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FINALS09 - Name Test Form A Economics 1 Final Exam June 8...

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Name Test Form A Economics 1 Final Exam June 8, 2009 True-False Questions: Fill in Bubble A for True, Bubble B for False. 1. If a monopolist charges one price to all customers and it must lower its price to sell more units of its product, its marginal revenue is less than the price it is currently charging. 2. If a monopolist charges one price to all consumers and chooses a price that maximizes its profits, the sum of demanders’ profits and suppliers’ profits at that price is lower than it would be with the competitive equilibrium price. 3. A monopolist will choose an output equal to the quantity at which the demand curve inter- sects the marginal cost curve. 4. If Country A can produce all products more cheaply than Country B, then Country A has no incentive to trade with Country B. 5. If a country imposes a tariff on imports of a particular good, the gain in profits to the country’s producers of that good plus the gain in tariff revenue for the country’s government will exceed the loss in consumer surplus for the country’s consumers due to the higher price they must pay for the good. 6. A demander’s consumer surplus from purchasing a unit of a good is defined to be the difference between his buyer value for the good and the price he actually pays for it. 7. If the supply curve shifts out (more supplied at every price) and the total revenue of suppliers decreases, the demand curve must be elastic. 8. Competitive equilibrium theory predicts that the number of transactions and the amount of profits for buyers and for sellers would be the same if a sales tax of $20 per unit were collected from buyers as they would be if a sales tax of $20 per unit were collected from sellers. 9. A laborer who is unemployed but would like to work at the current wage is said to be voluntarily unemployed.
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Economics 1 2 10. In the short run, a profit-maximizing firm will supply nothing if the price is below its average cost of production. Multiple Choice Questions 11. Professor William G . Gruff has written a new book about the dietary habits of his goat. He is publishing it himself. It cost him $5000 to do the research for the book and to write it. The marginal cost of each copy that he produces is $5. He has no other costs. The demand curve for this book is a downward sloping line that intersects the vertical axis at a price of $20 and the horizontal axis at 1000 units. If Professor Gruff is maximizing his profits, (a) he will sell his book at a price equal to marginal cost. (b) he will sell enough books so that the price elasticity of demand for his book is - 1. (c) demand will be price inelastic at the price he chooses. (d) demand will be price elastic at the price he chooses. (e) he will choose the quantity at which price equals average cost.
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