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1-When some factors of production are fixed (e.g., capital), in order to increase production by , a
firm would need to add successively:
A.larger and larger quantities of the variable factor.
B.constant quantities of the variable factor.
C.larger and larger quantities of the fixed factors.
D.smaller and smaller quantities of the variable factor.
2-The production function indicates:
A.The minimum production using different amounts of inputs for a fixed level of technology
B.How inefficient the firm is at production
C.The maximum production using different amounts of inputs for a fixed level of technology
D.How much labor must be used to obtain enough capital
3-if a firm is choosing between two options with costs as illustrated in the graph and the firm expects to produce Q3 units of output, it should choose:
A.Option 1 since Option 2 has a higher fixed cost
B.Option 2 since it has the lowest total cost of producing Q3
C.Option 2 but it should reduce production to Q2 to equalize the marginal costs between the two options
D.Option 1 because the firm could produce at Q1 at a lower cost and it can always choose Option 2 at a later date
4-In perfect competition we conclude that firms reach productive efficiency in the long-run because each firm produces:
A.where the ATC curve reaches its minimum point
B.where MR > MC
C.where the ATC exceeds the MC
D.as long as P exceeds AVC
5-Assuming a competitive market, if the market price of a doughnut is 10 cents, the firm will
A.produce 50 doughnuts and earn zero profit
B.produce 70 doughnuts and earn a profit of 10 cents per doughnut
C.produce 40 doughnuts and earn a loss
D.shut down because it is making losses