ECN FINAL TEST QUESTIONS WITH 100% CORRECT ANSWERS
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ECN
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ECN
ECN FINAL TEST QUESTIONS WITH 100% CORRECT ANSWERS
A firm is using 400 units of capital and 200 units of labor to produce 20,000 units of output. Capital costs $80 per unit and labor $20 per unit. The last unit of capital added 100 units of output, while the last unit of labor added 30 units of o...
ECN FINAL TEST QUESTIONS WITH
100% CORRECT ANSWERS
A firm is using 400 units of capital and 200 units of labor to produce 20,000 units of
output. Capital costs $80 per unit and labor $20 per unit. The last unit of capital added
100 units of output, while the last unit of labor added 30 units of output. The firm could
produce the same level of output at a lower cost by using ________capital and
_________ labor - Answer- using less capital and more labor
Suppose that when a firm increases its usage of all inputs by 100%, output increases by
less than 100%. The firm's production function exhibits - Answer- decreasing returns to
scale
if a firm is producing the level of output at which long run average cost equals long run
marginal cost then... - Answer- long run average cost is at its minimum point
If a firm is producing the level of output at which short-run average cost equals long-run
average cost, then - Answer- the firm has chosen the profit-maximizing level of output
with a fixed amount of capital, short-run average cost is greater than long-run average
cost at all other levels of output
the firm has chosen the cost-minimizing combination of inputs to produce this level of
output
economies of scale exist when - Answer- long run average cost decreases as output
increases
natural monopoly rises when - Answer- average cost is falling throughout the relevant
output range
an overallocation of resources in an industry means that for the last unit produced -
Answer- society places higher value on the resources required to produce the last unit
than the the value society places on consuming the the last unit
when social surplus is maximized in competitive equalibrium - Answer- allocation and
productive efficiency are achieved
marginal social benefit equals marginal social cost
when we say that market prices allocate goods to the highest valued users we mean
that - Answer- only consumers who value the good more than the market price of the
good will choose to buy the good
, the less information consumer have about product quality - Answer- the GREATER will
be the loss of social surplus due to ALLOCATIVE inefficiency
private provision of public goods fails to achieve economic efficiency because - Answer-
the free rider problem prevents collection of sufficient revenue
the price of privately supplied public goods must exceed zero in order to be allocatively
efficient
in long run perfectly competitive equilibrium, economic efficiency is achieved because -
Answer- price equal long run marginal cost for every firm in the industry
price equals minimum long run average cost for every firm in the industry
firms with market power - Answer- will maximize profit but fail to maximize social surplus
when a competitively produced product is subject to negative externalities in production
the industry will - Answer- over produce the good because marginal social cost will
exceed marginal social benefit in competitive equilibrium
an underallocation of resources occurs when - Answer- a positive externality in
consumption exists
market or monopoly power leads to market failure because - Answer- price exceeds
marginal revenue which causes the profit maximizing firm to UNDER produce the good
or service
the brooklyn bridge is not a pure public good because - Answer- the free rider problem
could be solved using toll accesses or booths
common property resources lead to market failure becuase - Answer- the resources is
over exploited and under supplied
when there is negative externalize in production - Answer- marginal social cost exceeds
marginal private cost
as a policy option for regulating natural monopoly, marginal cost pricing is desirable
because - Answer- allocative efficiency is achieved
social economic efficiency means that the market is achieving - Answer- allocative and
productive efficiency
___________ is/are examples of market failure that could be justify goverment
intervention in the market - Answer- imperfect information
public goods
a dominant firm that under takes pricing strategies aimed at maintaining high entry
barriers
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