Choose the correct answer for each question.

1. The short run is defined as a period when

   1.   ?    All factors of production are variable
   2.   ?    All factors of production are in fixed supply
   3.   ?    At least factor of production is in fixed supply
   4.   ?    The state of technology is variable

2. The table below shows the output that results from employing additional units of labour in the short run
   Labour Input Total Output
   
   (Workers) (Q)
   
   0 0
   1 20
   2 46
   3 81
   4 132
   5 200
   6 288
   7 357
   8 392
   9 414
   10 430
   
   Diminishing returns to labour sets in when
   

   1.   ?    6 workers are employed
   2.   ?    7 workers are employed
   3.   ?    8 workers are employed
   4.   ?    9 workers are employed

3. Which one of the following would not be classified as a fixed cost of production in the short run?

   1.   ?    Depreciation of capital inputs due to age
   2.   ?    The costs of purchasing new capital inputs
   3.   ?    Interest costs on loans
   4.   ?    Depreciation of capital inputs due to wear and tear

4. A firm finds that when its output = 4,000 units per month, its average total cost is £150 and its average variable costs are £90. What are the total fixed costs for this firm in the short run?

   1.   ?    £200,000
   2.   ?    £240,000
   3.   ?    £400,000
   4.   ?    £600,000

5. 
   The curve represented by the letter A in the diagram above is the

   1.   ?    Average variable cost curve
   2.   ?    Average fixed cost curve
   3.   ?    Average total cost curve
   4.   ?    Marginal cost curve

6. 
   The diagram above shows the cost and revenue curves for a firm seeking to maximise profits at an output where marginal revenue = marginal cost. The areas labelled FBCE in the diagram represents

   1.   ?    Economic profit
   2.   ?    Total cost
   3.   ?    Average cost per unit
   4.   ?    Marginal cost

7. 
   Which one of the output levels labelled in A, B, C or D in the diagram above shows the output level where this firm maximises total revenue?

   1.   ?    A
   2.   ?    B
   3.   ?    C
   4.   ?    D

8. 
   Which one of the output levels labelled in A, B, C or D in the diagram above shows the output level where this firm maximises total profit?

   1.   ?    A
   2.   ?    B
   3.   ?    C
   4.   ?    D

9. 
   The long run average total cost curve illustrated in the diagram above is consistent with the long run average cost curve we would expect to see with a

   1.   ?    Firm experiencing diminishing returns
   2.   ?    Natural Monopoly
   3.   ?    A Perfectly Competitive Firm
   4.   ?    A firm experiencing diseconomies of scale in the long run

10. An improvement in production technology and the entry of new firms into a market in the long run would be expected (other things being equal) to lead to

    1.   ?    An inward shift of the market supply curve and a rise in market price
    2.   ?    An inward shift of the market demand curve and a fall in market price
    3.   ?    An outward shift of the market supply curve and a fall in market price
    4.   ?    An inward shift of the market supply curve and a fall in market price