1. In the short run, the firm ________ change the number of workers it employs but ________ change the size of its plant.
A) can; can B) can; cannot C) cannot; can D) cannot; cannot
2.Jill runs a factory that makes lie detectors in Little Rock, Arkansas. This month, Jill's 34 workers produced 690 machines. Suppose Jill adds one more worker and, as a result, her factory's output increases to 700. Jill's marginal product of labor from the last worker hired equals ________.
A) 10 B) 20 C) 690 D) 700 Q1. Perfect Competition: Please explain and illustrate graphically how the diaper service market has been affected by the decrease in the North American birth rate and the development of disposable diaper. Explain the long-run and the short-run effects of the event, starting from the long run equilibrium. What happens to the price of diaper and the quantity of diaper in the market and a representative individual firm? (Show two diagrams for both market firms and an individual firm)
Q4. A firm has a production technology given by: Q =(L0.75)(K0.25 ) Initial input prices are given by w =$150 and r = $50. The firm wants to produce Q=100 units of output. Find the minimizing cost of labors and capitals subject to the production function.
Q5. Consider the market demand for coffee is Qd = 20 – P and the market supply for coffee is Qs=P. The competitive firm’s total cost is 4q2
a. what is the firm profit maximizing output
b. Calculate the total cost
c. Calculate economic profit
d. Can this be a long run equilibrium? Why?
Q6. The monopolist produces and distributes the Cartoon Magazine. Demand is given by P = 1200-10Q. The cost function is TC = 200Q+15Q2
a. What output maximizes its profit?
b. What is the profit-maximizing price?
c. Calculate the consumer surplus at the profit-maximizing price?
d. Calculate the producer surplus at the profit-maximizing price?
e. Calculate the deadweight loss at the profit-maximizing price?
f. What are outputs and price if the monopolist wants to maximize total social surplus?
Q7. A monopolistically competitive firm faces the inverse demand function P= 200-2Q TC= 100+2Q2
a. Solve for the profit maximizing price and quantity in the short run. P=ATC
b. Solve for the profit maximizing price and quantity in the long run. P=ATC
1. Ans: can; cannot
Short run is a period in which some factors of production are fixed and some are variable. In the short run, the quantity of variable factors (Such as labor) can be increased, but fixed factors (such as plant size) can not be increases.
Thus, option [B] is correct answer.
2. Ans: 10
Marginal product is defined as the additional units of output produced by the employment of an additional unit of variable factor (i.e., labor).
MP = ∆TP / ∆L.
Thus, option [A] is correct answer.
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