ECO 550 FINAL EXAM PART 1 & 2 2017/ECO 550 FINAL EXAM PART 1 & 2 2017

  
Question 1
Evidence from empirical studies of long-run cost-output relationships lends support to the:
existence of a non-linear cubic total cost function
hypothesis that marginal costs first decrease, then gradually increase over the normal operating range of the firm
hypothesis that total costs increase quadratically over the ranges of output examined
hypothesis that total costs increase linearly over some considerable range of output examined
Question 2
Theoretically, in a long-run cost function:
all inputs are fixed
all inputs are considered variable
some inputs are always fixed
capital and labor are always combined in fixed proportions
Question 3
George Webb Restaurant collects on the average $5 per customer at its breakfast & lunch diner. Its variable cost per customer averages $3, and its annual fixed cost is $40,000. If George Webb wants to make a profit of $20,000 per year at the diner, it will have to serve__________ customers per year.
10,000 customers
20,000 customers
30,000 customers
40,000 customers
50,000 customers