PSU ECON 102 FINAL EXAM WITH COMPLETE
SOLUTIONS 100% VERIFIED
1.Econ102 Final PSU Boyle
2.PSU ECON 102 Final Kagundu
Econ102 Final PSU Boyle
short run - ANSWER at least one factor of production is held fixed
long run - ANSWER all factors of production are variable
how firms produce output - ANSWER any process by which resources are transformed
into goods or services - making, transporting, packaging, selling, etc.
diminishing marginal product -ANSWER- increasing one factor of production while
holding the others constant will yield decreasing amounts of additional output; marginal
physical product will begin to fall
- assuming input cost (ex. wage) is constant -> MC increases
- MC = change in TC / change in Q = input cost/ marg. physical prod. of input
specialization and marginal product - ANSWER ability to substitute; marginal
productivity may increase rapidly when amount of workers is low
- hiring another worker may allow specialization
TFC and TVC - ANSWER total fixed costs and total variable costs
TC = - ANSWER Q * ATC = TFC + TVC
,MC (does not account for fixed costs) = - ANSWER change in TC / change in Q
AFC = - ANSWER TFC / Q
AVC = - ANSWER TVC / Q
ATC = - ANSWER AFC + AVC = TC / Q
LRATC curve - ANSWER min LRATC = min SRATC
Video of relationships - ANSWER http://youtu.be/CEnWsyOh5Sg
economies of scale - ANSWER - more output -> lower CPU (cost per unit)
- LRATC sloped downward
- reasons: specialization-division of tasks, dimensional factor-sometimes you are able to
double output without doubling all inputs, improvements in productive
equipment-large-volume machines/mass production methods
- example: utilities more consumers/more Q, less CPU
diseconomies of scale - ANSWER - more output → higher CPU
- LRATC sloped upward
- reasons: more output → larger plant site → larger firm; adding layers of management /
supervision; decrease in flexibility
- ex: local food restaurants
constant returns to scale - ANSWER - no change in CPU when output changes
- flat LRATC
- ex: olive garden -> menu prices stay the same, open more locations, can buy in bulk or
discount
, minimum efficient scale - ANSWER - no longer have economies of scale
- start to have constant returns to scale
*Point between economies of scale and constant returns to scale*
sunk costs - ANSWER - cannot be recovered
- no longer relevant to current decision making
- may give people hindsight when facing some situation in the future
- examples:
relationships -> not happy but "been together for so long so."" -> time wasted unhappy =
sunken costs
movie ticket -> value watching movie at $10, bought for $7, lost ticket. If you buy another
ticket -> $7 = sunken costs
perfect competition - ANSWER *# firms* : very many (1)
*characteristics of products* : homogeneous (2)
- both buyers and sellers have access to all relevant information: everyone knows prices
charged by all firms & profit opportunities (3)
*ease of entry/exit into industry* : easy (4)
*price determined by* : market D = market S
*relationship between price and MR* : P = MR
*firm's long-run profit* : 0
*slope of firm's demand curve* : perfectly elastic/horizontal
*advertises?* : only at industry level
perfect competition: Long Run - ANSWER - entry and exit of firms -> 0 economic profit
(profits attract entrants and losses encourage some firms to leave industry)
- allocation of capital (successful firms draw investment money and reinvest their own
funds)
SOLUTIONS 100% VERIFIED
1.Econ102 Final PSU Boyle
2.PSU ECON 102 Final Kagundu
Econ102 Final PSU Boyle
short run - ANSWER at least one factor of production is held fixed
long run - ANSWER all factors of production are variable
how firms produce output - ANSWER any process by which resources are transformed
into goods or services - making, transporting, packaging, selling, etc.
diminishing marginal product -ANSWER- increasing one factor of production while
holding the others constant will yield decreasing amounts of additional output; marginal
physical product will begin to fall
- assuming input cost (ex. wage) is constant -> MC increases
- MC = change in TC / change in Q = input cost/ marg. physical prod. of input
specialization and marginal product - ANSWER ability to substitute; marginal
productivity may increase rapidly when amount of workers is low
- hiring another worker may allow specialization
TFC and TVC - ANSWER total fixed costs and total variable costs
TC = - ANSWER Q * ATC = TFC + TVC
,MC (does not account for fixed costs) = - ANSWER change in TC / change in Q
AFC = - ANSWER TFC / Q
AVC = - ANSWER TVC / Q
ATC = - ANSWER AFC + AVC = TC / Q
LRATC curve - ANSWER min LRATC = min SRATC
Video of relationships - ANSWER http://youtu.be/CEnWsyOh5Sg
economies of scale - ANSWER - more output -> lower CPU (cost per unit)
- LRATC sloped downward
- reasons: specialization-division of tasks, dimensional factor-sometimes you are able to
double output without doubling all inputs, improvements in productive
equipment-large-volume machines/mass production methods
- example: utilities more consumers/more Q, less CPU
diseconomies of scale - ANSWER - more output → higher CPU
- LRATC sloped upward
- reasons: more output → larger plant site → larger firm; adding layers of management /
supervision; decrease in flexibility
- ex: local food restaurants
constant returns to scale - ANSWER - no change in CPU when output changes
- flat LRATC
- ex: olive garden -> menu prices stay the same, open more locations, can buy in bulk or
discount
, minimum efficient scale - ANSWER - no longer have economies of scale
- start to have constant returns to scale
*Point between economies of scale and constant returns to scale*
sunk costs - ANSWER - cannot be recovered
- no longer relevant to current decision making
- may give people hindsight when facing some situation in the future
- examples:
relationships -> not happy but "been together for so long so."" -> time wasted unhappy =
sunken costs
movie ticket -> value watching movie at $10, bought for $7, lost ticket. If you buy another
ticket -> $7 = sunken costs
perfect competition - ANSWER *# firms* : very many (1)
*characteristics of products* : homogeneous (2)
- both buyers and sellers have access to all relevant information: everyone knows prices
charged by all firms & profit opportunities (3)
*ease of entry/exit into industry* : easy (4)
*price determined by* : market D = market S
*relationship between price and MR* : P = MR
*firm's long-run profit* : 0
*slope of firm's demand curve* : perfectly elastic/horizontal
*advertises?* : only at industry level
perfect competition: Long Run - ANSWER - entry and exit of firms -> 0 economic profit
(profits attract entrants and losses encourage some firms to leave industry)
- allocation of capital (successful firms draw investment money and reinvest their own
funds)
