1.When Cost Elasticity > 1:

(a)average cost is falling.

(b)increasing returns to scale are implied.

(c)decreasing returns to scale are implied.

(d)constant returns to scale are implied.

2.If the slope of a long-run total cost function falls as output increases, the firm's underlying production function exhibits:

(a)constant returns to scale.

(b)decreasing returns to scale.

(c)decreasing returns to a factor input.

(d)increasing returns to scale.

3.Assume the following for a firm:

Demand function:P = 50 - Q

Total Revenue function: TR = 50Q - Q²

Marginal Revenue: MR = 50 - 2Q

Total cost function: TC = 200 + 2Q + Q²

Marginal cost function: MC = 2 + 2Q

Average cost function: AC = 200/Q + 2 + Q

The profit maximising level of output will be:

(a)11

(b)12

(c)13

(d)14

4.Using the profit maximising level of output from the previous question above, the profit amount will be:

(a)49

(b)88

(c)56

(d)39