Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost of the third worker hired is $40, and the average total cost when three workers are hired is $50. What is the total cost of production when three workers are hired?   1.  $50   2.  $90   3.  $120   4.   $150

Which of the following is a characteristic of a monopoly? low fixed costs as a portion of total costs free entry and exit barriers to entry declining marginal cost

A firm produces 400 units of output at a total cost of $1,200. If fixed costs are $200,   1.  average fixed cost is $2.   2.  average variable cost is $2.50.   3.  average total cost is $4.   4.  average total cost is $5.

In the wine industry 1. the price of a cheap wine and expensive wine are not that different 2. even experts have a difficult time telling the difference between cheap and expensive wine 3. it is very easy to tell different types apart 4. there are only a few wines that control the market

A free-rider problem exists for any good that is not   a private good free excludable rival in consumption

Which of the following is a characteristic of a competitive market?   Many firms have market power because they own patents Buyers and sellers are price takers . Firms sell differentiated products There are many buyers but few sellers

Sequence 2 – This question is worth 16 points.

In which type of market is advertising the most important? Monopolistic competition oligopoly       monopoly        perfect competition

If education produces positive externalities, we would expect   the government to subsidize education people to realize the benefits, which would increase the demand for education colleges to relax admission requirement the government to tax education

Highway engineers want to improve a dangerous stretch of highway. They expect that it will reduce the risk of someone dying in an accident from 5.3 percent to 2.1 percent over the life of the highway. If a human life is worth $10 million, then the project is worth doing as long as it does not cost more than 1. $320,000. 2. $210,000. 3. $450,000. 4. $2.1 million.