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M.A. and B.Sc. Examination School of Economics and Finance EC1002 Microeconomics January 2006: Time allowed – 2 hours This paper has two sections. Answer ALL questions in Section A [60% of the marks]. Answer ALL the questions Section B [40% of the marks]. Section A (60% of the total marks). Answer ALL the questions. Each question is worth one point. 1. If a person's opportunity cost of performing a task is lower than another person's, you know the person has _______________________ in performing the task. a) an absolute advantage. b) a comparative advantage. c) both a comparative advantage and an absolute advantage. d) neither an absolute nor a comparative advantage. e) either an absolute or a comparative advantage. 2. If a country experiences increasing opportunity costs, its production possibilities curve will a) be a straight line. b) bow outwards. c) bow inwards. d) shift out from the origin. e) shift in toward the origin. (Please turn over for Question 3)
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2 3. If the price of new cars falls, what will happen to the demand for used cars? a) remain the same b) increase c) decrease d) shift to the right e) become more inelastic 4. Refer to the diagram below. Which of the following is correct? a) The slope of the demand curve is -0.25. b) The vertical intercept of the demand curve is 50. c) The vertical intercept of the demand curve is 400. d) The equation of the demand curve is: P = 100 - 4 Q . e) The equation of the demand curve is: Q = 100 - 4 P . 5. David buys less pasta when he gets a rise in his income. This means that his a) income elasticity of demand is perfectly elastic. b) price elasticity of demand is perfectly elastic. c) income elasticity of demand is negative. d) price elasticity of supply is negative. e) tastes are inferior. 6. Market power refers to a firm's ability to a) set price. b) lower costs. c) produce output. d) control sales. e) eliminate rivals. (Please turn over for Question 7)
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3 7. With economies of scale a) average cost declines as output increases. b) marginal cost declines as output increases. c) output doubles when inputs double. d) all of the above e) none of the above 8. A monopolist’s marginal revenue a) is below price. b) can be negative. c) can be derived from the demand curve. d) is half of quantity demanded when price is 0. e) all of the above 9. The University Bookshop is the only textbook supplier in the town, and is a profit- maximizing business. The table below shows the reservation prices of its eight customers and the bookshop knows these.
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viewExam - M.A. and B.Sc. Examination School of Economics...

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