FINALW10

FINALW10 - Name Test Form A Economics 1 Final Exam...

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Unformatted text preview: Name Test Form A Economics 1 Final Exam March 18, 2010 True-False Questions: Fill in Bubble A for True, Bubble B for False. 1. If a monopolist must charge the same price to all consumers and the marginal cost of pro- ducing its output is positive, the demand for its output will be inelastic at the quantity that maximizes its profits. 2. When the demand curve for a good is downward sloping and the marginal cost of producing the good is constant, consumers’ surplus will be higher with a profit-maximizing monopolist that must charge the same price to all consumers than with a profit-maximizing monopolist that can practice perfect price discrimination. 3. If a competitive industry with free entry and exit is in long-run equilibrium, any firm that is not currently producing in the industry could not make a profit by entering the industry. 4. If a small increase in a firm’s output would decrease its average variable cost, the firm’s marginal cost is less than its average variable cost. 5. If the price of a firm’s output is less than the minimum average variable cost of producing it, the firm should produce nothing in the short run. 6. In a competitive equilibrium for a good, the most a buyer who does not buy would be willing to pay for a unit of the good is less than or equal to the least any seller who does not sell would be willing to accept for the good. 7. Assume the supply curve for a good shifts in (less supplied at every price) and the demand curve for the good does not change. If the total revenue of suppliers decreases as a result of this shift, the demand for the good is elastic. 8. If the supply curve for a good is perfectly elastic and the demand curve for the good is downward sloping, the loss to consumers from a tax on the good will equal the revenue raised by the tax. 9. If the purchase of a good by any one community resident provides external benefits to all other residents, the total profits of all residents can be increased by imposing a tax on every resident to finance a subsidy for those residents who purchase the good. Economics 1 2 10. If a firm’s revenue per worker exceeds the wage it pays workers, it will increase profit by hiring an additional worker. Multiple Choice Questions 11. Lambgen has developed a new drug, SneezeProof, to alleviate the symptoms of hay fever. It has a patent on the drug and is therefore the only company that can sell it. Its economists estimate that the demand for SneezeProof is given by the function Q = 25- . 25 P, where P is the price of a bottle of the drug and Q is the number of bottles it will sell in a year. The variable cost of SneezeProof is constant at $20 per bottle. There are no fixed costs of producing the drug, and SneezeProof must charge the same price to every buyer. What is the maximum profit Lambgen can earn in a year from selling SneezeProof?...
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This note was uploaded on 12/12/2011 for the course ECON 1 taught by Professor Bergstrom during the Fall '07 term at UCSB.

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FINALW10 - Name Test Form A Economics 1 Final Exam...

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