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Q9. LB Limited is a price taker in a perfectly competitive market. It produces and sells canned spices. The following information is available for the company:


Current output 5000 units

Current market price $3

Total cost $25,000

Marginal cost $3

Total variable cost $20,000


What is the best action for LB limited? 

A)Operating in the short run and in the long run

 B)Increase output in the short run and in the long run

 C)Shut down in the short run and exit in the long run

 D)Shut down in the short run and produce in the long run

 E)Reduce output in the short run and increase output in the long run


Q20. At a company's current level of production, the marginal cost is less than the marginal benefit. Based on this, which of the following is true?

 A)The firm is operating beyond its production possibilities curve.

 B)The firm is operating at a loss.

 C)To be efficient, the firm should increase production.

 D)To be efficient, the firm should decrease production.

E) The firm is operating at optimal efficiency.


Q22. Use the production possibilities table below to answer the following question. Assume constant opportunity costs for Tommy and Gina.

Pillows per Day Rugs per Day

Tommy 5 10

Gina 15 15


In the above situation, why might Gina be interested in trading with Tommy?

A) Since Gina can specialize in both products, there is no benefit for her to trade with Tommy.

B) Since Tommy has an absolute advantage in both products, it would be beneficial for Gina to trade for either product.

C) Since Tommy has a comparative advantage in rugs, Gina could specialize in pillows and trade pillows to Tommy for rugs.

D) Since Gina has an absolute advantage in both products, it would make sense for Tommy to specialize in pillows and trade with Gina for rugs.

 E)Since Tommy has a comparative advantage in both products, it does not make sense for Gina to trade with Tommy.


Q31.

6.06 PART A Q31.jpg

Which of the following could explain the change illustrated in the graph?

 A)The price of cell phones increases.

 B)The income of all consumers decreases.

 C)The cost of producing cell phones decreases.

 D)The quantity demanded of cell phones increases.

 E)The number of cell phone consumers increases.


Q33. Benjamin is an avid moviegoer and has $50 that he plans to spend entirely on attending movies. The cost of a movie at the local theater is $10. The table below shows the total utility he enjoys based on the quantity of movies he sees.

Movies Total Utility (utils)

1 4

2 9

3 13

4 15

5 16

How many movies maximize Benjamin's utility per dollar spent?

A) 1

 B)2

 C)3

 D)4

E) 5


Q35. John starts a bicycle business and makes and sells bicycles similar to those of his competitors. The bicycle industry has no barriers to entry and exit and there are many firms in the industry. John controls the price of his bicycles. Which of the following would have to occur for John's business to become a perfectly competitive firm?

 A)The business would have to sell highly differentiated products.

 B)There would have to be barriers to entry in the bicycle business.

 C)John would have to sell the quantity that would maximize his profits.

 D)The number of firms in the bicycle market would have to become restricted.

 E)John would have to become a price taker, accepting the market price for bicycles.


Q36. 2020-09-09 (5).png


Q37. The students in an economics class calculated cross-price elasticity to be zero. Which of the following could be the two goods considered?

 A)The price of cars increases by 5 percent, and the quantity of butter remains constant.

 B)The price of bread remains constant, and the quantity of butter decreases by 2 percent.

C) The price of cars increases by 5 percent, and the quantity of bikes increases by 5 percent.

 D)The price of cars decreases by 2 percent, and the quantity of petrol increases by 2 percent.

 E)The price of butter decreases by 7 percent, and the quantity of margarine decreases by 7 percent.


Q38. Jasmine owns a farm and sells produce to local restaurants and grocery stores. If her farm is perfectly competitive, what profits and losses can she expect to make in the short and in the long run?

 A)Jasmine may earn economic profits or losses in the short run and in the long run.

 B)Jasmine may earn zero economic profit in the short run and profits in the long run.

 C)Jasmine may earn zero economic profit in the short run and losses in the long run.

 D)Jasmine may earn economic profits or losses in the long run but not in the short run.

 E)Jasmine may earn economic profits or losses in the short run but not in the long run.


Q43. A technology company has invented a new device and has been awarded a patent for this product for twenty years. This creates ________, which provides the company opportunity to become a monopolist.

 A)a barrier to entry

 B)a few competitors

 C)low startup costs

 D)free entry and exit

 E)similar but differentiated products


Q47. Which of the following events correctly describes the outcome in a competitive market?

 A)An increase in demand, ceteris paribus, causes a decrease in equilibrium price and quantity.

 B)An increase in supply, ceteris paribus, causes a decrease in equilibrium price and an increase in equilibrium quantity.

 C)A decrease in demand, ceteris paribus, causes an increase in equilibrium price and quantity.

D) An increase in supply, ceteris paribus, causes an increase in equilibrium price and a decrease in equilibrium quantity.

 E)A decrease in demand, ceteris paribus, causes an increase in equilibrium price and a decrease in equilibrium quantity.


Q48. 2020-09-09 (8).png


Q49. 2020-09-09 (9).png


Q50. A worker can get paid $100 for a four-hour professional development course. If she must sacrifice making a product to sell online that earns her $10 per hour so she can attend the course, what is her opportunity cost?

 A)$10

 B)$25

 C)$40

 D)$100

E) $400


Q51. If marginal product increased from 50 to 60 when the quantity of labor increased from 200 to 205, then what must be true of costs over this range of output?

 A)Marginal costs are decreasing.

 B)Marginal costs are increasing.

 C)Average total costs are increasing.

 D)Average fixed costs are increasing.

 E)Average variable costs are decreasing.


Q52. Top Limited is currently maximizing its profits and earning only normal economic profits. Which of the following describes Top's situation?

 A)Marginal revenue = marginal cost; total cost = zero

 B)Marginal revenue < marginal cost; total revenue = total cost

 C)Marginal revenue = marginal cost; total revenue > total cost

 D)Marginal revenue < marginal cost; total revenue < total cost

 E)Marginal revenue = marginal cost; total revenue = total cost


Q53. Assume that all cell phone company workers are more productive because of a new technology. How does this affect the demand for labor in the telecommunications industry?

 A)The quantity demanded of labor shifts to the left.

 B)The market labor demand curve shifts to the left.

 C)The market labor demand curve shifts to the right.

 D)The slope of the market labor demand curve increases.

 E)The slope of the market labor demand curve decreases.

2020-09-09 (5).png
Use the table to answer the question that follows. What is the marginal revenue product of the 30th unit of labor, assuming this market is perfectly competitive in both
the factor and output markets?
2020-09-09 (8).png
Consider the market equilibrium supply and demand schedule for Edward and all other consumers. -———
m——— What is the quantity of the product that Edward buys when the market is in equilibrium? :
Z
Z
Z
Z
2020-09-09 (9).png
Megan and Martha own competing hair salons that are located in the same neighborhood. They are both
considering offering their clients discounts in order to increase business. The payoff matrix shows their yearly
incomes in thousands of dollars if they offer and do not offer discounts to their customers. Is there a Nash equilibrium with this payoff matrix? If so, what is it? —
l 0 Martha will not offer a discount; Megan will not offer a discount. I 0 Martha will not offer a discount; Megan will offer a discount. I 0 Martha will offer a discount; Megan will offer a discount. I Q There is no Nash equilibrium with this payoff matrix.
6.06 PART A Q31.jpg

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