Managerial Economics Homework-3.doc

Managerial Economics HOMEWORK SET#3 Name: Class: Student #: (Due day: Next class) Part 1: 1. When the average product is decreasing, marginal product a. equals average product. b. is increasing. c. exceeds average product. d. is decreasing. e. is less than average product. The next two questions refer to a firm in a constant- cost industry with ATC(q) = 2,000/q + 100 + 5q and MC(q) = 100 + 10q. 2. The long-run equilibrium price equals: a. $100 b. $200 c. $300 d. $500 e. None of the above is correct. 3. Demand for industry output has just increased. If the market price initially rises to $600, each firm in the long run will produce: a. 20 units b. 50 units. c. 88.7 unit d. 100 units. e. More information is needed. 4. A straight-line isoquant a. is impossible. b. would indicate that the firm could switch from one output to another costlessly. c. would indicate that the firm could not switch from one output to another. d. would indicate that capital and labor cannot be substituted for each other in production. e. would indicate that capital and labor are perfect substitutes in production. 5. A farmer uses M units of machinery and L hours of labor to produce C tons of corn, with the following production function C = L0.5 + M0.75. This production function exhibits a. decreasing returns to scale for all output levels b. constant returns to scale for all output levels c. increasing returns to scale for all output levels d. no clear pattern of returns to scale 6. The difference between the economic and accounting costs of a firm are a. the accountants fees b. the corporate taxes on profits c. the opportunity costs of the factors of production that the firm owns d. the sunk costs incurred by the firm e. the explicit costs of the firm 7. Price ceiling are inefficient because: a. both producers and consumers lose. b. Producers lose, consumers