEORY SPRING 2008 ECONOMICS 300/010 & 011 Section I: Multiple Choice (4 points each) Identify the choice that best completes the statement or answers the question. 1.

### Monopoly and Monopsony Labor Market Behavior

Monopoly and Monopsony abor Market Behavior 1 Introduction For the purposes of this handout, let s assume that firms operate in just two markets: the market for their product where they are a seller) and

### 1. According to Figure 1.1, what is the opportunity cost of increasing consumer output from OF to OD?

Solutions to Problem set 1 (chp 1 Q1-7 / chp 3 Q3-7) 28 possible points Chapter 1 1. According to Figure 1.1, what is the opportunity cost of increasing consumer output from OF to OD? In figure 1.1, the

### The Cobb-Douglas Production Function

171 10 The Cobb-Douglas Production Function This chapter describes in detail the most famous of all production functions used to represent production processes both in and out of agriculture. First used

### 4. Answer c. The index of nominal wages for 1996 is the nominal wage in 1996 expressed as a percentage of the nominal wage in the base year.

Answers To Chapter 2 Review Questions 1. Answer a. To be classified as in the labor force, an individual must be employed, actively seeking work, or waiting to be recalled from a layoff. However, those

### Managerial Economics Prof. Trupti Mishra S.J.M. School of Management Indian Institute of Technology, Bombay. Lecture - 13 Consumer Behaviour (Contd )

(Refer Slide Time: 00:28) Managerial Economics Prof. Trupti Mishra S.J.M. School of Management Indian Institute of Technology, Bombay Lecture - 13 Consumer Behaviour (Contd ) We will continue our discussion

### PART A: For each worker, determine that worker's marginal product of labor.

ECON 3310 Homework #4 - Solutions 1: Suppose the following indicates how many units of output y you can produce per hour with different levels of labor input (given your current factory capacity): PART

### The Marginal Cost of Capital and the Optimal Capital Budget

WEB EXTENSION12B The Marginal Cost of Capital and the Optimal Capital Budget If the capital budget is so large that a company must issue new equity, then the cost of capital for the company increases.

### Lecture 2. Marginal Functions, Average Functions, Elasticity, the Marginal Principle, and Constrained Optimization

Lecture 2. Marginal Functions, Average Functions, Elasticity, the Marginal Principle, and Constrained Optimization 2.1. Introduction Suppose that an economic relationship can be described by a real-valued

### Chapter 9: Perfect Competition

Chapter 9: Perfect Competition Perfect Competition Law of One Price Short-Run Equilibrium Long-Run Equilibrium Maximize Profit Market Equilibrium Constant- Cost Industry Increasing- Cost Industry Decreasing-

### Economics 100 Exam 2

Name: 1. During the long run: Economics 100 Exam 2 A. Output is limited because of the law of diminishing returns B. The scale of operations cannot be changed C. The firm must decide how to use the current

### A2 Micro Business Economics Diagrams

A2 Micro Business Economics Diagrams Advice on drawing diagrams in the exam The right size for a diagram is ½ of a side of A4 don t make them too small if needed, move onto a new side of paper rather than

### An increase in the number of students attending college. shifts to the left. An increase in the wage rate of refinery workers.

1. Which of the following would shift the demand curve for new textbooks to the right? a. A fall in the price of paper used in publishing texts. b. A fall in the price of equivalent used text books. c.

### AP Microeconomics Review

AP Microeconomics Review 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with Fair-Return

### Where are we? To do today: finish the derivation of the demand curve using indifference curves. Go on then to chapter Production and Cost

Where are we? To do today: finish the derivation of the demand curve using indifference curves Go on then to chapter Production and Cost Utility and indifference curves The point is to find where on the

### LECTURE NOTES ON MACROECONOMIC PRINCIPLES

LECTURE NOTES ON MACROECONOMIC PRINCIPLES Peter Ireland Department of Economics Boston College peter.ireland@bc.edu http://www2.bc.edu/peter-ireland/ec132.html Copyright (c) 2013 by Peter Ireland. Redistribution

