Question

1. From your study to the microeconomics theory, answer the following statements if they are true or false and explain your answers:

A.      A given output of wheat will be produced at the least cost if the output is divided among farms in such a way that the average cost of production is exactly the same on all farms.

B.      As the number of children in Philadelphia falls, the number of children per day care center will fall.

C.      Since holders of MBAs now make a lot of money, you should transfer to the MBA program.

D.      If bread is demanded inelastically, a tax on bread has no effect on the quantity consumed.

Answer 1

A> False

That does not guarantee the lowest cost of production because firms may not be identical or there can be economies of scale in production, thus such an inference is wrong.

B> True

Since the demand is falling, in the long run, the supply will also fall so that the price of the service remains constant.

C> False

One should do a marginal analysis for that, I have to see the marginal benefit of MBA and the marginal cost of it, the marginal benefit is not likely to be huge.

D> True

Since the demand is inelastic, price change does not change the quantity demanded.