Question

Answer the following statements from you knowledge in microeconomic theory: if they 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

Part A

False

A firm produces an output at a least cost when its marginal cost curve intersects it average variable cost curve at its minimum point.

Part B

True

When the number of children in Philadelphia falls the demand for child day care will also fall which leads to fall in the price of day care.

Part C

False

Because holders of MBA are making lot of money most of the individuals will turn towards MBA program which will decrease the amount of making money by MBAs.

Part D

True

When demand of bread is perfectly inelastic then the total burden of tax will be bear by the seller.