Question 1

In a certain industry, the supply curve of any firm is Si(p)= p/2.If a firm produces 5 units of output, what are its total variable costs?

Accepted Answer

A) $50 
B) $23 
C) $37.50 
D) $25 
E) There is not enough information given to determine total variable costs. 
A) $50 
B) $23 
C) $37.50 
D) $25 
E) There is not enough information given to determine total variable costs.

Question 2

A competitive industry has 10,000 identical firms.For each firm in the industry, the long-run cost of producing y units of output is c(y)= $100 + y2 if y > 0 and c(0)= 0.The government imposes a lump sum tax of $300 on each firm in the industry.Firms can avoid this tax only by going out of business.There is free entry and exit into this industry.In the long run, the number of firms

Accepted Answer

A) stays constant and the price of output rises by $30. 
B) doubles and the price of output doubles. 
C) is halved and the price of output is doubled. 
D) stays constant and the price of output rises by less than $30. 
E) None of the above. 
A) stays constant and the price of output rises by $30. 
B) doubles and the price of output doubles. 
C) is halved and the price of output is doubled. 
D) stays constant and the price of output rises by less than $30. 
E) None of the above.

Question 3

In the absence of government interference, there is a constant marginal cost of $4 per ounce for growing marijuana and delivering it to buyers.Suppose that government authorities seize shipments whenever they find them and resell the marijuana that they seize on the open market.The probability that any shipment of marijuana is seized is .50.If a shipment is seized, there is no other punishment besides loss of the marijuana that is seized.The effect of the government action is to

Accepted Answer

A) raise the equilibrium price by $8. 
B) raise the equilibrium price by $4. 
C) lower the equilibrium price by $2. 
D) leave prices unchanged. 
E) raise the equilibrium price by $2. 
A) raise the equilibrium price by $8. 
B) raise the equilibrium price by $4. 
C) lower the equilibrium price by $2. 
D) leave prices unchanged. 
E) raise the equilibrium price by $2.

Question 4

The bicycle industry y is made up of 100 firms with the long-run cost curve c(y)= 2 + (y2/2)and 60 firms with the long-run cost curve c(y)= y2/10.No new firms can enter the industry.What is the long-run industry supply curve at prices greater than $2?

Accepted Answer

A) y = 400p. 
B) y = 420p. 
C) y = 200p. 
D) y = 300p. 
E) y = 435p. 
A) y = 400p. 
B) y = 420p. 
C) y = 200p. 
D) y = 300p. 
E) y = 435p.

Question 5

In the problem discussed in your workbook, the cost of capturing a cockatoo and transporting him to the United States is about $40 per bird.Cockatoos are drugged and smuggled in suitcases to the United States.Half of the smuggled cockatoos die in transit.Each smuggled cockatoo has a 10% probability of being discovered, in which case the smuggler is fined.If the fine imposed for each smuggled cockatoo is increased to $1,200, then the equilibrium price of cockatoos in the United States will be

Accepted Answer

A) $100. 
B) $160. 
C) $76. 
D) $355.56. 
E) $266.67. 
A) $100. 
B) $160. 
C) $76. 
D) $355.56. 
E) $266.67.

Question 6

In Baggs, Wyoming, cattle can be produced according to the following process: C = G/20 + P/40, where C is the number of cattle, G are bushels of grain, and P are acres of pasture.If grain costs $4 per bushel and pasture costs $3 per acre, how many cattle can Rancher Roy produce with a budget of $6,000?

Accepted Answer

A) 50 
B) 100 
C) 1,500 
D) 75 
E) 300 
A) 50 
B) 100 
C) 1,500 
D) 75 
E) 300

Question 7

The cost per bushel of growing corn on a given acre of land depends partly on how intensely the land is farmed and partly on the quality of the soil, the amount of rainfall, and the length of the growing season.Suppose that the last three factors are summarized by a single index f for fertility.Suppose that the long-run total cost of producing y hundred bushels of corn on an acre of land of fertility f is
 c(y, f ), where c(y, f )= (1 + y2 )/f for y > 0 and c(0, f )= 0.

a.Write down a formula for the long-run average cost function per hundred bushels of corn from an acre of land of quality
b.At what level of output is long-run average cost minimized on an acre of land of quality f?
c.What is the lowest price per hundred bushels at which an acre of land of quality f will be used to produce corn?

Accepted Answer

a.LRAC = (

Question 8

In a certain industry, the supply curve of any firm is Si(p)= p/2.If a firm produces 5 units of output, what are its total variable costs?

Accepted Answer

A) $37.50 
B) $25 
C) $23 
D) $50 
E) There is not enough information given to determine total variable costs. 
A) $37.50 
B) $25 
C) $23 
D) $50 
E) There is not enough information given to determine total variable costs.

