1.) Suppose that 100 firms operate in a perfectly competitive industry and each
ID: 1247833 • Letter: 1
Question
1.) Suppose that 100 firms operate in a perfectly competitive industry and each firm has the same technology and cost structure. If each firm maximizes profits by selling 20 units of output at $5.00, then the quantity supplied in the market at $5.00 is:A. less than 2000
b. zero
c. 2000
d.greater than 2000
2.) refer to the table below. which gives a firm's production function. Assume that all non-labor inputs are fixed. The marginal product is maximized when the firm hires:
Number of workers/ units of output
0/0
1/25
2/55
3/95
4/125
5/150
a. 2 workers
b. 3 workers
c. 4 workers
d. 5 workers
3.) Suppose that Gigantic company is increasing in size. As Gigantic company grows, they are able to buy inputs in bulk, resulting in lower input prices. It is likely that continued growth will result in:
a.increasing marginal returns
b.diseconomies of scale
c.economies of scale
d. Gigantic company achieving the minimum efficient scale of production
4.) Since a large or a small wind turbine have the same installation, operating and maintenance costs, but a large turbine has four times the generating capacity but costs less than three times as much as a small turbine, the wind power industry faces:
a. economies of scale
b.diseconomies of scale
c. constant economies of scale
d. a hump shaped cost curve
Explanation / Answer
(1)20 units * 100 firms =2000 (2)Divide the ouput by the number of workers. 25/1=25, 55/2=27.5 and so on. The answer is the largest result of this process. (3)The company is getting bigger and it is producing more. Because it is producing more it's costs are going down. Revenue will increase as well from increased sales. This means what? (4) This one should be easy if you can answer 3.
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