Final S08 edited for released in F09 v2

# Final S08 edited for released in F09 v2 - ECONOMICS 211...

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ECONOMICS 211 FINAL EXAMINATION, Spring 2008 (3 hours, 200 points) Circle the name of your instructor: Gilbert Juarez Soligo Wu NAME: __________________________________________________________________________ PLEDGE:_______________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ PART 1: MULTIPLE CHOICE: Circle the correct answer (3 points each; 39 points in total) MULTIPLE CHOICE (Circle the correct answer) 1. (3 points) Product differentiation gives an established producer some market power because it makes A) the demand curve less elastic. B) the demand curve more elastic. C) the supply curve less elastic. D) the supply curve more elastic. 2. (3 points) An inferior good would have, A) a positive income elasticity of demand. B) a negative income elasticity of demand. C) income elasticity of demand greater than zero but less than one. D) both a positive income elasticity of demand and a price elasticity of demand greater than one. 3. (3 points) The production of good X needs two inputs, capital and labor. The production function is given as q = KL , where K represents capital and L represents labor. It exhibits: A) Decreasing returns to scale. B) Constant returns to scale. C) Increasing returns to scale. D) Decreasing returns to scale in one region and increasing returns to scale in another region. 4. (3 points) When the demand curve is unitary price elastic, the marginal revenue is A) positive. B) negative. C) equal to zero. 1

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D) equal to one. 5. (3 points) A small business owner earns \$50,000 in revenue annually. The explicit annual costs equal \$30,000. The owner could work for someone else and earn \$25,000 annually. The owner’s economic profit is ________. A) \$20,000. B) \$25,000. C) \$5,000. D) -\$5000. 6. (3 points) Table 1 shows a payoff matrix for two firms, A and B (payoff of firm A in lower left corner of each box and payoff of firm B in upper right corner of each box), that must choose between a high-price strategy and a low-price strategy. For firm B, Table 1 A) setting a high price is the dominant strategy. B) setting a low price is the dominant strategy. C) there is no dominant strategy. D) doing the opposite of firm A is always the best strategy. 7. (3 points) Suppose that commodities A and B are complements for one another in consumption, and the price of B rises sharply due to curtailed supply. Which of the following will occur? A) The amount demanded of A will tend to rise. B) The price of A will tend to fall. C) Both the price of A and the quantity demanded of A will tend to rise. D) The price of A will tend to rise and quantity demanded will tend to fall.
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Final S08 edited for released in F09 v2 - ECONOMICS 211...

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