- Suppose we have a perfectly competitive market where at the equilibrium
price the total market demand is 300 units. Each individual firm in the market has a cost function C(Q) = 50 -2Q + 0.7Q^2. The number of firms this market can support in the long run is _____?
- Refer to Figure 7-1. With the imposition of the tariff, the change in producer surplus is equal
- a loss measured by the area of P1FGP2.
- a gain measured by the area of P1FJP3.
- a gain measured by the area of P2GJP3.
- a loss measured by the area of P3JS0.
- a gain measured by the area of P1FC0
- Suppose that demand for and supply of a commodity in a market are shown on a graph with price on the vertical axis and quantity on the horizontal axis. The y-intercept of the demand curve is equal to $30. The equilibrium price and quantity are $15.6 and 300 units respectively. Total Consumer Surplus in this market is ____.
- Hint: answer to two decimal places.
- When all trade is prohibited in good X, the equilibrium price in the home country is PX. After free trade is instituted, the domestic country begins to import good X from the rest of the world. As a result of free trade:
- the domestic price of good X will fall.
- the domestic price of good X will rise.
- the domestic price of good X will exceed the price in foreign countries.
- the domestic price of good X will be less than the price in foreign countries.
- the domestic producers will gain surplus at the expense of domestic consumers.
- The height of an individual demand curve at each level of output shows:
- the marginal cost of producing the good.
- the marginal benefit from consuming an extra unit of the good.
- the value of consumer surplus.
- the value of producer surplus.
- the revenue earned by the firm from an additional unit consumed.
- With free trade, the market for a particular good or service is in equilibrium when:
- domestic supply is at its maximum possible level.
- there are no exports to the world market.
- imports into the domestic market are zero.
- the price in the world market is equal to the price in the domestic market.
- the domestic demand for the good equals the domestic supply of the good.
- Refer to Figure 7-1. When trade is not restricted, the level of imports to the domestic market is _____.
- Suppose the equilibrium price of bread is $2 per loaf. What would be the efficiency implications of a government policy that prevents the price of bread from rising above $1?
- The outcome would be inefficient since the marginal cost of producing bread is less than the marginal benefit to the consumers.
- The outcome would be inefficient since the marginal benefit to consumers is less than the marginal cost of producing the bread.
- The outcome would be efficient since the total benefit from consumption would be equal to the total cost of producing bread.
- The outcome would be efficient since the total net benefits would be maximized.
- The outcome will be efficient since the policy lowers the price of an essential item for consumers.
- If the long-run market supply curve in a perfectly competitive industry is upward sloping, then the industry:
- is a constant-cost industry
- is an increasing-cost industry
- exhibits constant returns to scale
- exhibits increasing returns to scale
- is a decreasing-cost industry.
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