This document provides guidelines and rules for a final exam in Microeconomics 1 at Masaryk University. It states that the exam will be 90 minutes, cover 8 pages, and be worth 50 points. Students are not allowed to use books or notes and any academic dishonesty will be punished. The exam includes fill-in-the-blank, true/false, and multiple choice questions. This exam counts for 50% of the student's final grade in the course.
Assignment Five ECON 503 Name_________________________________.docxssuser562afc1
Assignment Five ECON 503 Name:_________________________________
End of Chapter Problems
Chapter 12-(1,2,4,5,7,8,18) Chapter 13 (1,2,5,14,15,17)
Vocabulary
complement
Good used together.
complementors
Firms that produce complementary products.
countercyclical goods/inferior goods
Good for which sales vary inversely with income.
cross elasticity of demand
Percentage change in quantity demanded of one item divided by percentage change in price of a different item.
cyclical goods/normal goods
Good for which sales vary with income.
elastic
Percentage change in quantity exceeds percentage change in price.
income elasticity of demand
Percentage change in quantity demanded divided by percentage change income.
inelastic
Percentage change in quantity is less than percentage change in price.
price elasticity of demand
Percentage change in quantity demanded divided by percentage change in price.
substitutes
Items that can be used in place of each other.
unit-elastic
Percentage change in quantity equals percentage change in price.
average total cost (ATC)
Cost per unit of output.
constant returns to scale
The relationship between per unit costs are the size or scale of the firm.
diminishing marginal returns
Combining increasing quantities of variable resources with fixed resource causes marginal output to rise at diminishing rates.
diseconomies of scale
The relationship between per unit costs and the size or scale of the firm.
economies of scale
Cost per unit of output declines as output increases.
economies of scope
Cost per unit of output declines as more different products are produced.
experience curve
Declining costs resulting from learning and gaining experience.
long run or planning period
Period of time just long enough that everything is variable.
Marginal Cost (MC)
Change in cost divided by change in output.
operating leverage
Ratio of fixed costs to variable costs.
short run or operating period
Period of time just short enough that at least one resource is fixed.
cartel
Individual firms combine to act as a monopolist.
contribution margin per unit
Ratio of total fixed costs to difference between price and average variable cost.
determinants of demand
Factors that affect demand other than own price.
ECON 503 Week Five Practice Problems
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. Elasticity is
a.
a measure of how much buyers and sellers respond to changes in market conditions.
b.
the study of how the allocation of resources affects economic well-being.
c.
the maximum amount that a buyer will pay for a good.
d.
the value of everything a seller must give up to produce a good.
____ 2. If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?
a.
immediately after the price increase
b.
one month after the price increase
c.
three months after the price increase
d.
one year after the price increase
____ 3. Economists compute the price ...
Exchange with TaxesThe table below shows the marginal values f.docxSANSKAR20
Exchange with Taxes
The table below shows the marginal values for product X for five different individuals, A - E. The values are all in dollars. This table will be used to answer questions 1 - 9. For each question, assume that all transaction costs are zero and that when indifferent, sellers will sell and buyers will buy the marginal unit. Read each question carefully and make sure you understand the market conditions before answering. All of the questions are worth 5 points.
TABLE I
A
B
C
D
E
Quantity
MV
Quantity
MV
Quantity
MV
Quantity
MV
Quantity
MV
1
26
1
26
1
26
1
26
1
28
2
24
2
24
2
24
2
24
2
25
3
22
3
22
3
22
3
22
3
22
4
20
4
20
4
20
4
20
4
18
5
18
5
18
5
18
5
18
5
16
6
16
6
16
6
16
6
16
6
15
7
14
7
14
7
14
7
14
7
14
8
12
8
12
8
12
8
12
8
12
9
10
9
10
9
10
9
10
9
10
10
8
10
8
10
8
10
8
10
8
11
6
11
6
11
6
11
6
11
6
12
4
12
4
12
4
12
4
12
4
13
2
13
2
13
2
13
2
13
2
At the start A has 10 units of X, B has 4, C has 7, D has 9 and E has 2.
a. what will be the equilibrium price? ____________
b. In equilibrium, how many units of X will each person own.? __
2. Start over again. Everything is exactly the same as it was at the start of question 1 except that the
government now levies an excise tax on the sellers of X equal to $4 per unit of X sold.
a. What would the market price have to be in order to get A to sell 2 units of X? ____
b. What would the market price have to be in order to get B to buy 2 units of X? ____
c. If there is trade in this market with the government tax on X, what will be the
equilibrium price? ____
d. How many units of X will each person own after trade? _____
e. How much of the tax per unit was the seller able to pass on to the buyers? ____
3. Start over again. Everything is exactly the same as it was at the start of question 1 except that the
government now levies an excise tax on the buyers of X equal to $4 per unit of X sold.
a. What would the market price have to be in order to get A to sell 2 units of X? ____
b. What would the market price have to be in order to get B to buy 2 units of X? ____
c. If there is trade in this market with the government tax on X, what will be the
equilibrium price? ____
d. How many units of X will each person own after trade? _____
e. How much of the tax per unit was the buyer able to pass on to the sellers? ____
f. How much total tax revenue did the government collect? ____
4. Compare the equilibrium in question 2 with the equilibrium in question 3.
a. How much, in total, did the buyers pay for each unit of X when the tax was levied on the
buyer? ____
b. How much, in total did the sellers receive and get to keep for each unit of X they sold,
when the tax was levied on the buyers? ___
c. How much, in total, did the buyers pay for each unit of X when the tax was levied on the
sellers? ___
d. How much, in total, did the sellers receive and get to keep for each unit of X they sold,
when the tax was levied on the sellers? ___
El ...
I am Elena Y. I am a Microeconomics Exam Helper at liveexamhelper.com. I hold a PhD in Economics, from Queen's University of Canada. I have been helping students with their exams for the past 5 years. You can hire me to take your exam on Microeconomics.
Visit liveexamhelper.com or email info@liveexamhelper.com.
You can also call on +1 678 648 4277 for any assistance with Microeconomics Exams.
Assignment Five ECON 503 Name_________________________________.docxssuser562afc1
Assignment Five ECON 503 Name:_________________________________
End of Chapter Problems
Chapter 12-(1,2,4,5,7,8,18) Chapter 13 (1,2,5,14,15,17)
Vocabulary
complement
Good used together.
complementors
Firms that produce complementary products.
countercyclical goods/inferior goods
Good for which sales vary inversely with income.
cross elasticity of demand
Percentage change in quantity demanded of one item divided by percentage change in price of a different item.
cyclical goods/normal goods
Good for which sales vary with income.
elastic
Percentage change in quantity exceeds percentage change in price.
income elasticity of demand
Percentage change in quantity demanded divided by percentage change income.
inelastic
Percentage change in quantity is less than percentage change in price.
price elasticity of demand
Percentage change in quantity demanded divided by percentage change in price.
substitutes
Items that can be used in place of each other.
unit-elastic
Percentage change in quantity equals percentage change in price.
average total cost (ATC)
Cost per unit of output.
constant returns to scale
The relationship between per unit costs are the size or scale of the firm.
diminishing marginal returns
Combining increasing quantities of variable resources with fixed resource causes marginal output to rise at diminishing rates.
diseconomies of scale
The relationship between per unit costs and the size or scale of the firm.
economies of scale
Cost per unit of output declines as output increases.
economies of scope
Cost per unit of output declines as more different products are produced.
experience curve
Declining costs resulting from learning and gaining experience.
long run or planning period
Period of time just long enough that everything is variable.
Marginal Cost (MC)
Change in cost divided by change in output.
operating leverage
Ratio of fixed costs to variable costs.
short run or operating period
Period of time just short enough that at least one resource is fixed.
cartel
Individual firms combine to act as a monopolist.
contribution margin per unit
Ratio of total fixed costs to difference between price and average variable cost.
determinants of demand
Factors that affect demand other than own price.
ECON 503 Week Five Practice Problems
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. Elasticity is
a.
a measure of how much buyers and sellers respond to changes in market conditions.
b.
the study of how the allocation of resources affects economic well-being.
c.
the maximum amount that a buyer will pay for a good.
d.
the value of everything a seller must give up to produce a good.
____ 2. If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?
a.
immediately after the price increase
b.
one month after the price increase
c.
three months after the price increase
d.
one year after the price increase
____ 3. Economists compute the price ...
Exchange with TaxesThe table below shows the marginal values f.docxSANSKAR20
Exchange with Taxes
The table below shows the marginal values for product X for five different individuals, A - E. The values are all in dollars. This table will be used to answer questions 1 - 9. For each question, assume that all transaction costs are zero and that when indifferent, sellers will sell and buyers will buy the marginal unit. Read each question carefully and make sure you understand the market conditions before answering. All of the questions are worth 5 points.
