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Unformatted text preview: © Prep101 http://www.prep101.com/freestuff ECONOMICS 100 (Carr)
Practice Term Test 2 Answer the following questions TRUE, FALSE or UNCERTAIN. Give a brief
explanation of your answer. Marks will be given entirely for your explanation. All
questions are worth an equal share of the total mark.
1. If we know that a particular good’s income and substitution effect move in the same
direction, we know it is a Giffen good and that its demand curve is upward sloping. 2. A firm in a perfectly competitive industry will inevitably enjoy economic profits in
long run equilibrium; otherwise there would be no incentive to stay in business. 3. A monopoly is bad for the economy because of the excess economics profits earned
by that monopoly. If the government imposes a tax that took these profits away from
the monopoly, there would be no cost/burden on society as a result of the monopoly.
Assume that governments hold all tax revenues. 4. Airfare during the workweek is typically more expensive than over the weekend.
This pricing strategy demonstrates a social concern for non-business travelers with
less income. (Suppose that business travelers fly out and back within a workweek,
and non-business travelers travel for just the weekend.) 5. Total costs are made up of fixed costs (i.e. plant and equipment, capital) and variable
costs (i.e. labour). If the price of a variable input increases, producers will increase
their production in the short-run to cover the additional costs. Page 1 of 1 ...
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This note was uploaded on 09/18/2010 for the course ECON 100 taught by Professor Carr during the Spring '10 term at University of Toronto- Toronto.
- Spring '10