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FINALF08 - Name Test Form A Economics 1 Final Exam December...

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Name Test Form A Economics 1 Final Exam December 9, 2008 True-False Questions: Fill in Bubble A for True, Bubble B for False. 1. A profit-maximizing monopolist will sell more units of a good than the amount of the good that would be sold in a competitive equilibrium. 2. If the demand curve for a good is inelastic at a particular quantity, the marginal revenue of the good is negative at that quantity. 3. A monopolist faces a downward-sloping demand curve for its product. In order to maximize its profits, it will choose the output that maximizes its marginal revenue. 4. If Person A has absolute advantage over Person B in the production of Good X, then Person A must also have comparative advantage over Person B in the production of Good X. 5. If the world price for a good exceeds the autarky price for the good, opening the international market to domestic producers will decrease the consumer surplus of domestic consumers of the good. 6. A competitive equilibrium for a good will maximize the number of trades of the good for which both the buyer and seller have a positive profit. 7. Suppose the demand curve for a good slopes down, and the supply curve for that good slopes up. If the supply curve shifts and the demand curve does not shift, the equilibrium price and quantity will move in opposite directions. 8. If the demand curve slopes downwards and the supply curve slopes upwards, the total reduc- tion in sellers’ profit and consumers’ surplus caused by a sales tax of $20 per unit will exceed the amount of revenue collected by the tax. 9. We can expect there to be excess demand in a market where a legal price ceiling is set lower than the competitive equilibrium price.
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Economics 1 2 10. If a firm’s average variable cost does not change as it increases its output, the firm’s marginal cost equals its average variable cost. Multiple Choice Questions 11. A monopolist can sell 10 units of a good for a price of $90 per unit. To sell 11 units, it would have to lower its price to $87 per unit. What is the marginal revenue of the 11th unit? (a) $90 (b) $87 (c) $77 (d) $57 (e) $80 12. The demand curve for Econ 1 textbooks is given by the equation P = 100 - Q, where P is the price of the book and Q is the number of books sold. The variable cost of producing and selling a textbook is constant at $20 per book. The fixed cost is zero. What price would a profit-maximizing monopolist charge for the book?
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