TABLE I
A
B
C
D
E
Quantity
MV
Quantity
MV
Quantity
MV
Quantity
MV
Quantity
MV
1
26
1
26
1
26
1
26
1
28
2
24
2
24
2
24
2
24
2
25
3
22
3
22
3
22
3
22
3
22
4
20
4
20
4
20
4
20
4
18
5
18
5
18
5
18
5
18
5
16
6
16
6
16
6
16
6
16
6
15
7
14
7
14
7
14
7
14
7
14
8
12
8
12
8
12
8
12
8
12
9
10
9
10
9
10
9
10
9
10
10
8
10
8
10
8
10
8
10
8
11
6
11
6
11
6
11
6
11
6
12
4
12
4
12
4
12
4
12
4
13
2
13
2
13
2
13
2
13
2
At the start A has 10 units of X, B has 4, C has 7, D has 9 and E has 2.
a. what will be the equilibrium price? ____________
b. In equilibrium, how many units of X will each person own.? __
2. Start over again. Everything is exactly the same as it was at the start of question 1 except that the
government now levies an excise tax on the sellers of X equal to $4 per unit of X sold.
a. What would the market price have to be in order to get A to sell 2 units of X? ____
b. What would the market price have to be in order to get B to buy 2 units of X? ____
c. If there is trade in this market with the government tax on X, what will be the
equilibrium price? ____
d. How many units of X will each person own after trade? _____
e. How much of the tax per unit was the seller able to pass on to the buyers? ____
3. Start over again. Everything is exactly the same as it was at the start of question 1 except that the
government now levies an excise tax on the buyers of X equal to $4 per unit of X sold.
a. What would the market price have to be in order to get A to sell 2 units of X? ____
b. What would the market price have to be in order to get B to buy 2 units of X? ____
c. If there is trade in this market with the government tax on X, what will be the
equilibrium price? ____
d. How many units of X will each person own after trade? _____
e. How much of the tax per unit was the buyer able to pass on to the sellers? ____
f. How much total tax revenue did the government collect? ____
4. Compare the equilibrium in question 2 with the equilibrium in question 3.
a. How much, in total, did the buyers pay for each unit of X when the tax was levied on the
buyer? ____
b. How much, in total did the sellers receive and get to keep for each unit of X they sold,
when the tax was levied on the buyers? ___
c. How much, in total, did the buyers pay for each unit of X when the tax was levied on the
sellers? ___
d. How much, in total, did the sellers receive and get to keep for each unit of X they sold,
when the tax was levied on the sellers? ___
El ...
I am Elena Y. I am a Microeconomics Exam Helper at liveexamhelper.com. I hold a PhD in Economics, from Queen's University of Canada. I have been helping students with their exams for the past 5 years. You can hire me to take your exam on Microeconomics.
Visit liveexamhelper.com or email info@liveexamhelper.com.
You can also call on +1 678 648 4277 for any assistance with Microeconomics Exams.
I am Barry A. I am a Microeconomics Assignment Expert at economicshomeworkhelper.com/. I hold a Ph.D. in Microeconomics. I have been helping students with their homework for the past 5 years. I solve assignments related to Microeconomics Assignment.
Visit economicshomeworkhelper.com/ or email info@economicshomeworkhelper.com .
You can also call on +1 678 648 4277 for any assistance with MICROECONOMICS ASSIGNMENT HELP.
ECO 2003Multiple ChoiceIdentify the choice that best com.docxjack60216
ECO 2003
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1. A surplus results when a
a. nonbinding price floor is imposed on a market.
b. nonbinding price floor is removed from a market.
c. binding price floor is imposed on a market.
d. binding price floor is removed from a market.
Figure 6-3
Panel (a)Panel (b)
quantity
quantity
____
2. Refer to Figure 6-3. A nonbinding price floor is shown in
a. both panel (a) and panel (b).
b. panel (a) only.
c. panel (b) only.
d. neither panel (a) nor panel (b).
Figure 6-6
____
3. Refer to Figure 6-6. If the government imposes a price ceiling of $12 on this market, then there will be a. no shortage.
b. a shortage of 10 units.
c. a shortage of 20 units.
d. a shortage of 40 units.
Figure 6-9
____
4. Refer to Figure 6-9. At which price would a price ceiling be binding? a. $4
b. $5
c. $6
d. $7
Figure 6-11
____
5. Refer to Figure 6-11. Which of the following statements is not correct?
a. A government-imposed price of $9 would be a binding price floor if market demand is Demand A and a binding price ceiling if market demand is Demand B.
b. A government-imposed price of $15 would be a binding price ceiling if market demand is either Demand A or Demand B.
c. A government-imposed price of $3 would be a binding price ceiling if market demand is either Demand A or Demand B.
d. A government-imposed price of $12 would be a binding price floor if market demand is Demand A and a non-binding price ceiling if market demand is Demand B.
____
6. When a tax is imposed on the sellers of a good, the supply curve shifts
a. upward by the amount of the tax.
b. downward by the amount of the tax.
c. upward by less than the amount of the tax.
d. downward by less than the amount of the tax.
Figure 6-25
Panel (a)Panel (b)
quantity
quantity
Panel (c)
____
7. Refer to Figure 6-25. In which market will the majority of the tax burden fall on buyers? a. market (a)
b. market (b)
c. market (c)
d. All of the above are correct.
Table 7-6
Buyer
Willingness to Pay
Michael
$500
Earvin
$400
Larry
$350
Charles
$300
____
8. Refer to Table 7-6. You have four essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men’s NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You offer to sell the tickets for $400. How many tickets do you sell, and what is the total consumer surplus in the market? a. one ticket; $100
b. two tickets; $100
c. two tickets; $0
d. three tickets; $0
____
9. Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons? a. Consumer surplus increases.
b. Consumer surplus decreases.
c. Consumer surplus is not affected by this change in market forces.
d. We would have to know whether the demand for lemons is ela ...
PAGE 4Multiple-Choice Questions1. The difference betwee.docxalfred4lewis58146
PAGE
4
Multiple-Choice Questions
1. The difference between the short-run and the long-run production function is:
a. three months or one business quarter.
b. the time it takes for firms to change all production inputs.
c. the time it takes for firms to change only their variable inputs.
d. more information is required to answer this question.
2. Which of the following statements about the short-run production function is true?
a. MP always equals AP at the maximum point of MP.
b. MP always equals zero when TP is at its maximum.
c. TP starts to decline at the point of diminishing returns.
d. When MP diminishes, AP is at its minimum point.
e. None of the above is true.
3. Assume a firm employs 10 workers and pays each $15 per hour. Further assume that the MP of the 10th worker is 5 units of output and that the price of the output is $4. According to economic theory, in the short run
a. the firm should hire additional workers
b. the firm should reduce the number of workers employed
c. the firm should continue to employ 10 workers.
d. more information is required to answer this question.
4. A firm using two inputs, X and Y, is using them in the most efficient manner when
a. MPX = MPY
b. PX = PY and MPX = MPY
c. MPX/PY = MPY/PX
d. MPX/MPY = PX/PY
5. Average fixed cost is
a. AC minus AVC
b. TC divided by Q
c. AVC minus MC
d. TC minus TVC
6. Diseconomies of scale can be caused by
a. the law of diminishing returns.
b. bureaucratic inefficiencies.
c. increasing advertising and promotional costs.
d. all of the above.
7. Which of the following cost relationship is not true?
a. AFC = AC - MC
b. TVC = TC - TFC
c. the change in TVC divided by the change in Q = MC
d. the change in TC divided by the change in Q = MC
8. When a firm produces at the point where MR = MC, and the price of its product is higher that the cost per unit, the profit that it is earning is considered to be
a. maximum
b. normal
c. above normal
d. below normal
9. Which of the following is not characteristic of perfect competition?
a. A differentiated product
b. No barriers to entry
c. Large number of buyers
d. Complete knowledge of market price
10. Suppose a firm is currently maximizing its profits (i.e., following the MR = MC rule). Assuming that it wants to continue maximizing its profits, if its fixed costs increase, it should
a. maintain the same price
b. raise its price
c. lower its price
d. not enough information to answer this question
11. Which of the following is true about a monopoly?
a. Its demand curve is generally less elastic than in more competitive markets.
b. It will always earn economic profit.
c. It will charge the highest possible price.
d. It will always be subject to government regulations.
12. If an oligopolistic firm decides to raise its price,
a. other firms will automatically follow.
b. none of the other firms will follow.
c. other firms may follow if it is the price leader.
d. None of the above.
13.
3Final ExaminationBAM 223 Principles of EconomicsM.docxtamicawaysmith
3
Final Examination
BAM 223 Principles of Economics
Multiple Choice Questions (Enter your answers on the enclosed answer sheet)
An economic ________ is a simplified version of some aspect of economic life used to analyze 1.
an economic issue.
variablea.
marketb.
modelc.
trade-off d.
Scenario 1-2
Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of
$5,000 per week. The plant owner observes, “Although the last 300 hats we produced and
sold increased our revenue by $1,000 and our costs by $1,100, we are still making an
overall profit of $5,000 per week so I think we’re on the right track. We are producing the
optimal number of hats.”
Refer to Scenario 1-2. Had the firm not produced and sold the last 300 hats, would its profit 2.
be higher or lower, and if so by how much?
Its profit will be $1,100 higher. a.
Its profit will be $1,000 lower. b.
Its profit will be $100 lower.c.
Its profit will be $100 higher. d.
The term market in economics refers to: 3.
a place where money changes hands.a.
a legal institution where exchange can take place.b.
a group of buyers and sellers of a product and the arrangement by which they come c.
together to trade.
an organization which sells goods and services. d.
Scenario 1-3
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of
$10,000 per week. A manager at the plant observes, “Although the last 400 t-shirts we
produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still
making an overall profit of $10,000 per week so I think we’re on the right track. We are
producing the optimal number of t-shirts.”
