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Question 4 A monopolist estimates that at the current price being charged for the product, marginal revenue is less than marginal cost, and price...

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I am confused for 4, 10, 12, 15. My answer for 4, 10, 12, 15 is

4 A

10 I have no answer, I think is MC=MR and then 110=5x and x is the marginal units picked and x is 22, it is close when employ 6 workers.

12 B

15 D


The correct answer is

4 D 10 C 12 A/C 15 A

Can u explain how come for m, please?


Here is another pracexam for 2015, but I cant find the answer on the website. Here're my answers.

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I am not quite sure about 79 because I am not understand very clearly.WeChat Image_20190502233520.jpg

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Question 4
A monopolist estimates that at the current price being charged for the product, marginal revenue is less than marginal cost, and price elasticity of demand is —1.4. To increase profit
the monopolist should: (a) Increase price and sell less (b) Increase price and sell more (c) Decrease price and sell less (d) Decrease price and sell more X Quali— 9
The table below presents data on the productivity of fruit pickers working on a fruit farm The fruit farming industry can be assumed to be competitive.
Number of workers Quantity of fruit picked per day (kg)
1 20
50
90
l20
I45
I65
180
I90 eeqauAuu The market price of fruit is $5 per kilo. Fruit pickers here are not paid by results. They receive a fixed wage of S] 10 per day
The Marginal Revenue Product from employing the 7“ worker is: (a) $15 (b) 15 kg (c) S75 (d) SI 00 Question to Consider the data for Question 9 To maximise profit the factory should employ:
(a) 3 workers 0)) 4 workers (e) 5 workers (d) 6 workers If the supply curve of a factor of production facing a competitive firm is perfectly
inelastic, then from the firm’s point of view: (a) none of the factor’s earnings is necessary transfer payment (b) all of the factor’s earnings is producer surplus (c) none of the factor’s earnings is rent (d) all of the factor’s earnings is rent Question 15 Oligopolists are more likely to engage in successful collusion to maximise industry
profits when (a) the barriers to the entry of new firms into the industry are high
(b) The degree of product differentiation between each firms’ product is high
(c)'l'he number of member firms in the industry is high (d) total demand for the industry’s product is declining rather than growing

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Practice Final Exam 1
For a given question to be considered an economic question, it would need to involve:
explicit prices.
Op
making a choice.
a graph.
limited resources.
limited resources and making a choice.
e
2
The use of economic models, like the cost-benefit principle, means economists believe that:
this is how people explicitly choose between alternatives.
this is a reasonable abstraction of how people choose between alternatives.
a
those who explicitly make decisions this way are smarter.
with enough education, all people will start to explicitly make decisions this way
this is the way the world ought to explicitly make decisions.
The distinguishing feature of microeconomics is studying:
choices.
the performance of national economics.
b
the overall price level.
choices made by individuals or groups in the context of individual markets.
how to improve the performance of national economics.
4
Joe has decided to purchase his textbooks for the semester. His options are to purchase the
books via the Internet with next day delivery to his home at a cost of $250, or to drive to
campus tomorrow to buy the books at the university bookstore at a cost of $245. Last week
he drove to campus to buy a concert ticket because they offered 20 percent off the regular
price of $20.
a.
It would not be rational for Joe to drive to campus to purchase the books because the
$5 saving is only two percent of the cost of books, and that is much less than
the
20 percent he saved on the concert ticket.
b.
It would be rational for Joe to drive to campus because it costs less to buy the
books there than via the internet.
It would be rational for Joe to drive to campus because the $5 saving is more than he
saved by driving there to buy the concert ticket.
It would not be rational for Joe to drive to campus to purchase the books because the
cost of gas and his time must certainly be more than the $5 he would save.
e
e.
There is insufficient information to determine whether it would be rational or not for
Joe to purchase the books via the Internet or on campus.
C
The Smithville Elementary School Teachers Association petitions the Smithville School
b
Board to provide a computer lab for their school. To support their argument the Association
presents data from national studies that show when students are provided with computer
training they earn an average of $5,000 of additional income during their lives. In order for
the School Board to make a rational choice, it should:
determine if other elementary schools have computer labs.
build the computer lab because the children will be able to earn a higher income
during their lives.
not build the computer lab because the study was not based on a study of the
Smithville area.
build the computer lab if the additional cost per student is less than or equal to the
additional income.
build the computer lab if the additional cost per student is greater than or equal to the
additional income.
6.
Meredith had only $16 to spend this last weekend. Initially, she was uncertain about whether
to go to two movies she had been wanting to see or to buy a new CD she had recently heard.
O
In the end she went to the movies. Which of the following statements is correct?
The choice of the two movies and not the CD is an example of increasing costs.
The opportunity cost of the two movies is one CD.
The opportunity cost of the two movies is $16.
None of the above.
Practice Final Exam 1
REFER TO THE DIAGRAM BELOW WHEN ANSWERING THE NEXT 4 QUESTIONS. The graph is
Mendork's production possibility curve for the only two goods that it produces - quirks and quarks.
Quarrtity of Guirk
Refer to the above diagram. What is the opportunity cost of producing the first 600 quarks?
C
it is 4 quirks
it is 8 quirks
it is 10 quirks
the answer cannot be determined from the information above
8.
Refer to the above diagram. If Mendork's production is currently that indicated by point A.
what is the (approximate) cost of producing one or more quirk(s)?
100 quarks
50 quarks
b
d.
25 quarks
200 quarks
one more quark
9.
Refer to the above diagram. If new technology increased the output of quirks by 50%, how
many quirks could be produced if 600 quarks were produced?
C
18 quirks
20 quirks
15 quirks
10 quirks
no quirks
10.
Refer to the above diagram. Which of the following statements is correct if Mendork is
currently producing 500 quarks and 8 quirks?
This society is using competition to coordinate its economic activities.
This society is experiencing either unemployment or inefficiency
This economy is experiencing full time employment.
This society is not adequately answering the question: "What to produce".
This economy is growing quickly.

