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Chapter 10. Supply Theory I.
The Supply Curve. Cost Behaviour and Cost Curves
Chapter 10– Question 1
An economist ascribes a $8 value to seeing a movie. He buys a ticket for $6 and then loses it. Does he buy a new one?
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Chapter 10– Question 2
The supply curve of a commodity has shifted to the right. Which of the following developments is most likely to have caused the shift
- a decline in consumer income
- a decline in the price of an ingredient of the commodity
- a decline in the price of the commodity itself
- an increase in the price of the commodity
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Chapter 10– Question 3
Distinguish between diminishing returns to scale and diminishing returns.
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Chapter 10 – Question 4
Explain why the short-run ATC curve and the long-run ATC are different.
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Chapter 10– Question 5
Explain why the short-run supply curve and the long-run supply curve are different.
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Chapter 10– Question 6
If average total costs are declining
- marginal cost is greater than ATC
- marginal cost is greater than AVC
- marginal cost is less than ATC
- the marginal cost curve intersects the ATC curve
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Chapter 10– Question 7
The price a firm receives for its product is $50 per unit. Its total cost function is 8000 + 10Q. At what quantity do total costs equal total revenues?
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Chapter 10– Question 8
Which of the following must be true if average variable costs are rising
- marginal cost is below average variable cost
- marginal cost is above average variable cost
- average variable cost is above average total cost
- none of the above
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Chapter 10 – Question 9
If the price elasticity of supply is zero, then
- there is little supply of the commodity
- suppliers will produce the same quantity at any price
- the supply curve is a horizontal line
- there is little demand for the commodity
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Chapter 10– Question 10
The difference between the long run and the short run is that
- in the long run all inputs are variable, while in the short run at least one input is fixed
- in the short run all inputs are fixed while in the long run all inputs are variable
- in the short run all costs are sunk costs while in the long run they are fixed costs
- none of the above
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Chapter 10– Question 11
Explain what the short-run profits of a competitive firm consist of.
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Chapter 10– Question 12
Explain why in the long run economic profits disappear.
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Chapter 10– Question 13
A firm's production function is Q = K2L2. What quantity does it produce if it employs 4 units of capital and 8 workers?
- 80 units
- 1024 units
- 320 units
- 4096 units
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Chapter 10– Question 14
Please draw and label the four cost curves.
Chapter 10 –Question 15
If labour supply is inelastic, an increase in the wage rate leads to
- a small decline in the quantity of labour supplied
- no change in the quantity of labour supplied
- a small increase in the quantity of labour supplied
- a large increase in the quantity of labour supplied
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