Refer to Scenario 1-3. Using marginal analysis terminology, what is another economic term 4.
for the incremental cost of producing the last 400 t-shirts?
marginal costa.
explicit costb.
operating costc.
Any of the above terms are correct.d.
4
Final Examination
BAM 223 Principles of Economics
Suppose the U.S. government encouraged new teachers to take jobs in underperforming 5.
schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying
the economic idea that:
people respond to economic incentivesa.
people are rationalb.
optimal decisions are made at the marginc.
equity is more important than efficiency d.
Dr. Goldfinger decides to invest in companies which he believes can “improve the 6.
productivity and efficiency” of health care services. How can Dr. Goldfinger strive to achieve
this productive efficiency?
by investing in companies that produce goods and services at the lowest possible costa.
by investing in companies that produce up to the point where the marginal benefit of the b.
last unit produced is equal to the marginal cost of producing it.
by investing in companies that fairly distribute their products and servicesc.
by investing in companies that produce goods and services based on consumer d.
preferences ...
151. 10 is shopping for mixers (capital) for his bakery. E.docxfelicidaddinwoodie
15
1.
10 is shopping for mixers (capital) for his bakery. Each mixer costs $40. Assume this is a perfectly competitive market.
a. Fill in the “Total Capital Cost” and “Marginal Resource Cost” columns in the table below.
Henry's Capital Cost
Capital
(mixers)
Total
Capital Cost
(dollars)
Marginal
Resource Cost
(dollars)
0
$0
—
1
$
2
3
4
5
6
7
b. Graph the marginal resource cost of capital for Henry's business.
Instructions: Use the tool provided 'MRC Curve' to plot the line point by point (7 points total).
2.
Henry can purchase mixers (capital) for his bakery, where he makes loaves of bread. The productivity and revenue generated by additional mixers is presented in the table below. Assume this is a perfectly competitive market.
Capital Productivity
Capital
(mixers)
Total
Product
(loaves of bread)
Marginal
Product
(loaves of bread)
Price
(dollars)
Total
Revenue
(dollars)
Marginal
Revenue Product
(dollars)
0
0
—
$5
$ 0
—
1
11
11
5
55
$55
2
20
9
5
100
45
3
28
8
5
140
40
4
34
6
5
170
30
5
38
4
5
190
20
6
40
2
5
200
10
7
41
1
5
205
5
a. Graph Henry's demand for capital based on the information in the table above. Draw the marginal resource cost (MRC) curve if the price for a mixer is $30.
Instructions: Use the tools provided 'Demand for Capital' and 'MRC Curve' to plot each line point by point (7 points total for each line).
b. How much capital does Henry demand given the current price of mixers?
5 mixers
4 mixers
3 mixers
2 mixers
3.
Billy is hiring workers to help him install solar panels. The table below presents the marginal product (in terms of solar panels installed per week) of various workers. Assume this is a perfectly competitive market.
Labor Productivity and Marginal Revenue Product for Solar Panel Installation
Labor
(workers)
Marginal
Product
(solar panels)
Marginal Revenue
Product
for P = $50
(dollars)
Marginal Revenue
Product
for P = $100
(dollars)
Marginal Revenue
Product
for P = $150
(dollars)
1
14
$
$
$
2
12
3
10
4
8
5
6
6
4
7
2
a. What is the marginal revenue product of each worker if the current market price to install one solar panel is $50? What if the current market price is $100? $150? Using the table above, fill in the “Marginal Revenue Product” columns.
b. Graph the three marginal revenue product curves (for prices of $50, $100, and $150) based on your answers to part a.
Instructions: Use the tools provided 'MRP (P = $50),' 'MRP (P = $100),' and 'MRP (P = $150)' to plot each line point by point (7 points total for each line).
4.
Alfonso wants to know what the cost of living would be in four different cities. He looks at circular ads from each of the cities and finds the prices of goods that he would normally buy during a typical trip to the grocery store each week. He adds up what he would pay for each grocery trip in the different cities and calls the sum “Price of Grocery Basket ...
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ot
e,
ly
~n
~s,
to
[lS
ly
1te
• A monopolist often can raise its profits by charg-
ing different prices for the same good based on
a buyer's willingness to pay. This practice of
price discrimination can raise economic welfare
by getting the good to some consumers who
otherwise would not buy it. In the extreme case
of perfect price discrimination, the deadweight
loss of monopoly is completely eliminated, and
the entire surplus in the market goes to the
monopoly producer. More generally, when price
discrimination is imperfect, it can either raise or
1. Give an example of a government-created
monopoly. Is creating this monopoly necessarily
bad public policy? Explain.
2. Define natural monopoly. What does the size of a
market have to do with whether an industry is a
natural monopoly?
Why is a monopolist's marginal revenue less
than the price of its good? Can marginal
revenue ever be negative? Explain.
Draw the demand, marginal-revenue, average-
total-cost, and marginal-cost curves for a
monopolist. Show the profit-maximizing level
of output, the profit-maximizing price, and the
amount of profit.
A publisher faces the following demand schedule
for the next novel from one of its. popular authors:
Price Quantity Demanded
$100
90
80
70
60
50
40
30
20
10
0
0 novels
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
'
CHAPTER 15 MONOPOLY 325
lower welfare compared to the outcome with a
single monopoly price.
• Policymakers can respond to the inefficiency of
monopoly behavior in four ways. They can use
the antitrust laws to try to make the industry more
competitive. They can regulate the prices that the
monopoly charges. They can turn the monopolist
into a government-run enterprise. Or if the market
failure is deemed small compared to the jnevitable
imperfections of policies, they can do nothing at all.
5. In your diagram from the previous question,
show the level of output that maximizes total
surplus. Show the deadweight loss from the
monopoly. Explain your answer.
6. Give two examples of price discrimination. In
each case, explain why the monopolist chooses
to follow this business strategy.
7. What gives the government the power to regulate
mergers between firms? From the standpoint of
the welfare of society, give a good reason and a
bad reason that two firms might want to merge.
8. Describe the two problems that arise when
regulators tell a natural monopoly that it must
set a price equal to marginal cost.
The author is paid $2 million to write the book,
and the marginal cost of publishing the book
is a constant $10 per book.
a. Compute total revenue, total cost, and profit
at each quantity. What quantity would a
profit-maximizing publisher choose? What
price would it charge?
b. Compute marginal revenue. (Recall that
MR = A.TR/ A.Q.) How does marginal
revenue compare to the price? Explain.
c. Graph th.
Economics 101Homework #5Directions The homework will be colle.docxjack60216
Economics 101
Homework #5
Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly). Make sure you write your name as it appears on your ID so that you can receive the correct grade. Late homework will not be accepted so make plans ahead of time. Please show your work. Good luck!
Please realize that you are essentially creating “your brand” when you submit this homework. Do you want your homework to convey that you are competent, careful, professional? Or, do you want to convey the image that you are careless, sloppy, and less than professional. For the rest of your life you will be creating your brand: please think about what you are saying about yourself when you do any work for someone else!
1. Consider a monopolist where the market demand curve for the produce is given by P = 520 – 2Q. This monopolist has marginal costs that can be expressed as MC = 100 + 2Q and total costs that can be expressed as TC = 100Q + Q2 + 50.
a. Given the above information, what is this monopolist’s profit maximizing price and output if it charges a single price?
b. Given the above information, calculate this single price monopolist’s profit.
c. At the profit maximizing quantity, what is this monopolist’s average total cost of production (ATC)?
d. At the profit maximizing quantity, what is the profit per unit for this single price monopolist?
2. Consider a monopolist described by the following equations:
Market demand for monopolist’s product: P = 100 – Q
ATC for monopolist: ATC = 20 +(3/10) Q
MC for monopolist: MC = 20 + (3/5)Q
In this question we will use the above data to compare a single price monopolist to the same monopolist that is regulated either with average cost regulation or marginal cost regulation. At the end of the question you will fill out a table to compare your results.
a. Given the above information, what is the profit maximizing price and quantity for the single price monopolist? You should round your answers to the nearest whole number.
b. Given the above information, what is the level of profit for this single price monopolist?
c. Suppose this monopolist is regulated to produce at that quantity where price equals average total cost. Calculate the quantity the monopolist will produce and the price it will charge given this regulatory scenario.
d. Calculate the level of profits for the monopoly if it is regulated to produce that quantity where price equals average total cost. Explain how you got your answer.
e. Suppose this monopolist is regulated to produce at that quantity where price equals marginal cost. Calculate the quantity the monopolist will produce and the price it will charge given this regulatory scenario.
f. Calculate the level of profits for the monopoly if it is regulated to produce that quantity where price equals marginal cost.
g. How big a subsidy will the monopoly require in order to be willing to produce at t ...
AuthorsPublisherR. Glenn Hubbard and Anthony Patrick.docxikirkton
Authors:
Publisher:
R. Glenn Hubbard and Anthony Patrick O’Brien
Pearson/Prentice Hall
925 N. Spurgeon Street, Santa Ana, CA 92701 Phone: 714-547-9625 Fax: 714-547-5777
04/09
BAM223
PRINCIPLES OF ECONOMICS
F
in
a
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xa
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in
a
ti
o
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Text: Essentials of Economics
2nd Edition, 2009
ISBN-13: 978-0-13-608623-9
ISBN-10: 013-608623-3
Final Examination
1
Principles of Economics
1) Every society faces economic tradeoffs. This means
a. producing more of one good means less of another good can be produced.
b. not everyone can have enough goods and services to survive.
c. some people live better than others do.
d. society’s output cannot be made available to all.
