Answer Key to Study Questions for Test #3

Here is the answer key.

Since these are questions from older tests, there are some variations in terminology.

Diminishing marginal product is the same as diminishing returns.

Average revenue is something we did not talk about in class. The concept is simple: average revenue = total revenue / output, or AR = TR/Q. However, for price taking competitors, AR = MR, or average revenue and marginal revenue are the same.

Here is the key:

1-C, 2-A, 3-C, 4-A, 5-D*, 6-A (sorry for the repeat)
7-A, 8-D, 9-B, 10-B, 11-B, 12-B, 13-D,
14-A, 15-A, 16-B, 17-A, 18-B, 19-B (The table on p. 3 is for problems 18-22)
20-D**, 21-A, 22-D, 23-B, 24-B, 25-B, 26-A, 27-A,
28-A, 29-B, 30-A, 31-A, 32-D, 33-B, 34-A,
35-C, 36-B, 61-D (sorry about the numbering), 37-A,
38-C, 39-B, 40-D, 41-C,
42-B, 43-C, 44-C, 45-C.

Let me know if I've make any errors. (Email or AIM.)

* 5 was originally marked as C. It's D. Sorry. Thanks LS.
*20 was originally marked A. However 6 is the optimal level of output. The question asks about setting MR = MC, and that would be 9, option D. Thanks LS.