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ll. 12. [3. 14. 15. 16. Practice Final Exam 1 All of the following statements, except one, are nonnative statements. Which is the exception? a. The taxes on gasoline should be lower. it. Lowering the taxes on gasoline would decrease the price at the pump. c. It is wrong for the government to tax gasoline. d. The government is trying to mislead people about the tax on gasoline. 1 1 d
A production possibiiitics curve is bowed out because: 1 2 d
a. society has fixed amounts of productive resources. 1 3 a
b. the curve is negatively sloped. c. resources are not perfectly adaptable to different uses. d. it becomes less and less costly to produce each additional unit of output. which or the following is an example of a marginal question? a. How much will my chances of a job improve if I raise my GPA from a C to a (2+?
b. What is the average cost of a college education? 0. How many students borrow money in order to attend college? d. What is the average income of a college graduateil Sets-ct the best statement about economic models. a. An economic model is evaluated based on the realism of its assumptions. b. An economic model should not generate predictions about actual events in the real
world, since it discusses onlyr abstract events. c. An economic model will be discarded if its predictions are often in conflict with the
facts. d. Economic models are all false. Anytime one purchases a ticket in advance of an event. if the ticket is non-refundable and non-transferable then on the day ofthe event: 1 4 a
a. the ticket is part of the cost of going. b. the ticket is a variable cost. 1 5 d
c. the ticket is part of the cost of going if it was expensive. d. the ticket is a sunk cost and should pay no role in the decision to go or not. 1 6 a
c. the ticket is a titted cost but not a sunk cost. Specialization of labor not only results in the abilin to produce a larger amount of goods due
to innate differences in people’s skills, but also by: rigidly segmenting work. switching back and forth among numerous tasks.
breaking a task down into mind-numbing repetitive tasks.
deepening 9-937.” Practice Final Exam 1 REFER TO THE FOLLOWING TABLE WHEN ANSWERING THE NEXT4 QUESTIONS. 1?. 19. Shoes Per Hour Pants Per Hour Refer to In: above Iabfe. Craig possesses an absolute advantage in: a. the production of shoes. I). neither shoe nor pant production. 1 7 d
c. the production of pants. d. both shoe and pants production. 1 8 b
e. pants and possiny shoe production Refer to the above table. Jenny‘s opportunity cost of producing an extra pair of pants is: 1 pair of shoes.
1.5 pairs of shoes.
2 pairs of shoes.
2.5 pairs of shoes.
3 pairs of shoes. PEI-99'!” Refer to the above table. Craig‘s opportunity cost of producing an extra pair of shoes is: .75 pairs of pants.
.90 pairs of pants,
1 pair of pants.
[.25 pairs of pants
1.33 pairs of pants. 99-937!” Refer to the above table. Based on their comparative advantages. Craig should specialize in
producing while Jenny should specialize in producing . midi? 19 a a.
b.
3: 3:32:32? 20 d
e. pants; pants

