Economics 101Fall 1998Section 3 - HallamExam 41. Marginal revenue measuresa. the change in cost required to produce one more unit of output.b. the change in output that can be obtained from one more dollar of expenditure.c. the change in output that results from one more unit of an input.d. the change in revenue from the production of one more unit of output.e. the level of output divided by the level of input.2. We say that a firm experiences diseconomies of scale or decreasing returns to size whena. AC is decreasing.b. AC > MC.c. MC > AC.d. εS (elasticity of scale) > 1.e. the firm imposes costs on outside firms.3. Limit pricing is designed toa. eliminate excessive profits in a monopoly market.b. lower price below the average total cost of a competitor.c. limit the access of a competitor to key inputs.d. prevent the resale of low priced goods to high demand consumers.e. prevent sales of products at below cost.4. If a single price monopolist lowers the price of a product in order to sell one more unit, thena. total revenue will rise by the amount of the price.b. marginal revenue will be higher than the price.c. the net effect on total revenue is usually negative because price is falling.d. some revenue is lost due to the lower price for all previous units, but the unit brings in some newrevenue.e. revenue stays the same.5. What is the shutdown rule for a firm in the short-run?a. In the short-run, the firm should continue to produce if total revenue (TR) exceeds total variablecosts (TVC) and total fixed costs (TFC) are all sunk; otherwise, it should shut down.b. In the short-run, the firm should continue to produce if total revenue (TR) exceeds total costs(TC); otherwise, it should shut down.c. In the short-run, if some fixed costs are not sunk, the firm should continue to produce if(TR - TVC) > (TFC - sunk fixed costs) > 0; otherwise, it should shut down.d. In the short-run, the firm should continue to produce if total revenue (TR) is less than totalvariable costs.e. Both a and c are reasonable rules.For questions 6 and 7, consider the following data on oil and rice production in Indonesia and Thailand where thedata is production per time period. Assume that the production possibility frontier is linear. With no riceproduction, Indonesia can produce 10,000 barrels of oil. With 500 tons of rice, Indonesia has no oil production, etc.Oil RiceIndonesia 10,000 0Indonesia 0 500Thailand 6,000 0Thailand 0 4006. Which of the following statements is true?a. Thailand has an absolute advantage in oil production.b. Thailand has a comparative advantage in oil production.c. Indonesia has a comparative advantage in oil production.d. Cannot say which country has an absolute advantage in either product.e. Both c and d are correct.7. If Indonesia produced 4,000 barrels of oil and Thailand produced 3,000 barrels of oil and each used theirremaining resources for rice production, what would total rice production be?a. 200 tonsb. 350 tonsc. 600 tonsd. 500 tonse. 400 tons8. The marginal rate of substitution measuresa. the slope of the production possibility frontier.b. the slope of the isocost line.c. the slope of an isoquant.d. the decrease in the quantity of input 1 (x1) that is needed to accompany a one unit increase in thequantity of input two (x2), in order to keep production the same. e. both c and d.9. For a firm to minimize cost which of the following must hold?a. the slope of the isocost line and the slope of the isoquant curve must be equal w2w1b.MPPx2w2MPPx1w1c. w1w2 MRSx1x2∆ x1∆ x2d. both a and be. a, b, and c10. Firm A operates in a perfectly competitive market. Firm B operates in an imperfectly competitive market. Which of the following statements is correct?a. the total revenue curve for both firms is linearb. the total revenue curve first rises and then falls for the imperfectly competitive firm but is linearfor the perfectly competitive firmc. the total revenue curve first rises and then falls for both firmsd. the total revenue curve first rises and then falls for the perfectly competitive firm but is linear forthe imperfectly competitive firme. the total revenue curve is horizontal for the perfectly competitive firm but linear for theimperfectly competitive firm11. Marginal (physical) product measuresa. the change in cost from the production of one more unit of output.b. the change in an input required to produce one more unit of output.c. the change in output that can be obtained from one more dollar of expenditure.d. the change in output that results from one more unit of an input.e. the level of output divided by the level of input.12. Price discrimination refers toa. selling the same product at the same uniform price.b. selling the same product to different customers at different prices as a result of differentproduction costs.c. charging a price just above average total cost in order to drive competitors out of the market.d. charging a higher price to people who are ugly.e. selling the same product to different customers at different prices for reasons unrelated toproduction costs13. Which is the following products/services is a good candidate for price arbitrage?a. knee replacementb. tailored suitc. silverd. corn silagee. repair of plumbing leak14. Marginal cost measuresa. the change in cost from the production of one more unit of outputb. the change in an input required to produce one more unit of outputc. the change in output that can be obtained from one more dollar of expenditured. the change in output that results from one more unit of an inpute. the level of output divided by the level of inputFor questions 15-17, consider the following data on output (Q), fixed cost (FC), variable cost (VC), total cost (C),average fixed (AFC), variable (AVC), and total cost (ATC), marginal cost (MC), marginal revenue (MR), etc. Thecolumn labeled MC ∆ is the change in cost computed as a difference, similarly for MR ∆. MC and MR are exactmarginal cost and marginal revenue respectively. Q FC VC C AFC AVC ATC MC ∆ MC Price TR MR ∆ MR0.00 100 0.00 100.00 100.00 340 0 34082.00 318.00 1.00 100 82.00 182.00 100.00 82.00 182.00 66.00 318 318 29654.00 274.00 2.00 100 136.00 236.00 50.00 68.00 118.00 44.00 296 592 25238.00 230.00 3.00 100 174.00 274.00 33.33 58.00 91.33 34.00 274 822 20834.00 186.00 4.00 100 208.00 308.00 25.00 52.00 77.00 36.00 252 1008 16442.00 142.00 5.00 100 250.00 350.00 20.00 50.00 70.00 50.00 230 1150 12062.00 98.00
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