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that

### Pricing and Output Decisions: i Perfect. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young

Chapter 9 Pricing and Output Decisions: i Perfect Competition and Monopoly M i l E i E i Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young Pricing and

### ECON 443 Labor Market Analysis Final Exam (07/20/2005)

ECON 443 Labor Market Analysis Final Exam (07/20/2005) I. Multiple-Choice Questions (80%) 1. A compensating wage differential is A) an extra wage that will make all workers willing to accept undesirable

### or, put slightly differently, the profit maximizing condition is for marginal revenue to equal marginal cost:

Chapter 9 Lecture Notes 1 Economics 35: Intermediate Microeconomics Notes and Sample Questions Chapter 9: Profit Maximization Profit Maximization The basic assumption here is that firms are profit maximizing.

### Problem Set #3 Answer Key

Problem Set #3 Answer Key Economics 305: Macroeconomic Theory Spring 2007 1 Chapter 4, Problem #2 a) To specify an indifference curve, we hold utility constant at ū. Next, rearrange in the form: C = ū

### THE ECONOMY AT FULL EMPLOYMENT. Objectives. Production and Jobs. Objectives. Real GDP and Employment. Real GDP and Employment CHAPTER

THE ECONOMY AT 29 FULL EMPLOYMENT CHAPTER Objectives After studying this chapter, you will able to Describe the relationship between the quantity of labour employed and real GDP Explain what determines

### Learning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly

Chapter 6 The Two Extremes: Perfect Competition and Pure Monopoly Learning Objectives List the four characteristics of a perfectly competitive market. Describe how a perfect competitor makes the decision

### 8. Average product reaches a maximum when labor equals A) 100 B) 200 C) 300 D) 400

Ch. 6 1. The production function represents A) the quantity of inputs necessary to produce a given level of output. B) the various recipes for producing a given level of output. C) the minimum amounts

### Problems: Table 1: Quilt Dress Quilts Dresses Helen 50 10 1.8 9 Carolyn 90 45 1 2

Problems: Table 1: Labor Hours needed to make one Amount produced in 90 hours: Quilt Dress Quilts Dresses Helen 50 10 1.8 9 Carolyn 90 45 1 2 1. Refer to Table 1. For Carolyn, the opportunity cost of 1

### CHAPTER 13 MARKETS FOR LABOR Microeconomics in Context (Goodwin, et al.), 2 nd Edition

CHAPTER 13 MARKETS FOR LABOR Microeconomics in Context (Goodwin, et al.), 2 nd Edition Chapter Summary This chapter deals with supply and demand for labor. You will learn about why the supply curve for

### Midterm Exam #1 - Answers

Page 1 of 9 Midterm Exam #1 Answers Instructions: Answer all questions directly on these sheets. Points for each part of each question are indicated, and there are 1 points total. Budget your time. 1.

### Microeconomics Topic 6: Be able to explain and calculate average and marginal cost to make production decisions.

Microeconomics Topic 6: Be able to explain and calculate average and marginal cost to make production decisions. Reference: Gregory Mankiw s Principles of Microeconomics, 2 nd edition, Chapter 13. Long-Run

### Chapter 7 Monopoly, Oligopoly and Strategy

Chapter 7 Monopoly, Oligopoly and Strategy After reading Chapter 7, MONOPOLY, OLIGOPOLY AND STRATEGY, you should be able to: Define the characteristics of Monopoly and Oligopoly, and explain why the are

### Managerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets I. Perfect Competition Overview Characteristics and profit outlook. Effect

### Demand, Supply and Elasticity

Demand, Supply and Elasticity CHAPTER 2 OUTLINE 2.1 Demand and Supply Definitions, Determinants and Disturbances 2.2 The Market Mechanism 2.3 Changes in Market Equilibrium 2.4 Elasticities of Supply and

### , to its new position, ATC 2

S171-S184_Krugman2e_PS_Ch12.qxp 9/16/08 9:22 PM Page S-171 Behind the Supply Curve: Inputs and Costs chapter: 12 1. Changes in the prices of key commodities can have a significant impact on a company s

### Chapter. Perfect Competition CHAPTER IN PERSPECTIVE

Perfect Competition Chapter 10 CHAPTER IN PERSPECTIVE In Chapter 10 we study perfect competition, the market that arises when the demand for a product is large relative to the output of a single producer.