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ANSWER THE NEXT 2 QUESTIONS BASED ON THE DIAGRAM BELOW:
21.
Refer to the above diagram, illustrating the demand for guitars. An increase in price of
guitars would bring about a movement from:
Point B to Point C.
Point B to Point A.
b
Point Di to Point Do
Point Di to Point D2
22.
Refer to the above diagram, illustrating the demand for guitars. A successful advertising
campaign to sell guitars would bring about a movement from:
Point B to Point C
Point B to Point A.
Point Di to Point Do
Point D, to Point D2.
REFER TO THE FOLLOWING DIAGRAM WHEN ANSWERING THE NEXT 2 QUESTIONS
Price
Quantity of Guitar
23.
Refer to the above diagram, illustrating the supply of guitars. An increase in the price of
rosewood, which is used to make guitars, would most likely cause a movement from:
Point B to Point C
Point B to Point A.
Point S: to Point So.
Point S1 to Point S2.
d
24
Refer to the above diagram, illustrating the supply of guitars. A decrease in the quantity
supplied of guitars is represented by a movement from:
Point B to Point C.
oint B to Point A.
24 b
Point S, to Point So
Point S1 to Point S2.
25 b
25
Suppose that in October the price of a cup of cafe latte was $1.50 and 400 lattes were
consumed. In November the price of a latte was $2.00 and 600 lattes were consumed. What
might have caused this change?
The price of tea (a substitute for cafe lattes) fell.
The price of tea (a substitute for cafe lattes) rose.
The price of coffee beans (an input of production of cafe lattes) rose.
The price of coffee beans (an input of production of cafe lattes) fell.
26.
Suppose that the price of fertilizer, an input in the production of corn, falls. We would predict
that the equilibrium quantity of corn will
_and the equilibrium price of corn will
rise; rise
rise; fall
26 b
fall; rise
fall; fall
27 d
REFER TO THE FOLLOWING TABLE WHEN ANSWERING THE NEXT 2 QUESTIONS. The table
represents the market for mushrooms. Quantities are in thousands of kilos per month
Price ($)
2.50
3.00
3.50
4.00
4.50
5.00
5.50 6.00
Quantity
Demanded
64
62
60
58
56
54
52
50
Quantity
Supplied
40
44
48
52
56
60
64
68
27.
Refer to the above table. What are the values of equilibrium price and quantity traded?
$3 and 52
$3 and 62
ASS
$4 and 58
$4.50 and 56
cannot be determined
28.
Refer to the above table. What will happen if the price is $3?
1 87
A surplus of 18 which would lead to a decrease in price.
A shortage of 18 which would lead to an increase in price.
A shortage of 18 which would lead to a decrease in price
29 d
A surplus of 18 which would lead to an increase in price.
Supply exceeds demand.
29.
Bananas and apples are substitutes. In the market for apples, when the price of bananas falls,
and technological advance in apple production occurs at the same time:
the equilibrium price of apples rises and the equilibrium quantity of apples falls.
the equilibrium price of apples rises and the equilibrium quantity of apples rises.
the equilibrium price of apples rises and the equilibrium quantity of apples might rise
or fall.
the equilibrium price of apples falls and the equilibrium quantity of apples might rise
or fall.
30.
Improvements in personal computer technology and its widespread adoption in the
workplace have served to increase productivity." Assuming the statement is true, one would
expect this to cause:
an increase in supply.
an increase in quantity supplied.
30 a
a decrease in supply.
decrease in quantity supplied.
31 d
no change in the marketplace.
When a market is not in equilibrium:
government intervention is required to achieve equilibrium.
consumers will organize into special interest groups to promote their agenda.
firms will increase contributions to political action committees.
the economic motives of sellers and buyers will move the market to its
equilibrium.
e.
it will simply stay in a state of disequilibrium.

