Review Session Qs

Review Session Qs - Econ 010 Midterm 1 Review 1. In a...

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Econ 010 Midterm 1 Review 1. In a perfectly competitive market, prices have dropped in the short-run. Which of the following is not a possible explanation? a. The price of a substitute has gone down. b. New firms have entered the industry. c. Firms have lower variable costs. d. Firms have lower fixed costs. 2. A perfectly price discriminating monopolist is: a. Not maximizing profits. b. Creating dead weight loss. c. Selling all units that are valued at more than marginal cost. d. Maximizing consumer surplus. 3. In a monopolistically competitive market, firms are making negative profits in the short run. In the long run what will happen? a. Firms will exit the industry, moving every firm’s supply curve inward until profits are 0. b. Firms will change from price-takers to price-setters. c. Fixed costs will fall until profits are 0. d. Firms will exit the industry until every firm’s demand curve shifts outward enough that profits are 0. 5. If an individual allocates 200 dollars for his monthly expenditure on coffee and decides to spend no more and no less regardless the price, this individual’s demand for coffee is: a. perfectly elastic. b. perfectly inelastic. c. of unit elasticity. d. less than one but greater than zero. 6. The cross price elasticity of pizza and Philly cheese steaks is known to be positive. What happens to the price and quantity of pizza, in equilibrium, if the price of steak (an input of cheese steaks only) decreases? a. Price goes up, quantity goes down. b. Price goes down, quantity goes down. c. Price indeterminate, quantity goes down. d. Price indeterminate, quantity indeterminate. 7. A point to the right of an existing production possibility boundary might be attainable a. if less of one good is produced. b. with full employment of resources. c. with economic growth .
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Econ 010 Midterm 1 Review d. with a reallocation of factors of production. 8. Consider a market for a good for which the demand curve has the standard negative slope and the supply curve has the standard positive slope (that is, neither the supply nor the demand are perfectly elastic or inelastic). If the producers of that good choose to offer a quantity bigger than the efficient one, a. the consumer surplus will increase or decrease depending on the slope of the demand curve. b. the producer surplus will increase or decrease depending on the slope of the supply curve. c. the producer surplus will certainly increase. d. the consumer surplus will certainly increase. 9. Susie and Lucy are stranded on an island. They can only produce hats or collect berries. Their production possibilities are given in the following table: Hats (per day) Berries (per day) Susie X Y Lucy W Z If we say that Susie has comparative advantage in the production of hats, which of the following is true? a. X is bigger than W
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This note was uploaded on 03/10/2008 for the course ECON 010 taught by Professor Stein during the Fall '07 term at UPenn.

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Review Session Qs - Econ 010 Midterm 1 Review 1. In a...

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