### chapter Behind the Supply Curve: >> Inputs and Costs Section 2: Two Key Concepts: Marginal Cost and Average Cost

chapter 8 Behind the Supply Curve: >> Inputs and Costs Section 2: Two Key Concepts: Marginal Cost and Average Cost We ve just seen how to derive a firm s total cost curve from its production function.

### Chapter 04 Firm Production, Cost, and Revenue

Chapter 04 Firm Production, Cost, and Revenue Multiple Choice Questions 1. A key assumption about the way firms behave is that they a. Minimize costs B. Maximize profit c. Maximize market share d. Maximize

### Pre-Test Chapter 26 ed17

Pre-Test Chapter 26 ed17 Multiple Choice Questions 1. Which of the following describes a purely competitive labor market? A. MRP < Wage Rate. B. MRP > Wage Rate. C. Wage Rate = MRC. D. Wage Rate < MRC.

economicsentrance.weebly.com Basic Exercises Micro Economics AKG 09 Table of Contents MICRO ECONOMICS Budget Constraint... 4 Practice problems... 4 Answers... 4 Supply and Demand... 7 Practice Problems...

### Professor H.J. Schuetze Economics 370

Topic 3.1c - Trade Professor H.J. Schuetze Economics 370 Opening Up to Trade Unlike what the simple labour demand model assumes, labour markets do not operate in a global vacuum To be certain, the Canadian

### Cosumnes River College Principles of Microeconomics Problem Set 6 Due Tuesday, March 24, 2015

Name: Solutions Cosumnes River College Principles of Microeconomics Problem Set 6 Due Tuesday, March 24, 2015 Spring 2015 Prof. Dowell Instructions: Write the answers clearly and concisely on these sheets

### CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition

CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition Chapter Summary Now that you understand the model of a perfectly competitive market, this chapter complicates

### BPE_MIC1 Microeconomics 1 Fall Semester 2011

Masaryk University - Brno Department of Economics Faculty of Economics and Administration BPE_MIC1 Microeconomics 1 Fall Semester 2011 Final Exam - 05.12.2011, 9:00-10:30 a.m. Test A Guidelines and Rules:

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Econ 201 Practice Test 1 Professor V. Tremblay MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Scarcity can best be defined as a situation in which:

### I d ( r; MPK f, τ) Y < C d +I d +G

1. Use the IS-LM model to determine the effects of each of the following on the general equilibrium values of the real wage, employment, output, the real interest rate, consumption, investment, and the

### Midterm Exam #2. ECON 101, Section 2 summer 2004 Ying Gao. 1. Print your name and student ID number at the top of this cover sheet.

NAME: STUDENT ID: Midterm Exam #2 ECON 101, Section 2 summer 2004 Ying Gao Instructions Please read carefully! 1. Print your name and student ID number at the top of this cover sheet. 2. Check that your

### Chapter 27: Taxation. 27.1: Introduction. 27.2: The Two Prices with a Tax. 27.2: The Pre-Tax Position

Chapter 27: Taxation 27.1: Introduction We consider the effect of taxation on some good on the market for that good. We ask the questions: who pays the tax? what effect does it have on the equilibrium

### The Cost of Production

The Cost of Production 1. Opportunity Costs 2. Economic Costs versus Accounting Costs 3. All Sorts of Different Kinds of Costs 4. Cost in the Short Run 5. Cost in the Long Run 6. Cost Minimization 7. The

### Econ 202 Final Exam. Table 3-1 Labor Hours Needed to Make 1 Pound of: Meat Potatoes Farmer 8 2 Rancher 4 5

Econ 202 Final Exam 1. If inflation expectations rise, the short-run Phillips curve shifts a. right, so that at any inflation rate unemployment is higher. b. left, so that at any inflation rate unemployment

### Labor Demand The Labor Market

Labor Demand The Labor Market 1. Labor demand 2. Labor supply Assumptions Hold capital stock fixed (for now) Workers are all alike. We are going to ignore differences in worker s aptitudes, skills, ambition

### Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9

Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9 print name on the line above as your signature INSTRUCTIONS: 1. This Exam #2 must be completed within the allocated time (i.e., between

Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Chapter Outline The FE Line: Equilibrium in the Labor Market The IS Curve: Equilibrium in the Goods Market The LM Curve:

### Microeconomics Topic 3: Understand how various factors shift supply or demand and understand the consequences for equilibrium price and quantity.

