test2_july27 - Department of Economics University of...

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Page 1 of 11 Department of Economics Prof. Gustavo Indart University of Toronto July 27, 2006 ECO 100Y – L0201 INTRODUCTION TO ECONOMICS Midterm Test # 2 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS : 1. The total time for this test is 1 hour and 50 minutes. 4. Aids allowed: a simple calculator. 5. Write with pen instead of pencil. DO NOT WRITE IN THIS SPACE Part I /30 Part II 1. /5 2 . /5 3 . /5 Part III 1. /30 2 . /25 T O T A L /100
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Page 2 of 11 PART I (30 marks) Instructions : Enter your answer to each question in the table. Only the answer recorded in the table will be marked. Table cells left blank will receive a zero mark for that question. Each question is worth 3 (three) marks. No deductions will be made for incorrect answers. 1. Consider a perfectly competitive firm in the following position: output = 4000 units, market price = $2, fixed costs = $10,000, variable costs = $1000, and marginal cost = $1.10. To maximize profits in the short-run , the firm should A) reduce output B) expand output C) shut down D) increase the market price E) not change output 2. In the short-run, a decrease in a perfectly competitive firm’s fixed costs should lead to A) a decrease in output B) a decrease in the number of sellers C) an increase in price D) lower variable costs E) none of the above 3. Suppose a typical competitive firm has the following data in the short-run : price = $10; output = 100 units; ATC = $12; AVC = $7. A) in the long-run the industry will expand because of economic profits B) in the long-run the industry will contract because firms are suffering losses C) the size of the industry will remain the same in the long-run D) price will fall in the long-run E) there is not enough information to formulate an answer 4. Assume that a perfectly competitive industry has a perfectly inelastic supply curve. The government introduces a specific commodity tax of $2.50 per unit of output. As a result, which one of the following statements would be correct? A) the consumer price would increase by $2.50 B) the consumer price would fall by $2.50 C) the burden of the tax would fall completely on consumers D) the price received by the producer would decrease by $2.50 E) none of the above 1 2 3 4 5 6 7 8 9 10
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Page 3 of 11 5. Suppose all of the firms in a perfectly competitive industry form a cartel and agree to restrict output, thereby raising the price of the product. Individual firm A will gain the most from the existence of the cartel if A) all firms, including A, cooperate and restrict output B) firm A restricts output, while the other firms do not C) all firms, except A, cooperate and restrict output D) no firms restrict output E) all firms revert back to their competitive outputs
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This note was uploaded on 06/09/2010 for the course ECO ECO100 taught by Professor Inheart during the Spring '09 term at University of Toronto- Toronto.

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test2_july27 - Department of Economics University of...

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