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REFER TO THE FOLLOWING DIAGRAM WHEN ANSWERING THE NEXT 2 QUESTIONS.
120
Quantity per period
32.
Refer to the diagram above. What would be the result if a price floor is set which is $2
a
different from the equilibrium price?
a.
b.
The price would be above equilibrium and a surplus of 60 would be produced.
The price would be below equilibrium and a shortage of 60 would be produced.
The price would be above equilibrium and a shortage of 60 would be produced.
The price would be below equilibrium and a surplus of 60 would be produced.
33.
Refer to the diagram above. What would be the result if a price ceiling is set which is $2
different from the equilibrium price?
The price would be above equilibrium and a surplus of 60 would be produced.
The price would be below equilibrium and a shortage of 60 would be produced
C.
1
The price would be above equilibrium and a shortage of 60 would be produced.
The price would be below equilibrium and a surplus of 60 would be produced.
34.
Why is the market's allocation of products preferable to that of either the producers or of the
government?
P
Because it ensures that even the poor will be able to afford to buy everything.
Because it ensures that only people who really need certain products will be able to
afford them.
C
Because it ensures that both demand and supply factors are taken into
consideration.
33 b
D
e
Because it will mean that scarce resources are available at low prices 34 C
Because it ensures that the income distribution of the population is ignored.
35.
What is meant by an illegal market?
a.
An allocation system where sellers are allowed to determine the method of
allocation on the basis of their own preferences.
b.
A market where products are bought and sold at a rice above a government
imposed price ceiling.
C.
The effect which a price change has on real income and therefore on the quantity
demanded of a product.
d.
A mechanism to keep buyers and sellers apart.
36.
Suppose that the price of a product decreased from $6.50 to $5.50, and the quantity demanded
increased from 55 to 65. What is the value of the price elasticity of demand?
a.
0.5
b.
9.85
35 b
1.0
1.18
2.0
36 d
37.
A local transit authority has just applied to its regulatory board for a fare increase on its rail-
transit system arguing that the increase is needed to cover costs. A citizens committee is
opposed to the proposed increase arguing that the company could increase its revenue by
decreasing fares. Which of the statements below is correct?
a.
The company thinks that its demand is inelastic while the committee thinks it is
elastic.
The company thinks that its demand is elastic while the committee thinks it is
elastic.
C.
d
Both the company and committee think that the elasticity coefficient is unity.
It is possible that both the company and the committee think that the elastic
coefficient is unity.
e.
Price elasticity of demand is not relevant to whether the company or the
committee
is right.
38.
Which of the following products has the most elastic demand?
Coca Cola in 12 oz. cans
37 a
all cola drinks
all carbonated beverages
38 d
all beverages
39.
Suppose that the value of the price elasticity of demand for a product is 2 and its price
increases by 16%. What will happen to the quantity demanded?
it will increase by 8%
it will increase by 32%
it will decrease by 8%
it will decrease by 32%
it cannot be determined without further information
40.
If the price of Moonlight massage oil decreases from $3 to $2.50 and, as a result, total revenue
of $6,000 does not change, what is the elasticity of demand?
TP
0.22
39 d
0.55
40 d
1.2
1.67

