Question

1. In the short run production function of a firm, MC, ATC, and AVC curves are usually U Shaped because of:

a. diminishing marginal product of variable input as output produced rises.

b. increasing marginal product

c. the fact that increasing marginal product follows decreasing marginal product

d. the fact that decreasing marginal product follows increasing marginal product.

2. Perfectly Competitive market is considered to be efficient in the LR because, among others,:

a. MR=MC=P

b. MC=P=Minimum ATC

c. Produces at the lowest price at maximum possible output level

d. all of the above

3. Economies of scale of a firm is said to happen when a firms:

a. Marginal costs are constant as output increases

b. long run average total costs are decreasing as output increases

c. long run average total costs are increasing as output increases

d. marginal costs are equal to average total costs for all levels of output

4. Suppose your friend graduated from a college last year and decided to open her own business and earned 50,000 in accounting profit for the first year. When deciding to open her buisness, she turned down three seperate job offers with annual salaries of 40,000, 45,000 and 50,000. What is your friends economic profit from running her own buisness.

a. 10,000

b. 5,000

c. 0

d. 50,000

Answer 1

As per the HOMEWORKLIB RULES, we are allowed to solve at max 1 question, in case of multiple questions being asked, or else we will be revoked.

Question 1

The MC, ATC, and AVC curves are usually U Shaped because of the fact that, as we go on employing more and more inputs, initially their productivity rises but later on their productivity starts to decrease. Now, due to decreased productivity, we have to employ more of them in future for the production of same amount of good. Hence the curves are U shaped, and the reason is changes in marginal product of variable input as output produced rises. Atfirst it rises and later it falls. Hence the correct option is D.