Microeconomics Topic 3: Understand how various factors shift supply or demand and understand the consequences for equilibrium price and quantity. Reference: Gregory Mankiw s rinciples of Microeconomics,

### A. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost.

1. The supply of gasoline changes, causing the price of gasoline to change. The resulting movement from one point to another along the demand curve for gasoline is called A. a change in demand. B. a change

### CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION

CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION Chapter in a Nutshell Now that we understand the characteristics of different market structures, we ask the question

### Final Exam (Version 1) Answers

Final Exam Economics 101 Fall 2003 Wallace Final Exam (Version 1) Answers 1. The marginal revenue product equals A) total revenue divided by total product (output). B) marginal revenue divided by marginal

### Topic 1 - Introduction to Labour Economics. Professor H.J. Schuetze Economics 370. What is Labour Economics?

Topic 1 - Introduction to Labour Economics Professor H.J. Schuetze Economics 370 What is Labour Economics? Let s begin by looking at what economics is in general Study of interactions between decision

### This file includes the answers to the problems at the end of Chapters 1, 2, 3, and 5 and 6.

This file includes the answers to the problems at the end of Chapters 1, 2, 3, and 5 and 6. Chapter One 1. The economic surplus from washing your dirty car is the benefit you receive from doing so (\$6)

### Definition and Properties of the Production Function: Lecture

Definition and Properties of the Production Function: Lecture II August 25, 2011 Definition and : Lecture A Brief Brush with Duality Cobb-Douglas Cost Minimization Lagrangian for the Cobb-Douglas Solution

### AP Microeconomics 2003 Scoring Guidelines

AP Microeconomics 2003 Scoring Guidelines The materials included in these files are intended for use by AP teachers for course and exam preparation; permission for any other use must be sought from the

### How To Calculate Profit Maximization In A Competitive Dairy Firm

Microeconomic FRQ s 2005 1. Bestmilk, a typical profit-maximizing dairy firm, is operating in a constant-cost, perfectly competitive industry that is in long-run equilibrium. a. Draw correctly-labeled

### Pre-Test Chapter 10 ed17

Pre-Test Chapter 10 ed17 Multiple Choice Questions 1. Refer to the above diagrams. Assuming a constant price level, an increase in aggregate expenditures from AE 1 to AE 2 would: A. move the economy from

### Microeconomics Topic 7: Contrast market outcomes under monopoly and competition.

Microeconomics Topic 7: Contrast market outcomes under monopoly and competition. Reference: N. Gregory Mankiw s rinciples of Microeconomics, 2 nd edition, Chapter 14 (p. 291-314) and Chapter 15 (p. 315-347).

### Practice Questions Week 6 Day 1

Practice Questions Week 6 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Economists assume that the goal of the firm is to a. maximize total revenue

### SHORT-RUN PRODUCTION

TRUE OR FALSE STATEMENTS SHORT-RUN PRODUCTION 1. According to the law of diminishing returns, additional units of the labour input increase the total output at a constantly slower rate. 2. In the short-run

### Sample Midterm Solutions

Sample Midterm Solutions Instructions: Please answer both questions. You should show your working and calculations for each applicable problem. Correct answers without working will get you relatively few

### Study Questions for Chapter 9 (Answer Sheet)

DEREE COLLEGE DEPARTMENT OF ECONOMICS EC 1101 PRINCIPLES OF ECONOMICS II FALL SEMESTER 2002 M-W-F 13:00-13:50 Dr. Andreas Kontoleon Office hours: Contact: a.kontoleon@ucl.ac.uk Wednesdays 15:00-17:00 Study