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REFER TO THE TABLE ELOW WHEN ANSWERING THE NEXT 3 QUESTIONS.
Total
Total
Units
Utility
Utility
of Good A of Good B
48
97
41.
Refer to the above table. The price of Good A is $1, the price of Good B is $3, and $13 can
be spent. The rational spending rule predicts _
units of Good A and _
of Good B will be purchased.
units
4: 4
a
3; 3
-2.
Refer to the above table. The price of Good A is $2, the price of Good B remains at $3, and
$13 can be spent. The rational spending rule predicts _
units of Good A and
_ units of Good B will be purchased.
42 b
43 c
4: 3
43.
Refer to the above table. The "demand" for Good A is represented by
44 b
PASI: QA2
PA$1: QA4
PA$1: QA4
PASI: QA3
PA$2: QA4
PA$2: QA3
PA$2: QA2
PA$2: QA4
44.
Why does the demand curve slope downward?
Since the marginal utility increases with increased consumption, people will be
eager to buy more at lower prices.
Since the marginal utility decreases with increased consumption, the price must fall
in order to induce people to buy more.
Since total utility increases with increased consumption, a lower price is necessary
o encourage increased production.
Lower prices mean a lower consumer surplus which will encourage increased
consumption.
REFER TO THE TABLE BELOW WHEN ANSWERING THE NEXT 3 QUESTIONS. Below are some
production data for QUITE SIMPLE PRODUCTS LTD.
Units of Total
Labour Product
30
70
120
OUIAWN
160
216
216
47.
Refer to the table above. How many units of labour are being used when diminishing returns
first become evident?
e
cannot be determined
Refer to the table above. How many units of labour are being used when the firm's marginal
cost is at a minimum?
a.
48 e
b.
49 e
d.
50 c
49.
Refer to the table above. What is the value of average product when marginal product is zero?
ON
b.
31
27
cannot be determined
50.
Suppose you know that at the current level of production, average total cost equals marginal
cost, then you know that it is also true that:
fixed costs are zero.
verage fixed costs are increasing.
average total cost will decrease if production is increased.
average total cost is minimized at the current level of output.
51-
Suppose that in 1996 ABC Corp produced 500 million units of a good at an average cost of $2
and in 1997 ABC Corp expanded its plant capacity and produced 600 million units at an
average cost of $1.80. In this range, one can conclude that ABC Corp is experiencing:
economies of scale.
diseconomies of scale.
C.
neither economies of scale nor diseconomies of scale.
a
diminishing marginal product.
REFER TO THE DIAGRAM BELOW WHEN ANSWERING THE NEX1 4 QUESTIONS. the graph
shows the costs for a perfectly competitive producer.
VC, ATC, MC
20 30 40 50 60 70 80 90 100
Output per period
52.
Refer to the above diagram. If the price of a product is $35, what is the profit-maximizing
output? What is the total profit or loss?
O; -$10
20; $0
C
90; $900
100; $3,150
cannot be determined
e above diagram. If the price of the product is $10, what is the profit-maximizing
output? What is the total profit or loss?
0; -$45
20; -$40
30; -$20
60; $0
cannot be determined
C
Refer to the above diagram. If the price of the product is $40, what will be the average profit?
$10
$18
Sodo
$1000
cannot be determined
55.
Refer to the above diagram. Which of the following represents the firm's supply curve?
B
D
Price Qs Price Qs Price Qs Price Qs
$10 .........0 |$10......... 0 |$10.........0 |$10 .......30
$15 .........0 | $15....... 50 $15 .........0 $15 .......50
$20 .........0 $20....... 60 $20 ....... 60 $20 .......60
$25 .......70 |$25....... 70 $25 .. ..... 70 $25 .......70
$30 .......80 $30....... 80 $30 ....... 80 $30 .......80
54 b
refer to table A
55 d
refer to table B
eter to table C
r to table D