Question 9

In the absence of government interference, there is a constant marginal cost of $6 per ounce for growing marijuana and delivering it to buyers.Suppose that government authorities seize shipments whenever they find them and resell the marijuana that they seize on the open market.The probability that any shipment of marijuana is seized is .10.If a shipment is seized, there is no other punishment besides loss of the marijuana that is seized.The effect of the government action is to

Accepted Answer

A) leave prices unchanged. 
B) raise the equilibrium price by $.67. 
C) lower the equilibrium price by $.33. 
D) raise the equilibrium price by $1.33. 
E) raise the equilibrium price by $.60. 
A) leave prices unchanged. 
B) raise the equilibrium price by $.67. 
C) lower the equilibrium price by $.33. 
D) raise the equilibrium price by $1.33. 
E) raise the equilibrium price by $.60.

Question 10

The cheese business in Lake Fon-du-lac, Wisconsin, is a competitive industry.All cheese manufacturers have the cost function C = Q2 + 4, while demand for cheese in the town is given by Qd = 120 - P.The long-run equilibrium number of firms in this industry is

Accepted Answer

A) 29. 
B) 58. 
C) 56. 
D) 120. 
E) 59. 
A) 29. 
B) 58. 
C) 56. 
D) 120. 
E) 59.

Question 11

Chirimollas grow only on the island of Socorro, off the coast of Mexico.They need very little soil, so virtually an unlimited supply can be grown at a cost of $4 per unit.When they are exported to the United States, half of the chirimollas that are shipped rot on the boat and are dumped in the ocean.Shipping costs are $1 for every unit that is put on board a ship.The demand function for chirimollas in the United States is given by the equation q = 10,000 - 20p2.If chirimollas are competitively supplied, the number of units that are sold in the United States will be

Accepted Answer

A) 8,000. 
B) 9,500. 
C) 9,680. 
D) 9,190. 
E) 9,000. 
A) 8,000. 
B) 9,500. 
C) 9,680. 
D) 9,190. 
E) 9,000.

Question 12

A firm uses a single input to produce its output, which is sold in a competitive market.It gets quantity discounts on purchases of its input.If it buys x units of the input, the price it must pay per unit of input is 400/x+ 4.If it buys no inputs, it doesn't have to pay anything.The firm's production function is f(x)=40x - x2.If the price of the firm's output is 1, the profit-maximizing amount of input to buy is

Accepted Answer

A) 0. 
B) 36. 
C) 18. 
D) 27. 
E) None of the above. 
A) 0. 
B) 36. 
C) 18. 
D) 27. 
E) None of the above.

Question 13

In Baggs, Wyoming, cattle can be produced according to the following process: C = G/20 + P/30, where C is the number of cattle, G are bushels of grain, and P are acres of pasture.If grain costs $5 per bushel and pasture costs $4 per acre, how many cattle can Rancher Roy produce with a budget of $3,000?

Accepted Answer

A) 600 
B) 60 
C) 30 
D) 25 
E) 150 
A) 600 
B) 60 
C) 30 
D) 25 
E) 150

Question 14

On a tropical island there are 100 potential boat builders, numbered 1 through 100.Each can build up to8 boats a year, but anyone who goes into the boatbuilding business has to pay a fixed cost of $7.Marginal costs differ from person to person.Where y denotes the number of boats built per year, boat builder 1 has a total cost function c(y)= 7 + y.Boat builder 2 has a total cost function c(y)= 7 + 2y, and more generally, for each i, from 1 to 100, boat builder i has a cost function c(y)= 7 + iy.If the price of boats is 15, how many boats will be built per year?

Accepted Answer

A) 112 
B) 64 
C) 32 
D) 168 
E) Any number between 120 and 128 is possible. 
A) 112 
B) 64 
C) 32 
D) 168 
E) Any number between 120 and 128 is possible.

Question 15

In the problem discussed in your workbook, the cost of capturing a cockatoo and transporting him to the United States is about $40 per bird.Cockatoos are drugged and smuggled in suitcases to the United States.Half of the smuggled cockatoos die in transit.Each smuggled cockatoo has a 10% probability of being discovered, in which case the smuggler is fined.If the fine imposed for each smuggled cockatoo is increased to $1,100, then the equilibrium price of cockatoos in the United States will be

Accepted Answer

A) $333.33. 
B) $150. 
C) $95. 
D) $73. 
E) $244.44. 
A) $333.33. 
B) $150. 
C) $95. 
D) $73. 
E) $244.44.

Question 16

An industry has 100 firms.These firms have identical production functions.In the short run, each firm has fixed costs of $200.There are two variable factors in the short run and output is given by y = (min{x1, 4x2})1/2.The cost of factor 1 is $2 per unit and the cost of factor 2 is $4 per unit.In the short run, the industry supply curve is given by

Accepted Answer

A) Q = 100p/6. 
B) Q = 100p/6 
C) Q = 300p1/2. 
D) the part of the line Q = 50(min{2, 16})for which pQ > 200/Q. 
E) None of the above. 
A) Q = 100p/6. 
B) Q = 100p/6 
C) Q = 300p1/2. 
D) the part of the line Q = 50(min{2, 16})for which pQ > 200/Q. 
E) None of the above.

Question 17

Two firms constitute the entire doghouse industry.One has a long-run cost curve of 3 + 4y2/3 and the other has a long-run cost curve of 10 + y2/10.If no new firms enter the industry, at which of the following prices will exactly one firm operate?