2) Which of the following statements is false?
a. Tradeoffs do not apply when consumers purchase a product for which there is
excess supply, such as a stock clearance sale.
b. Every individual, no matter how rich or poor, is faced with making tradeoffs.
c. Anytime you have to decide which action to take you are facing an economic
tradeoff.
d. Economics is a social science that studies the tradeoffs we are forced to
make because of scarcity.
3) Which of the following is not an example of an economic tradeoff that a firm
has to make?
a. whether it should produce more of its product.
b. whether it is cheaper to produce with more machines or with more workers.
c. whether or not consumers will buy its products .
d. whether to outsource the production of a good or service
4) How are the fundamental economic decisions determined in Cuba?
a. Primarily, the government decides because Cuba is a centrally planned
economy.
b. These decisions are made by the country’s elders who have had much experi-
ence in answering these questions.
c. Individuals, firms, and the government interact in a market to make these
economic decisions.
d. The United Nations decides because Cuba is a developing economy.
5) Which of the following correctly describes the relationship between economic
efficiency and economic equity?
a. They are both automatically achieved in a free market economy.
b. There is no conflict between the two goals.
c. There is often a trade-off between the two.
d. They always call for opposite outcomes.
Multiple Choice Questions (Enter your answers on the enclosed answer sheet)
2
Final Examination
Principles of Economics
6) Which of the following statements best characterizes the disagreements be-
tween Paul Samuelson and Jagdish Bhagwati in their debate about outsourc-
ing?
a. Their disagreements are grounded in normative economic analysis. They dis-
agree over how to interpret the relevant economic statistics.
b. Their disagreements are grounded in positive economic analysis. They dis-
agree about the relevant economic statistics used in the model.
c. Their disagreements are grounded ...
South UniversityVirginia Beach CampusECO2071Name ________.docxwilliame8
South University
Virginia Beach Campus
ECO2071
Name: ____________________________________________
Score: ______________
Select the CORRECT answer to each question. Each question is worth 2 points.
1. Economics is the study of how society manages its
a.
limited wants and unlimited resources.
b.
unlimited wants and unlimited resources.
c.
limited wants and limited resources.
d.
unlimited wants and limited resources.
2. The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that
a.
equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
b.
equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits.
c.
equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits.
d.
equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.
3. Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial
a.
only if it allows us to obtain things that we couldn't make for ourselves.
b.
because it allows specialization, which increases total output.
c.
to us if we can gain and the others involved in the trade lose.
d.
in only a limited number of circumstances because others are typically self-interested.
4. A direct or positive relationship exists between a country's
a.
productivity and its standard of living.
b.
amount of government spending and its productivity.
c.
total population and its average citizen’s income.
d.
rate of population growth and the extent of its trade with other countries.
5. Economists, like mathematicians, physicists, and biologists,
a.
make use of the scientific method.
b.
try to address their subject with a scientist’s objectivity.
c.
devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.
d.
All of the above are correct.
6. Which of the following is an example of a positive, as opposed to normative, statement?
a.
Inflation is more harmful to the economy than unemployment is.
b.
If welfare payments increase, the world will be a better place.
c.
Prices rise when the government prints too much money.
d.
When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency.
7. Which of the following is an example of a normative, as opposed to positive, statement?
a.
Universal health care would be good for U.S. citizens.
b.
An increase in the cigarette tax would cause a decrease in the number of smokers.
c.
A decrease in the minimum wage would decrease unemployment.
d.
A law requiri.
Exam1. Economics is aa. social science that studies g.docxSANSKAR20
Exam
1. Economics is a:
a. social science that studies goods with no alternative uses.
b. natural science that studies goods with no alternative uses.
c. social science concerned chiefly with how people choose among alternatives.
d. social science concerned chiefly with reasons why society has unlimited resources.
2. Scarcity exists when:
a. a choice must be made among two or more alternatives.
b. we face the notion of "all other things unchanged."
c. countries and people find themselves facing poverty.
d. the notions of normative economics come into play.
3. A free good is:
a. also a scarce good.
b. a relatively abundant good.
c. a good with no opportunity cost.
d. a good with relatively low opportunity cost.
4. Suppose that voters in your community pass a one-cent sales tax increase to fund education, knowing full well they will have to forgo other goods they typically consume. This primarily addresses the economic question of:
a. How will each good be produced?
b. For whom shall the goods be produced?
c. Why will the resources be used to produce goods?
d. What goods and services should a society produce?
5. A factor of production that has been produced for use in the production of other goods and services is:
a. labor.
b. money.
c. capital.
d. natural resources.
6. The textbook classifies technology as _______ and entrepreneurs as _______ .
a. knowledge; persons who seek profit by finding new ways to organize factors of production
b. capital; labor
c. labor skills; capital
d. a factor of production; a factor of production
7. The production possibilities curve represents the fact that:
a. the economy will automatically end up at full employment.
b. an economy's productive capacity increases proportionally with its population.
c. if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
d. economic production possibilities have no limit.
8. An economy is said to have a comparative advantage in producing a particular good if it:
a. can produce more of all goods than another economy.
b. can produce less of all goods than another economy.
c. has the highest cost for producing that good.
d. has the lowest cost for producing that good.
9. A negative relationship between the quantity demanded and price is called the law of ______.
a. demand
b. diminishing marginal returns
c. market clearing
d. supply
10. If people demand more of product A when the price of B falls, then A and B are:
a. not related.
b. substitutes.
c. complements.
d. inferior.
11. The primary difference between a change in demand and a change in the quantity demanded is:
a. a change in demand is a movement along the demand curve, and a change in quantity demanded is a shift in the demand curve.
b. a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.
c. both a change i ...
Instructions This is an open-book exam. You may refer to you.docxdirkrplav
Instructions:
This is an open-book exam. You may refer to your text and other course materials as you work on the exam, and you may use a calculator.
Record your answers and work in this document.
There are 25 problems.
Problems #1-12 are multiple choice. Record your choice for each problem.
Problems #13-15 are short answer. Record your answer for each problem.
Problems #16-25 are short answer with work required when directed. When requested, show all work and write all answers in the spaces allotted on the following pages. You may type your work using plain-text formatting or an equation editor, or you may hand-write your work and scan it. In either case, show work neatly and correctly, following standard mathematical conventions. Each step should follow clearly and completely from the previous step. If necessary, you may attach extra pages.
MULTIPLE CHOICE. Record your answer choices.
1.7.
2.8.
3.9.
4.10.
5.11.
6.12.
SHORT ANSWER. Record your answers below.
13. (a)
(b)
(c)
(d)
14. (a)
(b)
(c)
15. (a)
(b)
(c)
SHORT ANSWER with Work Shown. Record your answers and work.
Problem Number
Solution
16
Answers:
(a)
(b)
(c)
Work for (a), (b), and (c):
17
Answer:
Work:
18
Answer:
Work:
19
Answers:
(a)
(b)
(c)
Work for (a) and (b):
20
Answer:
Work:
21
Answer:
Work:
22
Answer:
Work:
23
Answers:
(a)
(b)
(c)
(d)
Work for (b), (c), and (d):
24
Answer:
Work:
25
Answers:
(a)
(b) Region I:
Region II:
Region III:
Region IV:
Work:
MATH 106 Finite Mathematics 2148-OL4-7983-3D
Page 1 of 10
MATH 106 FINAL EXAMINATION
This is an open-book exam. You may refer to your text and other course materials as you work
on the exam, and you may use a calculator. You must complete the exam individually.
Neither collaboration nor consultation with others is allowed. Use of instructors’ solutions
manuals or online problem solving services in NOT allowed.
Record your answers and work on the separate answer sheet provided.
There are 25 problems.
Problems #1–12 are Multiple Choice.
Problems #13–15 are Short Answer. (Work not required to be shown)
Problems #16–25 are Short Answer with work required to be shown.
MULTIPLE CHOICE
1. – 2. Amalgamated Furniture Company makes dining room tables and chairs. A table requires
8 labor-hours for assembling and 2 labor-hours for finishing. A chair requires 2 labor-hours for
assembly and 1 labor-hour for finishing. The maximum labor-hours available per day for
assembling and finishing are 400 and 120, respectively. Production costs are $600 per table and
$150 per chair. Let x represent number of tables and y represent number of chairs made per day.
1. Identify the daily production constraint for finishing:
.
I am Barry A. I am a Microeconomics Assignment Expert at economicshomeworkhelper.com/. I hold a Ph.D. in Microeconomics. I have been helping students with their homework for the past 5 years. I solve assignments related to Microeconomics Assignment.
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ECO 2003Multiple ChoiceIdentify the choice that best com.docxjack60216
ECO 2003
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1. A surplus results when a
a. nonbinding price floor is imposed on a market.
b. nonbinding price floor is removed from a market.
c. binding price floor is imposed on a market.
d. binding price floor is removed from a market.
