2011级国贸专业《微观经济学》作业及答案(B).docVIP

School of International Business Administration，ZISU Solutions to Assignment B (Note: Assignment B should be finished and handed in on May 23, 2012) I. Interpret the following terms and concepts. (5x3 =15 points) 1. Monopoly: a market (industry) with a single producer of a good or service that has no close substitute and in which a barrier to entry prevents competition from new firms 2. Marginal product: The additional output that can be produced by adding one more unit of a specific input, ceteris paribus. 3. Marginal cost: The increase in total cost that results from producing one more unit of output. 4. Constant returns to scale: When a firm increases its plant size (physical capital) and labor employed by the same percentage, and the output increases by the same percentage, then the firm’s average cost remains constant as the output increases. 5. Long-run average cost curve: The curve shows the lowest average cost at which a firm is able to produce each output when the firm is in long run (i.e., a firm has had sufficient time to change both its plant size and its labor employed.) II. Answer the following questions briefly. (4x5 =20 points) 1. What are the characteristics of a perfectly competitive market (industry)? Answer: a large number of small producers (sellers) and buyers, no barriers to entry, identical product, well known market information. 2. Explain briefly the law of diminishing returns. Answer: When additional units of a variable input are added to fixed inputs after a certain point, the marginal product of the variable input declines. 3. What’s the relationship between average total cost and marginal cost? Answer: If marginal cost is below average total cost, average total cost will decline toward marginal cost; if marginal cost is above average total cost, average total cost will increase. 4. Explain briefly the difference between economic profit and accounting profit. Answer: Economic profit equals total revenue minus economic cost, i.e.,