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50 .
kevin's GOLF - A- RAMA sells Bolt balls in a perfectly competity
level of golf ball production . Kevin has marginal costs
market price of golf balls is $2 . Kevin should :`
I costs equal to $1 , and A VC is rising . If the
decrease the level of golf ball production ."
continue producing the current level of production*
56 d
shut down and produce no golf balls ."
57 2
57 .
Is considering adding an additional commuller inall of "'s Hope to ``co
trip is estimated to be $3000 of which $1000 are*
variable costs . The anticipated extra revenues are $180.0 . What should the company do ?*
Not add the train since the company will make a loss .\
for add the train since !"
since the loss*
be the company cannot cover its total fixed costs
Is is less than its total variable cost .\
Add the train since the marginal revenue exceeds the marginal cost .*
58 .
Sheila sells corn in a perfectly competitive market . This month Sheila rex
receives a lower price*
for a bushel of comm than she did last month . Which of the following might explain this ?\
The market demand increased for corn*
The market demand decreased for corn .
58 6
Firms exited the market .\
Sheila's costs have increased .
59 6
59 .
What is implied if P = MC > AC ?*
60 6
The market is achieving productive efficiency but is not achieving alloc*
Wiciency .
The market is achieving allocating cificiency but is not achieving productive*
elliciency .`
The market is achieving neither productive efficiency nor allocating efficiency*
The market is achieving both allocalive efficiency and productive efficiency ."
60. IT the price of a product is less than its marginal costs . then :\
society would prefer more of this product produced .
society would prefer less of this product produced .\
society would be making a profit .\
society would be making a loss ."
61 .
When a monopolist sells two units of output its total revenues are $120 . When the monopolist*
I'll's three units of output its price per unit is $50 . The monopolist's marginal revenue from*
"Iling the third unit of output is :"
9\
$37.50 .
\All of the following except one are features of patent legislation . Which is the exception ?
|1 gives a monopoly to the patent holder .\
"I creates a barrier
rier to entry .\
It guarantees that the patent hall
It is a source of monopoly power
" and development ."
a
18 8 8 8 8 8 8
9
Refer to the diagram above . What is the monopolist's profit- maximizing price and output ?"
$50 and 800
$40 and 600
$60 and 800|
$70 and 600
$75 and 450
04 .`
\Refer to the diagram above . What is the monopolist 's maximum level of total profits ?*
$6. 0.010
$8. 00`
a
$18 . 0.010
65 .
Refer to the diagram below
10 /
Price /} per unit
10
Quorfly (units per dov !
At the profit - maximizing output level for the above monopolist .`
the resource allocation is efficient in the economy since the price is less than the
highest price some buyers would be willing to pay .\
the resource allocation is efficient in the economy since the marginal revenue
equals the marginal cost .\
the resource allocation is inefficient in the coonomy since the price exceeds the
marginal cost .`
the efficiency of the resource allocation is assured since profit is maximized*
the efficiency of the resource allocation is assured since cost is minimized ."
REFER TO THE FOLLOWING TABLE WHEN ANSWERING THE NEXT S' QUESTIONS . The table*
gives the cast and demand data for a monopolist ."
\ Marginal| Average\ Marginal*
Output\ Price (})| Revenues| Costss| Costs*
109
` ` UN $ $8 8
\8 $8 8 8 8 8 8
79.2
Refer to the table above . Suppose that the monopolist is regulated and forced to charge and
allocatingly efficient price ."
ice . What will be the price and output ?*
3.03 and 4
b .
$80 and 5\
$75 and 6
Sos and 8
Refer in the cable above . Suppose that the monopolist is regulated and forced to charge and
allocatingly efficient price . "
ient price . What will be the level of profit or loss ?`
b .
loss of $25.20
67 I think it's profit but the answer
rofit of $1 2*
I caucalulated is not in the option*
profit of $60
68 6
84
Refer to the table above . Suppose that the monopolist is regulated and forced to charge a fair -
$75 an
$70 and 4\
US .
In order to practice price discrimination a firm must be in a market such that the consumers in
its market :*
all have identical tastes .\
I'll have identical price elasticities of demand
have different price elasticities of demand ."
have the same demand for its product .\
70
Suppose that each of the following goods and services are provided by a different monopoly*
In which case will it be the easiest to engage in price discrimination ?*
Uppics
haircuts
computers*
In general , firms in a cartel !
70 d
1 1 .
agree to set a price equal to marginal cost .*
71 b
lecisions .`
10 not consider the actions of the other firms in the cartel when making output*
produce levels of output exceeding the mono !
onopoly output level ."
"?`
agree to charge the price the monopolist would charge .\

