If elasticity of demand = - 3 and price RISES 2 %, Quantity demanded will: (A) r

Question

If elasticity of demand = - 3 and price RISES 2 %, Quantity demanded will: (A) rise 6% (B) fall 6% (C) rise 3% (D) rise .3% (16) A production function shows: (A) the quantity of output the firm can produce with different quantities of inputs (B)how much profit a firm can make (C) what it will costs to produce different levels of output (D) all of these (17) If there are many close substitutes for a good, the demand for this good will be: (A) elastic (B) inelastic (C) large (D) small (18) In the long run, (A) total fixed costs equals zero (B) total variable costs equal zero (C) there are no variable inputs (D) marginal costs equal zero (19) In the short run, as the firm uses the same plant to produce an output larger than the maximum technical efficiency output:(A) Average Fixed Cost rises (B) Average Variable Cost rises (C) Total fixed cost rises (D) total fixed cost falls Below are the cost and demand curves for 2 firms: What KIND of firm is firms: (20) What KIND OF FIRM IS FIRM a? (21) If the price is $150, firm A should produce Q= to maximize profits. (22) If firm A produces the output in question (21) they will earn profits equal to: (23) Is firm A likely to be able to continue making these profits in the LONG RUN ? (24) What is the maximum technical efficiency output level for firm (A) Q (26) What KIND of firm is firm (B)? (27) What is the profit maximizing output level for firm (B) ? Q = (28) What price should firm (B) charge to sell the profit maximizing output ? P (29) How much profit can firm (B) make if they sell the Q from question 27 at the Price from question

Explanation / Answer

1) elasticity =% change in quantity demanded/%change in price

-3 * 2 = %change in quantity demanded = fall 6%

2) Production fuction shows: quantity produce by the firm by using various inputs. Such as in cobb Douglas production function:

3) elastic demand as change in price of one good will effect so much the demand of other good.

4) In the long run total fixed cost will be zero as AFC is decreasing.

5) AVC rises. as it is increasing.

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