Summary ECS2601 Assignment 4 Semester 2 (ANSWERS)

ECS2601 Assignment 4 Semester 2 (ANSWERS) Question 1 Complete Mark 0.00 out of 2.00 Flag question Question text When a profit-maximising firm is at its short run optimum, a. none of the options will be true. b. the average cost of the product is at its lowest possible point, whether a profit is being made or not. c. the profit per unit of output will be at its maximum possible level. d. the firm will be shut down if its price is less than the average fixed cost. Question 2 Complete Mark 2.00 out of 2.00 Flag question Question text Implicit costs are the best alternative return of all of an agent’s input such as money or time. Select one: True False Question 3 Complete Mark 2.00 out of 2.00 Flag question Question text Which of the following statements about economies of scale is FALSE? a. A firm may have economies of scale, even if it does not have increasing returns to scale. b. An industry may have a number of small firms where the economies of scale are exhausted at an output level that is relatively low in comparison to the industry’s output level. c. A firm’s long-rung marginal cost curve (LMC) will slope downwards, throughout the output range where it enjoys economies of scale. d. A firm may have diseconomies of scale at a later stage even though it initially had economies of scale. Question 4 Complete Mark 0.00 out of 2.00 Flag question Question text Suppose the government wants to limit imports of a certain good. Itn this case it is therefore preferable to use an import quota. Select one: True False Question 5 Complete Mark 2.00 out of 2.00 Flag question Question text In what instance would a perfectly competitive industry have a long-run supply curve that slopes downwards? a. The perfectly competitive industry will never have a long-run supply curve that slopes downwards. b. When the perfectly competitive industry has increasing costs. c. When the perfectly competitive industry has decreasing costs. d. When the perfectly competitive industry has constant costs. Question 6 Complete Mark 2.00 out of 2.00 Flag question Question text When economic profit exists for a firm, it is very feeble because … a. price will fall because market supply will increase. b. costs will inevitably increase and eliminate profit. c. firms are driven to reduce output until average total cost equals price. d. firms are driven to increase output to the point where average total cost will equal price. Question 7 Complete Mark 2.00 out of 2.00 Flag question Question text If MC is greater than AC, AC must be decreasing in Q. Therefore, we have economies of scale. Select one: True False Question 8 Complete Mark 2.00 out of 2.00 Flag question Question text Thabang is willing to pay R20 for essay editing, and Tshego is willing to edit essays for R10. The perfect competitive market price for editting is R14. Calcuate total surplus. a. R9 b. R10 c. R5 d. R11 Question 9 Complete Mark 2.00 out of 2.00 Flag question Question text In place of a price floor, the government can instead impose a production quota. Select one: True False Question 10 Complete Mark 0.00 out of 2.00 Flag question Question text Suppose Hayley, Chloe and Olivia all purchase small whiteboard markers for their rooms at R250 each. Hayley’s willingness to pay was R400, Chloe’s willingness to pay was R350, and Olivia’s willingness to pay was R300. The total consumer surplus for these three would be ... a. R250. b. R800. c. R1 050. d. R300. Question 11 Complete Mark 2.00 out of 2.00 Flag question Question text When the government provides a subsidy for a product, this will ... a. Encourage overproduction. b. All of the options are true. c. Be a government cost. d. Increase Producer Surplus Question 12 Complete Mark 0.00 out of 2.00 Flag question Question text Import tariffs are better for the domestic economy as government revenue decreases deadweight loss. Select one: True False Question 13 Complete Mark 2.00 out of 2.00 Flag question Question text A firm’s average fixed cost is R20 if it produces six units of output. If it produces four units, its average fixed cost will be … a. R15. b. R20. c. R18. d. R30. Question 14 Complete Mark 2.00 out of 2.00 Flag question Question text A small city has a number of hot dog stands operating throughout the CBD area. Suppose that each vendor has a marginal cost of R1,50 per hot dog sold and no fixed cost. Suppose the maximum number of hot dogs that any one vendor can sell is 100 per day. If the vendor market is perfectly competitive, will the price remain R2 for a hot dog? a. Yes, remain at current price of R 2,00 b. No, change to R2,50 c. No, change to R1,50 d. No, change to R 1,00 Question 15 Complete Mark 2.00 out of 2.00 Flag question Question text When government intervenes in a competitive market by imposing an effective price ceiling, we would expect the quantity supplied to __________ and the quantity demanded to __________. a. fall; rise b. rise; fall c. fall; fall d. rise; rise