Basic Economics question and answer

Basic Economics


Type I: True/False question (give a brief explanation)
1. Diminishing marginal productivity implies decreasing total product.
2. Diminishing marginal product exists when the production function becomes flatter
as inputs increase.
3. If the marginal cost of producing the tenth unit of output is $3, and if the average
total cost of producing the tenth unit of output is $2, then at ten units of output,
average total cost is rising.
4. If the marginal cost of producing the fifth unit of output is higher than the marginal
cost of producing the fourth unit of output, then at five units of output, average total
cost must be rising.
5. The shape of the marginal cost curve tells a producer something about the marginal
product of her workers.


Type II: Discussion questions
A Frim has Total Cost: TC = 50Q+30000 and the demand function is P = 100-0.01Q.
1. What is the marginal cost of firm? Fixed cost?
MC=50 , FC= 30000
2. What is the marginal revenue of firm?
P x Q = 100 Q – 0.01Q2
MR =
3. What is the quantity which the firm will produce to maximize its profit?


Type III: Multiple Choice

, Table 5-1 Student service
Number Output
of (number of pet
Workers visits)
0 0
1 20
2 45
3 60
4 70