Figure 6-3
Panel (a)Panel (b)
quantity
quantity
____
2. Refer to Figure 6-3. A nonbinding price floor is shown in
a. both panel (a) and panel (b).
b. panel (a) only.
c. panel (b) only.
d. neither panel (a) nor panel (b).
Figure 6-6
____
3. Refer to Figure 6-6. If the government imposes a price ceiling of $12 on this market, then there will be a. no shortage.
b. a shortage of 10 units.
c. a shortage of 20 units.
d. a shortage of 40 units.
Figure 6-9
____
4. Refer to Figure 6-9. At which price would a price ceiling be binding? a. $4
b. $5
c. $6
d. $7
Figure 6-11
____
5. Refer to Figure 6-11. Which of the following statements is not correct?
a. A government-imposed price of $9 would be a binding price floor if market demand is Demand A and a binding price ceiling if market demand is Demand B.
b. A government-imposed price of $15 would be a binding price ceiling if market demand is either Demand A or Demand B.
c. A government-imposed price of $3 would be a binding price ceiling if market demand is either Demand A or Demand B.
d. A government-imposed price of $12 would be a binding price floor if market demand is Demand A and a non-binding price ceiling if market demand is Demand B.
____
6. When a tax is imposed on the sellers of a good, the supply curve shifts
a. upward by the amount of the tax.
b. downward by the amount of the tax.
c. upward by less than the amount of the tax.
d. downward by less than the amount of the tax.
Figure 6-25
Panel (a)Panel (b)
quantity
quantity
Panel (c)
____
7. Refer to Figure 6-25. In which market will the majority of the tax burden fall on buyers? a. market (a)
b. market (b)
c. market (c)
d. All of the above are correct.
Table 7-6
Buyer
Willingness to Pay
Michael
$500
Earvin
$400
Larry
$350
Charles
$300
____
8. Refer to Table 7-6. You have four essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men’s NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You offer to sell the tickets for $400. How many tickets do you sell, and what is the total consumer surplus in the market? a. one ticket; $100
b. two tickets; $100
c. two tickets; $0
d. three tickets; $0
____
9. Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons? a. Consumer surplus increases.
b. Consumer surplus decreases.
c. Consumer surplus is not affected by this change in market forces.
d. We would have to know whether the demand for lemons is ela ...
PAGE 4Multiple-Choice Questions1. The difference betwee.docxalfred4lewis58146
PAGE
4
Multiple-Choice Questions
1. The difference between the short-run and the long-run production function is:
a. three months or one business quarter.
b. the time it takes for firms to change all production inputs.
c. the time it takes for firms to change only their variable inputs.
d. more information is required to answer this question.
2. Which of the following statements about the short-run production function is true?
a. MP always equals AP at the maximum point of MP.
b. MP always equals zero when TP is at its maximum.
c. TP starts to decline at the point of diminishing returns.
d. When MP diminishes, AP is at its minimum point.
e. None of the above is true.
3. Assume a firm employs 10 workers and pays each $15 per hour. Further assume that the MP of the 10th worker is 5 units of output and that the price of the output is $4. According to economic theory, in the short run
a. the firm should hire additional workers
b. the firm should reduce the number of workers employed
c. the firm should continue to employ 10 workers.
d. more information is required to answer this question.
4. A firm using two inputs, X and Y, is using them in the most efficient manner when
a. MPX = MPY
b. PX = PY and MPX = MPY
c. MPX/PY = MPY/PX
d. MPX/MPY = PX/PY
5. Average fixed cost is
a. AC minus AVC
b. TC divided by Q
c. AVC minus MC
d. TC minus TVC
6. Diseconomies of scale can be caused by
a. the law of diminishing returns.
b. bureaucratic inefficiencies.
c. increasing advertising and promotional costs.
d. all of the above.
7. Which of the following cost relationship is not true?
a. AFC = AC - MC
b. TVC = TC - TFC
c. the change in TVC divided by the change in Q = MC
d. the change in TC divided by the change in Q = MC
8. When a firm produces at the point where MR = MC, and the price of its product is higher that the cost per unit, the profit that it is earning is considered to be
a. maximum
b. normal
c. above normal
d. below normal
9. Which of the following is not characteristic of perfect competition?
a. A differentiated product
b. No barriers to entry
c. Large number of buyers
d. Complete knowledge of market price
10. Suppose a firm is currently maximizing its profits (i.e., following the MR = MC rule). Assuming that it wants to continue maximizing its profits, if its fixed costs increase, it should
a. maintain the same price
b. raise its price
c. lower its price
d. not enough information to answer this question
11. Which of the following is true about a monopoly?
a. Its demand curve is generally less elastic than in more competitive markets.
b. It will always earn economic profit.
c. It will charge the highest possible price.
d. It will always be subject to government regulations.
12. If an oligopolistic firm decides to raise its price,
a. other firms will automatically follow.
b. none of the other firms will follow.
c. other firms may follow if it is the price leader.
d. None of the above.
13.
3Final ExaminationBAM 223 Principles of EconomicsM.docxtamicawaysmith
3
Final Examination
BAM 223 Principles of Economics
Multiple Choice Questions (Enter your answers on the enclosed answer sheet)
An economic ________ is a simplified version of some aspect of economic life used to analyze 1.
an economic issue.
variablea.
marketb.
modelc.
trade-off d.
Scenario 1-2
Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of
$5,000 per week. The plant owner observes, “Although the last 300 hats we produced and
sold increased our revenue by $1,000 and our costs by $1,100, we are still making an
overall profit of $5,000 per week so I think we’re on the right track. We are producing the
optimal number of hats.”
Refer to Scenario 1-2. Had the firm not produced and sold the last 300 hats, would its profit 2.
be higher or lower, and if so by how much?
Its profit will be $1,100 higher. a.
Its profit will be $1,000 lower. b.
Its profit will be $100 lower.c.
Its profit will be $100 higher. d.
The term market in economics refers to: 3.
a place where money changes hands.a.
a legal institution where exchange can take place.b.
a group of buyers and sellers of a product and the arrangement by which they come c.
together to trade.
an organization which sells goods and services. d.
Scenario 1-3
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of
$10,000 per week. A manager at the plant observes, “Although the last 400 t-shirts we
produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still
making an overall profit of $10,000 per week so I think we’re on the right track. We are
producing the optimal number of t-shirts.”
Refer to Scenario 1-3. Using marginal analysis terminology, what is another economic term 4.
for the incremental cost of producing the last 400 t-shirts?
marginal costa.
explicit costb.
operating costc.
Any of the above terms are correct.d.
4
Final Examination
BAM 223 Principles of Economics
Suppose the U.S. government encouraged new teachers to take jobs in underperforming 5.
schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying
the economic idea that:
people respond to economic incentivesa.
people are rationalb.
optimal decisions are made at the marginc.
equity is more important than efficiency d.
Dr. Goldfinger decides to invest in companies which he believes can “improve the 6.
productivity and efficiency” of health care services. How can Dr. Goldfinger strive to achieve
this productive efficiency?
by investing in companies that produce goods and services at the lowest possible costa.
by investing in companies that produce up to the point where the marginal benefit of the b.
last unit produced is equal to the marginal cost of producing it.
by investing in companies that fairly distribute their products and servicesc.
by investing in companies that produce goods and services based on consumer d.
preferences ...
151. 10 is shopping for mixers (capital) for his bakery. E.docxfelicidaddinwoodie
15
1.
10 is shopping for mixers (capital) for his bakery. Each mixer costs $40. Assume this is a perfectly competitive market.
a. Fill in the “Total Capital Cost” and “Marginal Resource Cost” columns in the table below.
Henry's Capital Cost
Capital
(mixers)
Total
Capital Cost
(dollars)
Marginal
Resource Cost
(dollars)
0
$0
—
1
$
2
3
4
5
6
7
b. Graph the marginal resource cost of capital for Henry's business.
Instructions: Use the tool provided 'MRC Curve' to plot the line point by point (7 points total).
2.
Henry can purchase mixers (capital) for his bakery, where he makes loaves of bread. The productivity and revenue generated by additional mixers is presented in the table below. Assume this is a perfectly competitive market.
Capital Productivity
Capital
(mixers)
Total
Product
(loaves of bread)
Marginal
Product
(loaves of bread)
Price
(dollars)
Total
Revenue
(dollars)
Marginal
Revenue Product
(dollars)
0
0
—
$5
$ 0
—
1
11
11
5
55
$55
2
20
9
5
100
45
3
28
8
5
140
40
4
34
6
5
170
30
5
38
4
5
190
20
6
40
2
5
200
10
7
41
1
5
205
5
a. Graph Henry's demand for capital based on the information in the table above. Draw the marginal resource cost (MRC) curve if the price for a mixer is $30.
Instructions: Use the tools provided 'Demand for Capital' and 'MRC Curve' to plot each line point by point (7 points total for each line).
b. How much capital does Henry demand given the current price of mixers?
5 mixers
4 mixers
3 mixers
2 mixers
3.
Billy is hiring workers to help him install solar panels. The table below presents the marginal product (in terms of solar panels installed per week) of various workers. Assume this is a perfectly competitive market.
