F09M3 - Name: _ Third Midterm Examination Economics 101...

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Version 1 Page 1 Name: __________________________ Third Midterm Examination Economics 101 December 14, 2009 This exam has 34 questions. Unless a question explicitly says otherwise, assume that all demand curves slope downward and all supply curves slope upward, and there are no externalities. True/False. Mark box A for True and box B for False. Each correct answer adds 2 points to your score. Each blank answer gives you 1 point. 1. Game theory predicts companies will maximize their combined profits. 2. We expect more output in a market that is characterized as an oligopoly than in one that is competitive. 3. It is possible for a nation with an absolute advantage in the production of all goods to gain from trade with other nations. 4. The substitution effect of an increase in the wage causes a person to work more. 5. A profit-maximizing monopolist's total revenue is the same when it charges each consumer the marginal benefit of each unit and when it prices according to the two-part tariff pricing scheme. 6. One explanation for the decreasing gender gap is that women have increasing access to jobs that were traditionally male.
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Version 1 Page 2 7. When demand for a product is price inelastic, a monopolist's marginal revenue is negative. 8. If marginal revenue decreases when more of a product is sold, then the demand for the workers producing it is increasing. 9. It is profitable for a monopolistically competitive firm to further differentiate its product if the revenue gained from that differentiation is positive. 10. The world price of a good is determined by the demand of domestic consumers and the supply of foreign companies. Multiple Choice. Mark the box corresponding to the best answer. Each correct answer adds 5 points to your score. Each blank answer gives you 1 point. 11. Bowden & Sons, Inc. is a profit-maximizing monopolistically competitive firm that produces football helmets for college teams in Florida. The firm has constant marginal costs of $10 and fixed costs of $100. It is currently producing 50 helmets and selling them at a price of $15. Compared to the current situation, how will the firm’s profits change in the long run? A) Decrease by $250 B) Increase by $150 C) Decrease by $150 D) They will not change E) Increase by $250
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Version 1 Page 3 12. The diagram below represents the US market for luxury cars. With no barriers to trade, the US is currently importing 40,000 luxury cars. However, with pressure from the Big Three car companies of Detroit, the government decides to implement a quota on imports of foreign luxury cars of 20,000. With the quota, the equilibrium price of a luxury car in the US is ______. 10 20 30 40 50 70 60 80 90 100 110 10 20 30 40 50 60 120 domestic demand Price (in thousand) ($) Quantity (in thousands) domestic supply 70 A) $80,000 B) $50,000 C) $60,000 D) $90,000 E) $70,000 13. Two countries, Country A and Country B, each produce 2 goods, Food and Clothing.
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F09M3 - Name: _ Third Midterm Examination Economics 101...

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