The long run average total cost curve slopes downward

3. Watching television shows and movies on small screens, such as iPads and smartphones, becomes very popular.

b) State whether each of the following will cause the supply of large screen LCD TVs to increase or decrease. Treat each case separately. (2 points each):

1. The cost of the LCD panels used to make these TVs decreases.

a. The government imposes tariffs on imported steel. Explain how this will affect the market for domestically produced cars.

d. The winter is unexpectedly mild, with much warmer temperatures. Explain how this will affect the market for home heating oil.

a) What is the firm's short run profit‑maximizing or loss‑minimizing level of output and its total profit or loss at each of the following market prices? (16 pts.)

2. Of all possible prices (not just those shown above), what is the minimum price required for the firm to keep operating in the short run?

Quantity	AFC	AVC	ATC	MC	Price	TR	MR
0	---------	--------	---------	----	$200	$0	------
1	$100.00	$17.00	$117.00	$17	190	190	$190
2	50.00	16.00	66.00	15	180	360	170
3	33.33	15.00	48.33	13	170	510	150
4	25.00	14.25	39.25	12	160	640	130
5	20.00	14.00	34.00	13	150	750	110
6	16.67	14.00	30.67	14	140	840	90
7	14.29	15.71	30.00	26	130	910	70
8	12.50	17.50	30.00	30	120	960	50
9	11.11	19.44	30.55	35	110	990	30
10	10.00	21.60	31.60	41	100	1000	10
11	9.09	24.00	33.09	48	90	990	-10
12	8.33	26.67	35.00	56	80	960	-30

Multiple Choice For each question, write the letter of the best answer. (1 pt. each)

A B C D E F

Tanks 0 1 2 3 4 5

b. 200 d. 50

Answer:

d. not attainable because it is not listed on the schedule.

Answer:

c. cannot be produced by society, given its current level of resources and production technology.

d. is attainable but involves the unemployment or inefficient use of some of society's resources.

b. become bowed inward.

c. shift inward.

a. suggests that insatiable wants can be fulfilled.

b. is irrelevant if the production possibilities curve is downward sloping.

7. In a competitive market, if the price of a good is above the equilibrium price:

a. there will be a surplus, causing the price to decrease and the market to clear.

a. the market does not make the producers of pollution pay for the damage they cause to others.

b. the government fails to properly regulate polluters.

9. If the production or consumption of a good such as education creates substantial external benefits, then too:

a. much of the good will be produced unless producers are subsidized.

10. The free‑rider problem is encountered when:

Answer:

d. those who don’t pay for it can be denied its benefits.

Answer:

c. more elastic in the short run than in the long run.

d. perfectly elastic because there are no close substitutes.

b. is inelastic.

c. is of unitary elasticity.

b. the variable resource (labor) has too little of the fixed resource (capital) to work with.

c. the productivity of the variable resource increases due to specialization.

a. total cost must also be declining.

b. marginal cost must be less than average total cost.

16. If economies of scale extend over a very large range of output, the structure of the industry will tend to be:

a. purely competitive.

17. When diseconomies of scale occur:

e. average fixed costs will fall.

Answer:

c. firms will enter the market, causing the market price and quantity to fall.

d. firms will enter the market, causing the market price to fall and quantity to rise.

b. price equals marginal revenue.

c. price equals the minimum of average variable cost.

a. price. c. average total cost.

b. marginal revenue. d. average variable cost.

b. produces products identical to its rivals'.

c. must consider the reactions of its rivals when it determines its price policy.

a. other firms will determine their pricing and output policies in collusion with the given firm.

b. there is product differentiation.

23. A tariff on sugar imported into the US:

a. will make sugar cheaper in the US.

24. The European Union: