Question 1

Short-run producer surplus can be calculated by integration as (where q* is the firm's profit maximizing output level and MC(q)is its marginal cost function):

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 2

If a firm's marginal revenue is below its marginal cost,an increase in production will usually:

Accepted Answer

A) increase profits. 
B) leave profits unchanged. 
C) decrease profits. 
D) increase marginal revenue. 
A) increase profits. 
B) leave profits unchanged. 
C) decrease profits. 
D) increase marginal revenue.

Question 3

In an input market,economic rent is defined as the:

Accepted Answer

A) total remuneration paid to a factor of production. 
B) minimum amount required to retain a factor of production in its present use. 
C) total cost for a firm of renting land,equipment,and buildings. 
D) extent to which payments to a factor of production exceed the minimum amount required to retain it in its present use. 
A) total remuneration paid to a factor of production. 
B) minimum amount required to retain a factor of production in its present use. 
C) total cost for a firm of renting land,equipment,and buildings. 
D) extent to which payments to a factor of production exceed the minimum amount required to retain it in its present use.

Question 4

The size of the reduction in quantity of labor hired by a firm due to an increase in the wage rate depends upon all of the following except:

Accepted Answer

A) what percentage of total costs are made up of labor costs. 
B) how much quantity demanded in the output market will be reduced by a higher price. 
C) the capital to labor ratio before the wage increase. 
D) how easily other inputs can be substituted for labor. 
A) what percentage of total costs are made up of labor costs. 
B) how much quantity demanded in the output market will be reduced by a higher price. 
C) the capital to labor ratio before the wage increase. 
D) how easily other inputs can be substituted for labor.

Question 5

If demand facing the firm is price-inelastic,marginal revenue will be:

Accepted Answer

A) positive. 
B) zero. 
C) negative. 
D) constant. 
A) positive. 
B) zero. 
C) negative. 
D) constant.

Question 6

It is usually assumed that a perfectly competitive firm's supply curve is given by its marginal cost curve.In order for this to be true,which of the following additional assumptions are necessary?
I.That the firm seeks to maximize profits.
II.That the marginal cost curve be positively sloped.
III.That price exceeds average variable cost.
IV.That price exceeds average total cost.

Accepted Answer

A) All of the above. 
B) I and II but not III and IV. 
C) I and III but not II and IV. 
D) I,II and III,but not IV. 
A) All of the above. 
B) I and II but not III and IV. 
C) I and III but not II and IV. 
D) I,II and III,but not IV.

Question 7

If a price-taking firm's production function is given by  ,its supply function is given by:

Accepted Answer

A) q = 2pw. 
B) q = p/2w. 
C) q = 2p/w. 
D) q = 2w/p. 
A) q = 2pw. 
B) q = p/2w. 
C) q = 2p/w. 
D) q = 2w/p.

Question 8

Input demand functions that are calculated from profit functions differ from those calculated from cost functions because:

Accepted Answer

A) they assume cost-minimization. 
B) they hold output constant. 
C) they assume output price is constant. 
D) they assume output is set at its profit-maximizing level. 
A) they assume cost-minimization. 
B) they hold output constant. 
C) they assume output price is constant. 
D) they assume output is set at its profit-maximizing level.

Question 9

If price is equal to short-run average variable cost,the firm is at the point known as:

Accepted Answer

A) the break even point. 
B) the profit maximizing point. 
C) the shutdown point. 
D) the revenue maximizing point. 
A) the break even point. 
B) the profit maximizing point. 
C) the shutdown point. 
D) the revenue maximizing point.

Question 10

A profit-maximizing firm's demand function for labor can be found by differentiating:

Accepted Answer

A) the profit function with respect to w. 
B) the cost function with respect to w. 
C) the supply function with respect to w. 
D) the production function with respect to w. 
A) the profit function with respect to w. 
B) the cost function with respect to w. 
C) the supply function with respect to w. 
D) the production function with respect to w.

Question 11

The output effect of a change in the wage rate on a firm's demand for labor input will be greater:

Accepted Answer

A) the larger the share of labor costs in total costs and the greater the price elasticity of demand for output. 
B) the larger the share of labor costs in total costs and the smaller the price elasticity of demand for output. 
C) the larger the share of labor costs in total costs and the higher the quantity demanded. 
D) the smaller the possibilities of substituting capital for labor. 
A) the larger the share of labor costs in total costs and the greater the price elasticity of demand for output. 
B) the larger the share of labor costs in total costs and the smaller the price elasticity of demand for output. 
C) the larger the share of labor costs in total costs and the higher the quantity demanded. 
D) the smaller the possibilities of substituting capital for labor.

Question 12

If the wage rate rises,labor's share in the total costs of a production process:

Accepted Answer

A) will increase. 
B) will decrease. 
C) may increase or decrease depending on the elasticity of demand for the product. 
D) may increase or decrease depending on the ease of substitution of other inputs for labor. 
A) will increase. 
B) will decrease. 
C) may increase or decrease depending on the elasticity of demand for the product. 
D) may increase or decrease depending on the ease of substitution of other inputs for labor.

Short-run producer surplus can be calculated by integration as (where q* is the firm's profit maximizing output level and MC(q)is its marginal cost function):

If a firm's marginal revenue is below its marginal cost,an increase in production will usually:

In an input market,economic rent is defined as the:

The size of the reduction in quantity of labor hired by a firm due to an increase in the wage rate depends upon all of the following except:

If demand facing the firm is price-inelastic,marginal revenue will be:

If a price-taking firm's production function is given by ,its supply function is given by:

Input demand functions that are calculated from profit functions differ from those calculated from cost functions because:

If price is equal to short-run average variable cost,the firm is at the point known as:

A profit-maximizing firm's demand function for labor can be found by differentiating:

The output effect of a change in the wage rate on a firm's demand for labor input will be greater:

If the wage rate rises,labor's share in the total costs of a production process:

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Exam 9: Profit Maximization

Short-run producer surplus can be calculated by integration as (where q* is the firm's profit maximizing output level and MC(q)is its marginal cost function):

If a firm's marginal revenue is below its marginal cost,an increase in production will usually:

In an input market,economic rent is defined as the:

The size of the reduction in quantity of labor hired by a firm due to an increase in the wage rate depends upon all of the following except:

If demand facing the firm is price-inelastic,marginal revenue will be:

If a price-taking firm's production function is given by ,its supply function is given by:

Input demand functions that are calculated from profit functions differ from those calculated from cost functions because:

If price is equal to short-run average variable cost,the firm is at the point known as:

A profit-maximizing firm's demand function for labor can be found by differentiating:

The output effect of a change in the wage rate on a firm's demand for labor input will be greater:

If the wage rate rises,labor's share in the total costs of a production process:

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters