Principles of Microeconomics 2020-1 Spring 2011 Test #2
Instructions: Choose the answer you think is best. You have the full class time to take the exam.
There are 100 possible points. Each question counts 4 points. Good Luck!
Instructions: Choose the answer you think is best. You will have the entire class period to take
the exam. Each question counts for 4 points out of 100. Good Luck.
Use the following to answer questions 1-2:
A monopoly is an inefficient way to produce a product because
a. it can earn both short-run and long-run profits.
b. it faces a downward-sloping demand curve.
c. the cost to the monopolist of producing one more unit exceeds the value of that unit to po
This figure depicts a situation in a monopolistically competitive market.
Refer to Figure 16-2. What price will the monopolistically competitive firm charge in this market?
LOC: Monopolistic compet
Using a supply and demand diagram, demonstrate how a negative externality leads to market inefficiency.
How might the government help to eliminate this inefficiency?
When a negative externality exists, the private cost (or supply curv
Refer to Table 18-1. Which firms production function exhibits diminishing margin
If the world price of textiles is higher than Vietnams domestic price of textiles without trade, then Vietnam
a. should import textiles.
b. has a comparative advantage in textiles.
c. should produce just enough textiles to meet its domestic demand.
Even when allowed to collude, firms in an oligopoly may choose to cheat on their agreements with the rest of
the cartel. Why?
Individual profits can be increased at the expense of group profits if individuals cheat on the cartel's cooperative
Hypothetical Scenario: A hurricane has just hit the Gulf Coast of the United States. The majority of the
nations oil refining capacity is also located in this region and, as a result, there will be consequences in
the market for gasoline. What do you expe
Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are
earning economic profits. Can this scenario be maintained in the long run? Explain your answer.
In a competitive market where firms are earning
Using the graph shown, analyze the effect a $300 price ceiling would have on the market for
ten-speed bicycles. Would this be a binding price ceiling?
Using the graph shown, analyze the effect a $700 price floor would have on this market for