Microeconomics Exam
alsteve69
eco1b_exam_3__sp_15.docx
NAME:_______________________________
Econ 1B Ex #3 Sp 15 Cost of Production & Perfect Competition
1. Your answers must be typed. With the exception of the graph, nothing hand written will be graded, including words/answers that have been “whited” out and replaced with hand written answer will not be considered.
2. Do not provide additional answers outside of the space provided. Nothing written outside of the designated space will be graded.
3. Type your answers in bold so they can be differentiated from the questions.
4. TEST IS DUE: on Wednesday, March 18th between 2:30 PM to 6:00 PM in my office, C352B. Do not come earlier than 2:15 PM as no one will be there to collect the test and do not come after 6:45 PM as late tests will not be accepted.
5. Each student must submit HIS/HER OWN test. ID will be required at the time of submission. Please do not ask a third party to submit your test.
6. You may use your notes and your book. You are not to request help from anyone including tutors, other professors, friends, parents, etc.
7. By signing here____________________________________, you are stating that you have read and understood all the above instructions as well as the PCC HONOR CODE (link is available on my syllabus) and you understand the full ramification of cheating.
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1. Draw a Short Run situation for perfectly competitive firm earning economic losses but decides that it is more profitable to produce in the short run. Indicate each of the following curves: D, P, AR, MR, SRATC, SRAVC and the supply curve. Indicate the price (label it P*) that the firm charges and the output produced (label it Q*). Clearly show the area for the TR and TC by indicating on your graph the area that shows total revenue (shade it and label it as TR) and total cost of production (shade it and label it as TC). Indicate the loss if the firm were to continue producing (shade it and label it as LOSS). Indicate the loss if the firm were to shut down (shade it and label is as SHUT DOWN LOSS). Show the area of consumer surplus (shade it a different color and label it as CS).
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2. Indicate on your graph the output that would be considered productively (technically) efficient by labeling that output as QT. PROVE that a perfectly competitive firm ALWAYS PRODUCES WITH TECHNICAL EFFICIENCY IN THE LONG RUN.
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3. Indicate on your graph the output that would be considered allocatively (economically) efficient by labeling that output as QA. PROVE that a perfectly competitively firm ALWAYS PRODUCES WITH ALLOCATIVE EFFICIENCY IN THE LONG RUN.
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4. The consumer surplus present in perfectly competitive industry represents technical efficiency / allocative efficiency (circle your choice). Explain your choice.
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