True/False/Uncertain Questions [20 pts]

Instructions: Explain your answer as most marks awarded for explanation and not the answer. Answers with no explanation will receive 0 marks.

1. (5 points) [VF] Suppose a firm in a perfectly competitive market has a producer surplus of $750, that means that their profits will also be $750.

2. (5 points) [VF] In problem set #6, we discussed the idea of homegeneity. For a consumer's demand function the homogeniety is of degree zero, i.e.qx(gP,gY) =g0qx(P,Y)wherePis prices andYis income.

1. (5 points) [VF] If the government imposes a per unit tax of=$?5, then the equilibrium quantity,qmust decrease.
2. (5 points) [VF] For a given level of outputq, a firm's long-run average costs are always lower than its short-run average variable costs.