FINAL REVIEW QUESTIONS

1. Define the following terms; a) Perfect Competition b) Marginal Cost, c) Short Run & Long Run d) Marginal Product

2. Draw a graph of a firm's short-run marginal cost, average variable cost, and average total cost curves. On this graph, identify the firm's short-run
supply curve. Explain why this is the firm's short-run supply curve?
3. What happens to a firm's profit-maximizing level of output if the price of the product rises? Use a graph to explain your answer.
4. Emre`s Lahmacun shop hires you to determine the company's status to understand how the company is performing. The data below provides
information on the company's annual costs and revenues.
Wages & Salaries 50,000 L.
Interest paid on loans
7,000 L.
Transportation
10,000 L.
Other expenditures for factors of production
60,000 L.
Price of Khacapuri
2 Lira
Total yearly Output
70,000

Emre spends at least 35 hours a week at his place of business. If he closed the Lahmacun shop, he could work for his competitor and earn 20,000 Lira per
year. He also owns the building that houses the shop and could rent it out for 15,000 Lira per year if he closes his business. Calculate the economic cost
and economic profit for Emre`s Lahmacun shop

5. You run a firm that produces T-shirts that are sold in a perfectly competitive market. Your firm faces the following cost and revenue schedule:
Quantity Price TR TC Profit MR MC FC VC ATC AVC
0 12 5 ---- ---- 5 ---- ----
1 12
2 22
3 33
4 45
5 60
6 78
Fill in the table above. What is your firm's profit maximizing level of output? (10 p.)

6. The figure below shows the demand, average total, and average variable cost curve for Pepe's Pet Salon which produces pet haircuts in a
perfectly competitive market: (10)
MC
price
ATC

P*=MR
20
15
13

output
5 15 20 25
Suppose that the firm's manager decides to produce 15 units of output. He asks your opinion of this decision. What would you tell him?
Then calculate, TR,TC, and economic profit (if there is) and show areas of TC,TR, and economic profit.

7. The following table gives total………………(4th question of problem set of chapter 7)

8. A firm can use there different production technologies, ……… (15th question of problem set of chapter 7)
9. The following table gives capital and labor requirements for…. (6th question of problem set of chapter 8)
10. A firms cost curves are given by the ….. (8th question of problem set of chapter 8)
11. The following is a total cost curve. Sketch the corresponding ….. (10th question of problem set of chapter 8)
12. The following curve is a production function for a firm that….. (11th question of problem set of chapter 8)
13. Suppose that the demand for good Y and the supply of good Y both increase.
a. Is it possible to predict whether the equilibrium quantity of good Y will increase, decrease, or remain the same as a result of these changes? Why of
why not?
b. Is it possible to predict whether the equilibrium price of good Y will increase, decrease, or remain the same as a result of these changes? Why of
why not?
14. Illustrate the following with supply and/or demand curves:

a. A shortage of housing caused by a rent control law that sets a ceiling price for housing.

b. The supply of tickets to a concert in a hall that has exactly 500 seats.
c. The price of gasoline rises, shifting the demand for large automobiles.
15. Suppose the demand and supply schedules for copper in the United States are as follows:

16.

a. What is the equilibrium price for copper in the United States, assuming that there is no trade with the rest of the world? What amount of copper will be
exchanged? Now suppose that the United States market is opened up to the rest of the world, where the price is $250 per ton.

b. Once opened to trade, will the U.S. price remain at its no trade level? What will be the United States price? c. Will the United States import copper? How
much will be imported?

Now suppose that the United States imposes a $50 per ton import fee on imported copper.

d. What will happen to the price that the United States pays for copper?

e. What is the new level of imports?

f. What is the total amount of fees paid to the United States government?

17. Consider the market for apple. Suppose the market demand is given by the equation Qd = 200 - 40P and the market supply for apple is given by the equation
Qs = -120 + 40P, where Qd = quantity demanded, Qs = quantity supplied, and P = price of apple.

a. What is the equilibrium price of apple? The equilibrium quantity?

b. If the actual price were not at equilibrium, but at $3.50, what would be quantity demanded? What would be quantity supplied? Would there be a shortage or a
surplus?

c. If the new advertising campaign for apple caused more people to want apples, what would happen to the equilibrium price and quantity? (Only indicate the
direction of the changes. No numerical answer is necessary.)

18. Describe the price ceiling and price floor in detail, use demand and supply to explain.
19. Describe the market equilibrium in detail.
20. Distinguish “the change in supply” and “ the change in the quantity supplied” through diagram, and explain.
21. Distinguish “the change in demand” and “the change in the quantity demanded” through diagram, and explain.
22. For cases A through F in the following table… (5th question of problem set of chapter 9)
23. You are given the following cost data:…. (9th question of problem set of chapter 9)
24. The following problem traces the relationship between firm … (14th question of problem set of chapter 9)
25. The following graph the supply curve and three different …. (16th question of problem set of chapter 9)
26. For each of the three scenarios in the previous question … (17th question of problem set of chapter 9)
27. The long run average cost curve for an industry … (21th question of problem set of chapter 9)
28. On the following graph for a purely competitive industry… (22th question of problem set of chapter 9)