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Homework Chapter 5

The document consists of three parts: True/False statements regarding economic concepts, multiple choice questions about costs and production, and calculating exercises related to profit maximization and production functions. It covers topics such as marginal cost, average total cost, implicit costs, and the law of diminishing returns. The exercises require mathematical derivations and applications of economic theories to specific scenarios.

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Nguyen Thi Hoai An
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144 views2 pages

Homework Chapter 5

The document consists of three parts: True/False statements regarding economic concepts, multiple choice questions about costs and production, and calculating exercises related to profit maximization and production functions. It covers topics such as marginal cost, average total cost, implicit costs, and the law of diminishing returns. The exercises require mathematical derivations and applications of economic theories to specific scenarios.

Uploaded by

Nguyen Thi Hoai An
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Part I.

True/False with explanation (use a graph if necessary)

1. The marginal cost curve intersects the average total cost curve at the
minimum point of the average total cost curve.

2. Economists and accountants usually disagree on the inclusion of


implicit costs into the cost analysis of a firm.

3. Accountants often ignore implicit costs.

4. Although economists and accountants treat many costs differently, they


both treat the cost of capital the same.

5. Diminishing marginal product exists when the total cost curve becomes
flatter as outputs increases.

Part II. Multiple choice questions

1. Whenever marginal cost is greater than average total cost,

a. marginal cost is rising.


b. marginal cost is falling.
c. average total cost is rising.
d. average total cost is falling.

2. In the short run, a firm incurs fixed costs

a. only if it incurs variable costs.


b. only if it produces no output.
c. only if it produces a positive quantity of output.
d. whether it produces output or not.

3. Implicit costs

a. do not require an outlay of money by the firm.


b. do not enter into the economist's measurement of a firm's profit.
c. are also known as variable costs.
d. are not part of an economist’s measurement of opportunity cost.

4. Which of the following measures of cost is best described as "the


increase in total cost that arises from an extra unit of production?"

a. Variable cost
b. Average variable cost
c. Average total cost
d. Marginal cost
5. Which of the following measures of cost is best described as "the cost
of a typical unit of output if total cost is divided evenly over all the units
produced?"

a. Average fixed cost


b. Average variable cost
c. Average total cost
d. Marginal cost

Part III. Calculating exercises

1. A firm is facing the market demand function: P=100-Q


and a cost function: TC= Q2 +4Q +100

P($/kg) Q(kg)

a. Prove that profit maximizing strategy and revenue maximizing strategy


lead to different P, Q, TR, profit

b. If this firm want to maximize revenue with the condition of getting


exactly 590$ profit, what will be their P, Q, TR, profit?

2. A firm has the short run production function:


3
2 L
Q=10 L+ L −
10
a. Derive the function of MP , AP
L L
b. What is the maximum quantity of output? How many labors do this firm use to maximize
its quantity of output?
c. At which point does the law of diminishing return start to be applied?
d. When APL max, what is L?

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