Problem 1. If a firm used a combination of inputs that was to the left of the isocost line, it would indicate that
A. It is exceeding its budget.
B. It is not spending all of its budget.
C. It is operating at its optimal point because it is saving money.
D. None of the above.
Problem 2. The Learning Curve
A. Is really no different from a marginal cost curve.
B. Shows the decrease in unit cost as more of the same product is produced over time.
C. Calculates average cost at a particular point in time.
D. None of the above
Problem 3. Assume a profit maximizing firm's short run cost is TC = 700 + 60Q. If its demand curve is P = 300 - 15Q, what should it do in the short run?
A. Shut down
B. Continue operating in the short run even though it is losing money.
C. Continue operating because it is earning an economic profit
D. Cannot be determined from the above information
Problem 4. Assume a perfectly competitive firm's short run cost is TC = 100 +160Q + 3Q2. If the market price is $196, what should it do?
A. Produce 5 units and continue operating.
B. Produce 6 units and continue operating.
C. Produce zero units (i.e., shut down)
D. Cannot be determined from the above information.
Problem 5. Mutual interdependence means that
A. All firms are price takers.
B. Each firm sets its own price based on its anticipated reaction by its customers.
C. All firms collaborate to establish one price.
D. All firms are free to enter or leave the market.
Problem 6. Mutual interdependence means that
A. All firms are price takers.
B. Each firm sets its own price based on its anticipated reaction by its customers.
C. All firms collaborate to establish one price.
D. All firms are free to enter or leave the market.