Accepted Answer

A) $1 
B) $3 
C) $5 
D) $7 
E) None of the above. 
A) $1 
B) $3 
C) $5 
D) $7 
E) None of the above.

Question 18

Suppose that all firms in a given industry have the same supply curve given by Si(p)= 2p when p is greater than or equal to $2 and Si(p)= 0 when p is less than $2.Suppose that market demand is given by D(p)= 12 - p.If firms continue to enter the industry so long as they can do so profitably, the equilibrium price must be closest to

Accepted Answer

A) $5. 
B) $4. 
C) $2.40. 
D) $2. 
E) $1.75. 
A) $5. 
B) $4. 
C) $2.40. 
D) $2. 
E) $1.75.

Question 19

Consider a competitive industry with several firms all of which have the same cost function, c(y)= y2 + 4 for y > 0 and c(0)= 0.The demand curve for this industry is D(p)= 50 2 p, where p is the price.The long-run equilibrium number of firms in this industry is

Accepted Answer

A) 4. 
B) 23. 
C) 25. 
D) 46. 
E) 2. 
A) 4. 
B) 23. 
C) 25. 
D) 46. 
E) 2.

Question 20

An industry has 1,000 firms, each with the production function f(x1, x2)=x1/21x1/22.The price of factor 1 is $1 and the price of factor 2 is $1.In the long run, both factors are variable, but in the short run, each firm is stuck with using 100 units of factor 2.The long-run industry supply curve is

Accepted Answer

A) upward sloping with zero supply if price is less than $10. 
B) downward sloping for outputs less than 10. 
C) horizontal with zero supply for prices less than $2 and infinite supply for prices greater than $2. 
D) horizontal with zero supply for prices less than $10 and infinite supply for prices greater than $10. 
E) upward sloping with zero supply if price is less than $20. 
A) upward sloping with zero supply if price is less than $10. 
B) downward sloping for outputs less than 10. 
C) horizontal with zero supply for prices less than $2 and infinite supply for prices greater than $2. 
D) horizontal with zero supply for prices less than $10 and infinite supply for prices greater than $10. 
E) upward sloping with zero supply if price is less than $20.

Exam 22: Industry Supply-Part A

In a certain industry, the supply curve of any firm is Si(p)= p/2.If a firm produces 5 units of output, what are its total variable costs?

The bicycle industry y is made up of 100 firms with the long-run cost curve c(y)= 2 + (y2/2)and 60 firms with the long-run cost curve c(y)= y2/10.No new firms can enter the industry.What is the long-run industry supply curve at prices greater than $2?

In a certain industry, the supply curve of any firm is Si(p)= p/2.If a firm produces 5 units of output, what are its total variable costs?

The cheese business in Lake Fon-du-lac, Wisconsin, is a competitive industry.All cheese manufacturers have the cost function C = Q2 + 4, while demand for cheese in the town is given by Qd = 120 - P.The long-run equilibrium number of firms in this industry is

Two firms constitute the entire doghouse industry.One has a long-run cost curve of 3 + 4y2/3 and the other has a long-run cost curve of 10 + y2/10.If no new firms enter the industry, at which of the following prices will exactly one firm operate?

Consider a competitive industry with several firms all of which have the same cost function, c(y)= y2 + 4 for y > 0 and c(0)= 0.The demand curve for this industry is D(p)= 50 2 p, where p is the price.The long-run equilibrium number of firms in this industry is

An industry has 1,000 firms, each with the production function f(x1, x2)=x1/21x1/22.The price of factor 1 is $1 and the price of factor 2 is $1.In the long run, both factors are variable, but in the short run, each firm is stuck with using 100 units of factor 2.The long-run industry supply curve is

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part A

Utility-Part B

Choice-Part A

Choice-Part B

Demand-Part A

Demand-Part B

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Asymmetric Information-Part A

Asymmetric Information-Part B

Filters

In a certain industry, the supply curve of any firm is S_i(p)= p/2.If a firm produces 5 units of output, what are its total variable costs?

The bicycle industry y is made up of 100 firms with the long-run cost curve c(y)= 2 + (y₂/2)and 60 firms with the long-run cost curve c(y)= y₂/10.No new firms can enter the industry.What is the long-run industry supply curve at prices greater than $2?

In a certain industry, the supply curve of any firm is S_i(p)= p/2.If a firm produces 5 units of output, what are its total variable costs?

The cheese business in Lake Fon-du-lac, Wisconsin, is a competitive industry.All cheese manufacturers have the cost function C = Q² + 4, while demand for cheese in the town is given by Q_d = 120 - P.The long-run equilibrium number of firms in this industry is

Two firms constitute the entire doghouse industry.One has a long-run cost curve of 3 + 4y₂/3 and the other has a long-run cost curve of 10 + y₂/10.If no new firms enter the industry, at which of the following prices will exactly one firm operate?

Consider a competitive industry with several firms all of which have the same cost function, c(y)= y² + 4 for y > 0 and c(0)= 0.The demand curve for this industry is D(p)= 50 2 p, where p is the price.The long-run equilibrium number of firms in this industry is