ECON 503 FA-12 EMA2

ECON 503 FA-12 EMA2 in $11 only

Individual Homework Exercises from Chapter Readings

Chapter 1-(1,5,6,7,14) Chapter 2-(1,2,7,11,15) Chapter 3-(3,4,5,9,13)

Additional Practice Problems

Multiple Choice

Identify the choice that best completes the statement or answers the question.

Table 13-8

Quantity

of Output

Fixed

Cost

Variable

Cost

0$20$0
1$20$10
2$20$40
3$20$80
4$20$130
5$20$200
6$20$300

____ 1. Refer to Table 13-8. What is the average fixed cost of producing 5 units of output?

a.$4
b.$5
c.$40
d.$44

____ 2. Refer to Table 13-8. What is the average variable cost of producing 5 units of output?

a.$4
b.$5
c.$40
d.$44

____ 3. Refer to Table 13-8. What is the marginal cost of producing the fifth unit of output?

a.$4
b.$40
c.$50
d.$70

____ 4. Refer to Table 13-8. What is the shape of the marginal cost curve for this firm?

a.constant
b.upward-sloping
c.downward-sloping
d.U-shaped

____ 5. The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,

a.has a low opportunity cost of producing that good, relative to the opportunity costs of other producers.
b.has a comparative advantage in the production of that good.
c.has an absolute advantage in the production of that good.
d.should be the only producer of that good.

____ 6. A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output?

a.$250
b.$275
c.$340.91
d.$350

____ 7. Marginal cost increases as the quantity of output increases. This reflects the property of

a.increasing total cost.
b.diminishing total cost.
c.increasing marginal product.
d.diminishing marginal product.

Table 3-6

Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate.

Hours Needed

To Make 1

Amount Produced

in 40 Hours

mixertoastermixerstoasters
Maya8558
Miguel201024

____ 8. Refer to Table 3-6. The opportunity cost of 1 mixer for Maya is

a.0.625 toasters.
b.5 hours of labor.
c.1.6 toasters.
d.20 hours of labor.

____ 9. Refer to Table 3-6. The opportunity cost of 1 mixer for Miguel is

a.1/2 toaster.
b.1/2 hour of labor.
c.2 toasters.
d.8 hours of labor.

____ 10. Refer to Table 3-6. The opportunity cost of 1 toaster for Maya is

a.0.625 mixers.
b.1.6 hours of labor.
c.1.6 mixers.
d.8 hours of labor.

____ 11. Refer to Table 3-6. The opportunity cost of 1 toaster for Miguel is

a.1/2 mixer.
b.2 hours of labor.
c.2 mixers.
d.20 hours of labor.

____ 12. Refer to Table 3-6. Maya has an absolute advantage in the production of

a.both goods and a comparative advantage in the production of mixers.
b.both goods and a comparative advantage in the production of toasters.
c.neither good and a comparative advantage in the production of mixers.
d.neither good and a comparative advantage in the production of toasters.

____ 13. Refer to Table 3-6. Miguel has an absolute advantage in the production of

a.both goods and a comparative advantage in the production of mixers.
b.both goods and a comparative advantage in the production of toasters.
c.neither good and a comparative advantage in the production of mixers.
d.neither good and a comparative advantage in the production of toasters.

____ 14. Refer to Table 3-6. Maya should specialize in the production of

a.mixers and Miguel should specialize in the production of toasters.
b.toasters and Miguel should specialize in the production of mixers.
c.both goods and Miguel should specialize in the production of neither good.
d.neither good and Miguel should specialize in the production of both goods.

____ 15. Refer to Table 3-6. At which of the following prices would both Maya and Miguel gain from trade with each other?

a.4 mixers for 7 toasters
b.8 mixers for 10 toasters
c.12 mixers for 18 toasters
d.Maya and Miguel could not both gain from trade with each other at any price.

____ 16. The term market failure refers to

a.a situation in which the market on its own fails to allocate resources efficiently.
b.an unsuccessful advertising campaign which reduces demand for a product.
c.a situation in which competition among firms becomes ruthless.
d.a firm which is forced out of business because of losses.

____ 17. Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

a.a market failure caused by an externality.
b.a market failure caused by market power.
c.a market failure caused by equality.
d.There is no market failure in this case.

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