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REFER TO THE DIAGRAM BELOW WHEN ANSWERING THE NEXT 2 QUESTIONS.
PROFIT PAYOFF MATRIX
BECKY
High Prices
Low Prices
Becky 90
Becky
High Prices
100
David 90
David 60
DAVID
Low Prices
Becky 60
ecky 70
David
100
David 7
72.
Refer to the above diagram. Becky's dominant strategy is
_and David's dominant
strategy is
b.
high; high
b
high; low
low; high
73. Refer to the above diagram. If Becky and David could coordinate their decisions then:
they would each earn profits of 100.
they would both choose to charge a low price and cam profits of 90 each
they would both choose to charge a high price and carn profits of 90 each
they would both choose to charge a high price and earn profits of 70 each.
74.
Refer to the above diagram. The "dilemma" in the prisoner's dilemma is that:
73 c
one of the players cannot get to the best outcome.
both players would be better off by not confessing, but confessing is a
74 c
dominant
C.
both players would be better off by confessing. but not confessing is a dominant
the player with the first-mover ad
dvantage always gets the better outcome.
75.
If two firms use a tit-for-tat scheme to maintain cartel pricing and one firm chooses a high
price in the current time period then:
that firm will also choose a low price in the next time period.
that firm will also choose a high price in the next time period.
the other firm will choose a low price in the next time period
the other firm will choose a high price in the next time period
76.
One potential advantage that a monopoly might have over perfect competition is:
almost always a lower price.
almost always a higher output
75 c
diseconomies of scale.
possibly an increased incentive to do innovative research.
76 e
77 b
71.
What is true about the long-run equilibrium price of a monopolistically competitive firm?
It will equal average cost and exceed marginal cost.
It will equal both average cost and marginal cost.
It will equal marginal
It will exceed both average cost and marginal cost.
It will equal both marginal cost and marginal revenue
78.
Suppose in the city of Blacksburg, music stores operate in a monopolistically competitive
market. If the price of CDs in Blacksburg is currently equal to $20 per CD and the average
cost of CDs is $15, in the long run we expect the price of CDs to:
stay the same.
C
decrease and the
ase, and the average cost of producing CDs to increase.
ease, and the average cost of producing CDs to decrease.
79.
Refer to the diagram below to answer this question.
e
Consider the monopoly in the diagram above. If this is a single-price monopoly, what is th
reduction in consumer surplus compared to the perfect competition case?
80.
Which of the following statements is false?
To sell more, a price setter must lower price.
A price taker must charge the market price.
If a price setter raises price, they will sell less.
Jdie
A price taker's revenues will rise if they sell more.
Price setters can sell any quantity at any price.
90.
other things remaining the same, it education costs decrease
would expect to
see:
an increase in the marginal revenue product of high-skilled workers
e supply of low-skilled workers.
a decrease in the wages receiv
the wages received by high-skilled workers.
90 c
crease in the number of high-s
mber of high-skilled workers employed.
a decrease in the wages of low-skilled workers.
91 b
91.
Why does the market fail to produce public goods?
92 d
e normally there is no den
Because it is impossible for the producer to exclude non-buyers from enjoying the
benefit.
Because such products usually entail large external costs.
Because their production normally leads to increased income inequality.
92.
What are externalities?
The extra cost involved in the packaging and marketing of a product.
The additional costs of a product which cannot be recouped from the government.
The extra cost to the consumers of a product in terms of maintenance and insurance.
The benefits or costs of a product experienced by people who neither consume nor
produce that product.
93.
When people try to benefit from a public good without paying for it we call it the:
93 a
public goods problem
taxation problem.
94 b
94.
Brady owns a beachfront lot with a small house. During hurricanes, he refuses to leave and
afterward he applies for federal assistance to rebuild and files insurance claims for damage.
By doing so, Brady is:
pursuing life liberty and happiness without harm to others.
imposing an external cost on himself.
imposing an external cost on rescue workers, taxpayers, and insurance policy
d.
holders.
treating his property as common property.
in a positional arms race.
REFER TO THE DIAGRAM BELOW WHEN ANSWERING THE NEXT 2 QUESTIONS.
SiAuto
$700
45% 50% 70%
reduction k
air pollution
95.
Refer to the above diagram. The socially optimal reduction in air pollution due to
automobiles is:
45%
C
70%
Refer to the above diagram. An EPA requirement for a $700 air pollution control device for
all autos would be _
efficient; any and all reductions in pollution are warranted
inefficient: the marginal costs exceed the marginal benefits
inefficient; the marginal benefits exceed the marginal costs.
efficient; there is no other way to force the auto industry to reduce emissions.
98.
Suppose two power plants pollute a river and both firms operate under a system of marketable
pollution permits. If it costs firm A $90 to reduce pollution by 800 units per day, and firm B
can reduce costs by $1 15 by increasing pollution by 800 units per day:
p
the firms cannot gain by trading the right to pollute.
both firms can benefit if firm A trades the right to increase pollution by 800 units to
firm B for $70.
C.
both firms can benefit if firm B trades the right to increase pollution by 800 units to
firm A for $120.
d.
both firms can benefit if firm A trades the right to increase pollution by 800 units to

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