Преподаватель __

Заведующий кафедрой Галым Жусипбек

Протокол заседания кафедры № 5 от 16.10.2012г.

Факультет экономики

Кафедра экономики и международных отношений

Дисциплина _microeconomics___

Name and surname:

Group:

Duration: 70 minutes

Variant-B

Part-1 (75 points)

1.Suppose a firm must pay an annual tax, which is a fixed sum, independent of whether it produces any output.

a. How does this tax affect the firm’s fixed, marginal, and average costs?

c. Now suppose the firm is charged a tax that is proportional to the number of items it produces. Again, how does this tax affect the firm’s fixed, marginal, and average costs?

2. You are an employer seeking to fill a vacant position on an assembly line. Are you more concerned with the average product of labor or the marginal product of labor for the last person hired? If you observe that your average product is just beginning to decline, should you hire any more workers? What does this situation imply about the marginal product of your last worker hired?

3. a. Fill in the blanks in the following table.

outputs	FC	VC	TC	MC	AFC	AVC	ATC

b. Draw a graph that shows MC, AVC, ATC, with cost on the vertical axis and quantity on the horizontal axis.

4. A chair manufacturer hires its assembly line labor for $30 an hour and calculates that the rental cost of its machinery is $15 per hour. Suppose that a chair can be produced by using 4 hours of labor or machinery in any combination. If the firm is currently using 3 hours of labor for each hour of machine time, is it minimizing its costs of production? If so, why? If not, how can it improve the situation? Graphically illustrate the isoquant and the two isocost lines, for the current combination of labor and capital and the optimal combination of labor and capital.

5. Suppose the cost function is C(q) = 4q2+16.

a. Find VC, FC, AC, AVC, and AFC. (Hint MC =8q.)

b. show the average cost, marginal cost, and average variable cost curves on a graph.

c. Find the output that minimizes average cost

d. At what range of prices will the firm produce a positive output?

e. At what range of prices will the firm earn a negative profit?

f. At what range of prices firm will earn a positive profit?

Part–2. (25 points) (explain the following terms.)

1. In long run equilibrium, all firms in the industry earn zero economic profit. Why is this true?
2. What is the difference between economic profit and producer surplus?
3. Suppose that labor is the only variable input to the production process. If the marginal cost of production is diminishing as more units of output are produced, what can you say about the marginal product of labor?
4. Explain the term “MRTS”? What does a MRTS=4 mean?
5. Can a firm have a production function that exhibits increasing returns to scale, constant returns to scale, and decreasing returns to scale as output increases? Discuss.

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