Labor Productivity and Marginal Revenue Product for Solar Panel Installation
Labor
(workers)
Marginal
Product
(solar panels)
Marginal Revenue
Product
for P = $50
(dollars)
Marginal Revenue
Product
for P = $100
(dollars)
Marginal Revenue
Product
for P = $150
(dollars)
1
14
$
$
$
2
12
3
10
4
8
5
6
6
4
7
2
a. What is the marginal revenue product of each worker if the current market price to install one solar panel is $50? What if the current market price is $100? $150? Using the table above, fill in the “Marginal Revenue Product” columns.
b. Graph the three marginal revenue product curves (for prices of $50, $100, and $150) based on your answers to part a.
Instructions: Use the tools provided 'MRP (P = $50),' 'MRP (P = $100),' and 'MRP (P = $150)' to plot each line point by point (7 points total for each line).
4.
Alfonso wants to know what the cost of living would be in four different cities. He looks at circular ads from each of the cities and finds the prices of goods that he would normally buy during a typical trip to the grocery store each week. He adds up what he would pay for each grocery trip in the different cities and calls the sum “Price of Grocery Basket ...
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ly
1te
• A monopolist often can raise its profits by charg-
ing different prices for the same good based on
a buyer's willingness to pay. This practice of
price discrimination can raise economic welfare
by getting the good to some consumers who
otherwise would not buy it. In the extreme case
of perfect price discrimination, the deadweight
loss of monopoly is completely eliminated, and
the entire surplus in the market goes to the
monopoly producer. More generally, when price
discrimination is imperfect, it can either raise or
1. Give an example of a government-created
monopoly. Is creating this monopoly necessarily
bad public policy? Explain.
2. Define natural monopoly. What does the size of a
market have to do with whether an industry is a
natural monopoly?
Why is a monopolist's marginal revenue less
than the price of its good? Can marginal
revenue ever be negative? Explain.
Draw the demand, marginal-revenue, average-
total-cost, and marginal-cost curves for a
monopolist. Show the profit-maximizing level
of output, the profit-maximizing price, and the
amount of profit.
A publisher faces the following demand schedule
for the next novel from one of its. popular authors:
Price Quantity Demanded
$100
90
80
70
60
50
40
30
20
10
0
0 novels
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
'
CHAPTER 15 MONOPOLY 325
lower welfare compared to the outcome with a
single monopoly price.
• Policymakers can respond to the inefficiency of
monopoly behavior in four ways. They can use
the antitrust laws to try to make the industry more
competitive. They can regulate the prices that the
monopoly charges. They can turn the monopolist
into a government-run enterprise. Or if the market
failure is deemed small compared to the jnevitable
imperfections of policies, they can do nothing at all.
5. In your diagram from the previous question,
show the level of output that maximizes total
surplus. Show the deadweight loss from the
monopoly. Explain your answer.
6. Give two examples of price discrimination. In
each case, explain why the monopolist chooses
to follow this business strategy.
7. What gives the government the power to regulate
mergers between firms? From the standpoint of
the welfare of society, give a good reason and a
bad reason that two firms might want to merge.
8. Describe the two problems that arise when
regulators tell a natural monopoly that it must
set a price equal to marginal cost.
The author is paid $2 million to write the book,
and the marginal cost of publishing the book
is a constant $10 per book.
a. Compute total revenue, total cost, and profit
at each quantity. What quantity would a
profit-maximizing publisher choose? What
price would it charge?
b. Compute marginal revenue. (Recall that
MR = A.TR/ A.Q.) How does marginal
revenue compare to the price? Explain.
c. Graph th.
Economics 101Homework #5Directions The homework will be colle.docxjack60216
Economics 101
Homework #5
Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly). Make sure you write your name as it appears on your ID so that you can receive the correct grade. Late homework will not be accepted so make plans ahead of time. Please show your work. Good luck!
Please realize that you are essentially creating “your brand” when you submit this homework. Do you want your homework to convey that you are competent, careful, professional? Or, do you want to convey the image that you are careless, sloppy, and less than professional. For the rest of your life you will be creating your brand: please think about what you are saying about yourself when you do any work for someone else!
1. Consider a monopolist where the market demand curve for the produce is given by P = 520 – 2Q. This monopolist has marginal costs that can be expressed as MC = 100 + 2Q and total costs that can be expressed as TC = 100Q + Q2 + 50.
a. Given the above information, what is this monopolist’s profit maximizing price and output if it charges a single price?
b. Given the above information, calculate this single price monopolist’s profit.
c. At the profit maximizing quantity, what is this monopolist’s average total cost of production (ATC)?
d. At the profit maximizing quantity, what is the profit per unit for this single price monopolist?
2. Consider a monopolist described by the following equations:
Market demand for monopolist’s product: P = 100 – Q
ATC for monopolist: ATC = 20 +(3/10) Q
MC for monopolist: MC = 20 + (3/5)Q
In this question we will use the above data to compare a single price monopolist to the same monopolist that is regulated either with average cost regulation or marginal cost regulation. At the end of the question you will fill out a table to compare your results.
a. Given the above information, what is the profit maximizing price and quantity for the single price monopolist? You should round your answers to the nearest whole number.
b. Given the above information, what is the level of profit for this single price monopolist?
c. Suppose this monopolist is regulated to produce at that quantity where price equals average total cost. Calculate the quantity the monopolist will produce and the price it will charge given this regulatory scenario.
d. Calculate the level of profits for the monopoly if it is regulated to produce that quantity where price equals average total cost. Explain how you got your answer.
e. Suppose this monopolist is regulated to produce at that quantity where price equals marginal cost. Calculate the quantity the monopolist will produce and the price it will charge given this regulatory scenario.
f. Calculate the level of profits for the monopoly if it is regulated to produce that quantity where price equals marginal cost.
g. How big a subsidy will the monopoly require in order to be willing to produce at t ...
AuthorsPublisherR. Glenn Hubbard and Anthony Patrick.docxikirkton
Authors:
Publisher:
R. Glenn Hubbard and Anthony Patrick O’Brien
Pearson/Prentice Hall
925 N. Spurgeon Street, Santa Ana, CA 92701 Phone: 714-547-9625 Fax: 714-547-5777
04/09
BAM223
PRINCIPLES OF ECONOMICS
F
in
a
l E
xa
m
in
a
ti
o
n
Text: Essentials of Economics
2nd Edition, 2009
ISBN-13: 978-0-13-608623-9
ISBN-10: 013-608623-3
Final Examination
1
Principles of Economics
1) Every society faces economic tradeoffs. This means
a. producing more of one good means less of another good can be produced.
b. not everyone can have enough goods and services to survive.
c. some people live better than others do.
d. society’s output cannot be made available to all.
2) Which of the following statements is false?
a. Tradeoffs do not apply when consumers purchase a product for which there is
excess supply, such as a stock clearance sale.
b. Every individual, no matter how rich or poor, is faced with making tradeoffs.
c. Anytime you have to decide which action to take you are facing an economic
tradeoff.
d. Economics is a social science that studies the tradeoffs we are forced to
make because of scarcity.
3) Which of the following is not an example of an economic tradeoff that a firm
has to make?
a. whether it should produce more of its product.
b. whether it is cheaper to produce with more machines or with more workers.
c. whether or not consumers will buy its products .
d. whether to outsource the production of a good or service
4) How are the fundamental economic decisions determined in Cuba?
a. Primarily, the government decides because Cuba is a centrally planned
economy.
b. These decisions are made by the country’s elders who have had much experi-
ence in answering these questions.
c. Individuals, firms, and the government interact in a market to make these
economic decisions.
d. The United Nations decides because Cuba is a developing economy.
5) Which of the following correctly describes the relationship between economic
efficiency and economic equity?
a. They are both automatically achieved in a free market economy.
b. There is no conflict between the two goals.
c. There is often a trade-off between the two.
d. They always call for opposite outcomes.
Multiple Choice Questions (Enter your answers on the enclosed answer sheet)
2
Final Examination
Principles of Economics
6) Which of the following statements best characterizes the disagreements be-
tween Paul Samuelson and Jagdish Bhagwati in their debate about outsourc-
ing?
a. Their disagreements are grounded in normative economic analysis. They dis-
agree over how to interpret the relevant economic statistics.
b. Their disagreements are grounded in positive economic analysis. They dis-
agree about the relevant economic statistics used in the model.
c. Their disagreements are grounded ...
South UniversityVirginia Beach CampusECO2071Name ________.docxwilliame8
South University
Virginia Beach Campus
ECO2071
Name: ____________________________________________
Score: ______________
Select the CORRECT answer to each question. Each question is worth 2 points.
1. Economics is the study of how society manages its
a.
limited wants and unlimited resources.
b.
unlimited wants and unlimited resources.
c.
limited wants and limited resources.
d.
unlimited wants and limited resources.
2. The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that
a.
equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
b.
equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits.
c.
equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits.
d.
equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.
3. Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial
a.
only if it allows us to obtain things that we couldn't make for ourselves.
b.
because it allows specialization, which increases total output.
c.
to us if we can gain and the others involved in the trade lose.
d.
in only a limited number of circumstances because others are typically self-interested.
4. A direct or positive relationship exists between a country's
a.
productivity and its standard of living.
b.
amount of government spending and its productivity.
c.
total population and its average citizen’s income.
d.
rate of population growth and the extent of its trade with other countries.
5. Economists, like mathematicians, physicists, and biologists,
a.
make use of the scientific method.
b.
try to address their subject with a scientist’s objectivity.
c.
devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.
d.
All of the above are correct.
