Question

Answer the following and state your reasoning.

(1) Economists normally assume that the goal of a firm is to

(i)	sell as much of its product as possible.
(ii)	set the price of the product as high as possible.
(iii)	maximize profit.

	a.	(i) and (ii) only
	b.	(ii) and (iii) only
	c.	(iii) only
	d.	(i), (ii), and (iii)

(2) Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when the firm hires 2 workers, the total cost of production is $100. When the firm hires 3 workers, the total cost of production is $120. In addition, assume that the variable cost per unit of labor is the same regardless of the number of units of labor that are hired. What is the firm's fixed cost?

	a.	$40
	b.	$60
	c.	$80
	d.	$100

(2) In the long run,

	a.	inputs that were fixed in the short run remain fixed.
	b.	inputs that were fixed in the short run become variable.
	c.	inputs that were variable in the short run become fixed.
	d.	variable inputs are rarely used.

Answer 1