6. Which of the following is an example of a positive, as opposed to normative, statement?
a.
Inflation is more harmful to the economy than unemployment is.
b.
If welfare payments increase, the world will be a better place.
c.
Prices rise when the government prints too much money.
d.
When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency.
7. Which of the following is an example of a normative, as opposed to positive, statement?
a.
Universal health care would be good for U.S. citizens.
b.
An increase in the cigarette tax would cause a decrease in the number of smokers.
c.
A decrease in the minimum wage would decrease unemployment.
d.
A law requiri.
Exam1. Economics is aa. social science that studies g.docxSANSKAR20
Exam
1. Economics is a:
a. social science that studies goods with no alternative uses.
b. natural science that studies goods with no alternative uses.
c. social science concerned chiefly with how people choose among alternatives.
d. social science concerned chiefly with reasons why society has unlimited resources.
2. Scarcity exists when:
a. a choice must be made among two or more alternatives.
b. we face the notion of "all other things unchanged."
c. countries and people find themselves facing poverty.
d. the notions of normative economics come into play.
3. A free good is:
a. also a scarce good.
b. a relatively abundant good.
c. a good with no opportunity cost.
d. a good with relatively low opportunity cost.
4. Suppose that voters in your community pass a one-cent sales tax increase to fund education, knowing full well they will have to forgo other goods they typically consume. This primarily addresses the economic question of:
a. How will each good be produced?
b. For whom shall the goods be produced?
c. Why will the resources be used to produce goods?
d. What goods and services should a society produce?
5. A factor of production that has been produced for use in the production of other goods and services is:
a. labor.
b. money.
c. capital.
d. natural resources.
6. The textbook classifies technology as _______ and entrepreneurs as _______ .
a. knowledge; persons who seek profit by finding new ways to organize factors of production
b. capital; labor
c. labor skills; capital
d. a factor of production; a factor of production
7. The production possibilities curve represents the fact that:
a. the economy will automatically end up at full employment.
b. an economy's productive capacity increases proportionally with its population.
c. if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
d. economic production possibilities have no limit.
8. An economy is said to have a comparative advantage in producing a particular good if it:
a. can produce more of all goods than another economy.
b. can produce less of all goods than another economy.
c. has the highest cost for producing that good.
d. has the lowest cost for producing that good.
9. A negative relationship between the quantity demanded and price is called the law of ______.
a. demand
b. diminishing marginal returns
c. market clearing
d. supply
10. If people demand more of product A when the price of B falls, then A and B are:
a. not related.
b. substitutes.
c. complements.
d. inferior.
11. The primary difference between a change in demand and a change in the quantity demanded is:
a. a change in demand is a movement along the demand curve, and a change in quantity demanded is a shift in the demand curve.
b. a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.
c. both a change i ...
Instructions This is an open-book exam. You may refer to you.docxdirkrplav
Instructions:
This is an open-book exam. You may refer to your text and other course materials as you work on the exam, and you may use a calculator.
Record your answers and work in this document.
There are 25 problems.
Problems #1-12 are multiple choice. Record your choice for each problem.
Problems #13-15 are short answer. Record your answer for each problem.
Problems #16-25 are short answer with work required when directed. When requested, show all work and write all answers in the spaces allotted on the following pages. You may type your work using plain-text formatting or an equation editor, or you may hand-write your work and scan it. In either case, show work neatly and correctly, following standard mathematical conventions. Each step should follow clearly and completely from the previous step. If necessary, you may attach extra pages.
MULTIPLE CHOICE. Record your answer choices.
1.7.
2.8.
3.9.
4.10.
5.11.
6.12.
SHORT ANSWER. Record your answers below.
13. (a)
(b)
(c)
(d)
14. (a)
(b)
(c)
15. (a)
(b)
(c)
SHORT ANSWER with Work Shown. Record your answers and work.
Problem Number
Solution
16
Answers:
(a)
(b)
(c)
Work for (a), (b), and (c):
17
Answer:
Work:
18
Answer:
Work:
19
Answers:
(a)
(b)
(c)
Work for (a) and (b):
20
Answer:
Work:
21
Answer:
Work:
22
Answer:
Work:
23
Answers:
(a)
(b)
(c)
(d)
Work for (b), (c), and (d):
24
Answer:
Work:
25
Answers:
(a)
(b) Region I:
Region II:
Region III:
Region IV:
Work:
MATH 106 Finite Mathematics 2148-OL4-7983-3D
Page 1 of 10
MATH 106 FINAL EXAMINATION
This is an open-book exam. You may refer to your text and other course materials as you work
on the exam, and you may use a calculator. You must complete the exam individually.
Neither collaboration nor consultation with others is allowed. Use of instructors’ solutions
manuals or online problem solving services in NOT allowed.
Record your answers and work on the separate answer sheet provided.
There are 25 problems.
Problems #1–12 are Multiple Choice.
Problems #13–15 are Short Answer. (Work not required to be shown)
Problems #16–25 are Short Answer with work required to be shown.
MULTIPLE CHOICE
1. – 2. Amalgamated Furniture Company makes dining room tables and chairs. A table requires
8 labor-hours for assembling and 2 labor-hours for finishing. A chair requires 2 labor-hours for
assembly and 1 labor-hour for finishing. The maximum labor-hours available per day for
assembling and finishing are 400 and 120, respectively. Production costs are $600 per table and
$150 per chair. Let x represent number of tables and y represent number of chairs made per day.
1. Identify the daily production constraint for finishing:
.
1. Masaryk University - Brno
Department of Economics – Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
BPE_MIC1 Microeconomics 1 – Fall Semester 2011
Final Exam - 12.12.2011, 9:00-10:30 a.m. Test B
Guidelines and Rules:
1. The test setup has 8 pages. It is your responsibility to check that you have all the
pages.
2. The time limit is 90 minutes.
3. The exam is worth 50 points.
4. You are NOT allowed to use any books or notes.
5. Any violation of academic honesty will be punished to the fullest extent possible.
6. At most one exam-taker is allowed to be outside the room at one time.
7. Write the answers to the fill-the-gaps, true/false and multiple-choice questions in the spaces
corresponding to the respective questions in the setup sheet.
8. When ready, submit the filled setup sheet with your name written on the first page.
This exam will count for 50% of your final grade from the course. Good luck!
Fill the gaps
Complete each statement.
1. _____________________ arises because a single firm can supply a good or service to an entire market at
1
a smaller cost than could two or more firms.
2. If a firm produces nothing, _____________ cost will be zero.
3. ___________ demand curves are summed horizontally to obtain the ____________ demand curve.
4. ___________________ refers to the business practice of selling the same good at different prices to
different customers.
5. Economists say that an economy has a/an ____________ when comparing its productivity in a
market relative to another economy.
6. ___________ tend to have inelastic demands, whereas ___________ have elastic demands.
7. A _______________ strategy is one that is best for the player, regardless of what strategies other players follow.
8. ___________________ describes a situation in which unregulated market is unable to allocate resources
efficiently.
9. Firms that produce a quantity below the efficient scale are said to have _________________ .
10. The marginal product of an input times the price of the output gives _______________ .
True/False
Indicate whether the statement is true or false.
____ 11. Monopolists can achieve any level of profit they desire because they have unlimited market power.
____ 12. All else equal, an increase in demand will cause an increase in producer surplus.
2. Masaryk University - Brno, Department of Economics - Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
____ 13. The shape of the total cost curve is related to the shape of the production function.
____ 14. Surpluses drive price up while shortages drive price down.
____ 15. Labor supply curves are always upward sloping.
____ 16. For a firm operating in a perfectly competitive industry, marginal revenue and average revenue are equal.
____ 17. Positive statements can be evaluated using data alone, but normative statements cannot.
____ 18. A production possibilities frontier is a graph that shows the combination of outputs that an economy should produce.
____ 19. If a firm is facing elastic demand, then the firm should decrease price to increase revenue.
____ 20. The indifference curves for perfect substitutes are straight lines.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
2
____ 21. Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles.
Refer to Figure 13-9. Which of the curves is most likely to characterize the short-run average total cost curve of the
smallest factory?
a. ATCA c. ATCC
b. ATCB d. ATCD
____ 22. Refer to Figure 13-9. The firm experiences economies of scale at which output levels?
a. output levels less than M
b. output levels between M and N
c. output levels greater than N
d. All of the above are correct as long as the firm is operating in the long run.
____ 23. Refer to Figure 13-9. In the long run, the firm can operate on which of the following average total cost curves?
a. ATCA c. ATCC
b. ATCB d. All of the above are correct.
____ 24. What will happen in the rice market now if sellers expect higher rice prices in the near future?
a. The supply of rice will increase. c. The supply of rice will be unaffected.
b. The supply of rice will decrease. d. The demand for rice will decrease.
3. Masaryk University - Brno, Department of Economics - Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
____ 25. A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In
addition, suppose the family could afford a total of 8 nights in a hotel if they don’t buy any meals. How many meals
could the family afford if they gave up two nights in the hotel?
a. 1 c. 5
b. 2 d. 8
____ 26. When the local used bookstore prices economics books at $15.00 each, it generally sells 70 books per month. If it
lowers the price to $7.00, sales increase to 90 books per month. Given this information, we know that the price
elasticity of demand for economics books is about
a. 2.91, and an increase in price from $7.00 to $15.00 results in an increase in total revenue.
b. 2.91, and an increase in price from $7.00 to $15.00 results in a decrease in total revenue.
c. 0.34, and an increase in price from $7.00 to $15.00 results in an increase in total revenue.
d. 0.34, and an increase in price from $7.00 to $15.00 results in a decrease in total revenue.
____ 27. When Sam has an income of $1,000, he consumes 30 units of good A and 50 units of good B. After Sam’s income
increases to $1,500, he consumes 60 units of good A and 45 units of good B. Which of the following statements is
correct?
a. Both goods A and B are normal goods.
b. Both goods A and B are inferior goods.
c. Good A is a normal good, and good B is an inferior good.
d. Good A is an inferior good, and good B is a normal good.
____ 28. Table 17-17. Consider a small town that has two grocery stores from which residents can choose to buy a gallon of
milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table,
showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2).
3
Store 2
Low Price High Price
Store 1
Low Price (500, 500) (800, 100)
High Price (100, 800) (650, 650)
Refer to Table 17-17. If grocery store 2 sets a high price, what price should grocery store 1 set? And what will
grocery store 1's payoff equal?
a. Low price, $800 c. Low price, $100
b. High price, $650 d. High price, $800
____ 29. Refer to Table 17-17. What is the Nash Equilibrium of this price-setting game?
a. Grocery store 1: Low price
Grocery store 2: Low price
b. Grocery store 1: Low price
Grocery store 2: High price
c. Grocery store 1: High price
Grocery store 2: How price
d. Grocery store 1: High price
Grocery store 2: High price
____ 30. A monopolistically competitive firm faces the following demand curve for its product:
Price ($) 10 9 8 7 6 5 4 3 2 1
Quantity 2 4 6 8 10 12 14 16 18 20
The firm has total fixed costs of $20 and a constant marginal cost of $5 per unit. The firm will maximize profit with
the production of
a. 6 units of output. c. 10 units of output.
b. 8 units of output. d. 12 units of output.
4. Masaryk University - Brno, Department of Economics - Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
4
____ 31. Figure 7-15
Supply
Demand
10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 Quantity
28
26
24
22
20
18
16
14
12
10
8
6
4
2
Price
Refer to Figure 7-15. Assume demand increases and as a result, equilibrium price increases to $22 and equilibrium
quantity increases to 110. The increase in producer surplus would be
a. $210. c. $480.
b. $360. d. $570.
____ 32. Refer to Figure 7-15. The efficient price is
a. $22, and the efficient quantity is 40. c. $16, and the efficient quantity is 80.
b. $22, and the efficient quantity is 110. d. $8, and the efficient quantity is 40.
____ 33. Refer to Figure 7-15. If 110 units of the good are being bought and sold, then
a. the marginal cost to sellers is equal to the marginal value to buyers.
b. the marginal value to buyers is greater than the marginal cost to sellers.
c. the marginal cost to sellers is greater than the marginal value to buyers.
d. producer surplus is greater than consumer surplus.
____ 34. Suppose that a toxic waste spill renders half of the land in New Jersey uninhabitable. Assuming that land and labor
are complements in the production function, what would happen to the wages earned by workers and rents earned by
landowners?
a. Both wages and rents would increase.
b. Both wages and rents would decrease.
c. Wages would increase, and rents would decrease.
d. Wages would decrease, and rents would increase.
____ 35. Assume the market for pork is perfectly competitive. When one pork buyer exits the market,
a. the price of pork increases. c. the price of pork does not change.
b. the price of pork decreases. d. there is no longer a market for pork.
____ 36. Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in
his tastes such that he values strawberries more than before. If the market price is the same as before, then
a. Dallas's consumer surplus would be unaffected.
b. Dallas's consumer surplus would increase.
c. Dallas's consumer surplus would decrease.
d. Dallas would be wise to buy fewer strawberries than before.
5. Masaryk University - Brno, Department of Economics - Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
5
____ 37. A monopolist faces the following demand curve:
Price Quantity
$51 1
$47 2
$42 3
$36 4
$29 5
$21 6
$12 7
The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing
price?
a. $4 c. $36
b. $39 d. $42
____ 38. A likely example of substitute goods for most people would be
a. peanut butter and jelly.
b. tennis balls and tennis rackets.
c. televisions and subscriptions to cable television services.
d. pencils and pens.
____ 39. Table 13-4
Gallo Cork Factory
Number
of
Workers
Number
of
Machines
Output
(corks
produced
per hour)
Marginal
Product of
Labor
Cost of
Workers
Cost of
Machines
Total
Cost
1 2 5
2 2 10
3 2 20
4 2 35
5 2 55
6 2 70
7 2 80
Refer to Table 13-4. Each worker at Gallo's cork factory costs $12 per hour. The cost of each machine is $20 per
day regardless of the number of corks produced. If Gallo's produces at a rate of 35 corks per hour, what is the total
labor cost per hour?
a. $40 c. $384
b. $48 d. $424
____ 40. Refer to Table 13-4. Assume Gallo's currently employs 5 workers. What is the marginal product of labor when
Gallo's adds a 6th worker?
a. 5 corks per hour c. 25 corks per hour
b. 15 corks per hour d. 70 corks per hour
6. Masaryk University - Brno, Department of Economics - Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
6
____ 41. Scenario 21-1
Suppose the price of hot wings is $10, the price of beer is $1, and the consumer’s income is $50. In addition, suppose
the consumer’s budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis.
Refer to Scenario 21-1. If the price of beer doubles to $2, then the
a. budget constraint intersects the vertical axis at 25 beers.
b. slope of the budget constraint rises to -2.
c. budget constraint intersects the vertical axis at 100 beers.
d. budget constraint shifts inward in a parallel fashion.
____ 42. Refer to Scenario 21-1. If the consumer's income rises to $60, then the budget line for hot wings and beer would
a. now intersect the horizontal axis at 6 orders of hot wings and the vertical axis at 60 beers.
b. not change.
c. now intersect the horizontal axis at 4 orders of hot wings and the vertical axis at 16 beers.
d. rotate outward along the beer axis.
____ 43. Holding all other factors constant and using the midpoint method, if a pencil manufacturer increases production from
40 to 50 boxes when price increases by 20 percent, then supply is
a. inelastic, since the price elasticity of supply is equal to .91.
b. inelastic, since the price elasticity of supply is equal to 1.1.
c. elastic, since the price elasticity of supply is equal to 0.91.
d. elastic, since the price elasticity of supply is equal to 1.1.
____ 44. The following diagram shows one indifference curve representing the preferences for goods X and Y for one
consumer.
What is the marginal rate of substitution between points A and B?
a. 2/5 c. 5/2
b. 1 d. 3
7. Masaryk University - Brno, Department of Economics - Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
7
____ 45. Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each
industry.
Firm Industry A Industry B Industry C Industry D
1 13,250 8,750 1,750 15,000
2 10,975 7,500 1,725 14,000
3 8,175 6,400 1,700 13,000
4 4,275 5,000 1,675 12,000
5 1,250 4,250 1,650 11,000
6 875 4,000 1,625 10,000
Total 45,350 70,900 30,125 120,000
Refer to Table 16-2. Which industry has the lowest concentration ratio?
a. Industry A c. Industry C
b. Industry B d. Industry D
____ 46. Refer to Table 16-2. Which industry is the most competitive?
a. Industry A c. Industry C
b. Industry B d. Industry D
____ 47. Consider a competitive market with 50 identical firms. Suppose the market demand is given by the equation QD =
200 - 10P and the market supply is given by the equation QS = 10P. In addition, suppose the following table shows
the marginal cost of production for various levels of output for firms in this market.
Output Marginal Cost
0 --
1 $5
2 $10
3 $15
4 $20
5 $25
How many units should a firm in this market produce to maximize profit?
a. 1 unit c. 3 units
b. 2 units d. 4 units
____ 48. Which of the following might cause the supply curve for an inferior good to shift to the right?
a. An increase in input prices.
b. A decrease in consumer income.
c. An improvement in production technology that makes production of the good more profitable.
d. A decrease in the number of sellers in the market.
8. Masaryk University - Brno, Department of Economics - Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
____ 49. The market for diamond rings is closely linked to the market for high-quality diamonds. If a large quantity of
high-quality diamonds enters the market, then
a. the supply curve for diamond rings will shift right, which will create a shortage at the current price.
That will increase price, which will decrease quantity demanded and increase quantity supplied.
The new market equilibrium will be at a higher price and higher quantity.
b. the supply curve for diamond rings will shift right, which will create a surplus at the current price.
That will decrease price, which will increase quantity demanded and decrease quantity supplied.
The new market equilibrium will be at a lower price and higher quantity.
c. the demand curve for diamond rings will shift right, which will create a shortage at the current
price. That will increase price, which will decrease quantity demanded and increase quantity
supplied. The new market equilibrium will be at a higher price and higher quantity.
d. the demand curve for diamond rings will shift right, which will create a surplus at the current price.
That will decrease price, which will increase quantity demanded and decrease quantity supplied.
The new market equilibrium will be at a lower price and higher quantity.
____ 50. Which of the following would be most likely to contribute to the breakdown of a cartel in a natural resource (e.g.,
bauxite) market?
a. high prices
b. low price elasticity of demand
c. high compatibility of member interests
d. unequal member ownership of the natural resource
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