1. Amy is living with his parents in LA, and he is considering spending a month in his ancestral Germany for the summer. He calculated that it would cost him $2,000 for travel (in total) and $3,000 for renting an apartment in Germany. His other expenditures such as food and entertainment amount to $1,000, and these would be the same in LA and Germany. Amy has also been offered a Research Assistant position for the same month that would require him to stay in LA, and for which he would be paid $1,800. What is his total economic cost of going to Berlin?

1. $6,800
2. $5,000
3. $1,000
4. $7,800
5. $1,800

2. Conceptually, which statement appliesonlyto a market under monopolistic competition and not to a market under a monopoly?

1. If economic profits are being made, new firms will enter the market
2. Firms face a downward-sloping demand curve
3. A firm operating in the market can make positive economic profits in the short run
4. None of the other answers (i.e., all of the other answers apply to both market structures)
5. A firm operating in the market maximizes profits where marginal revenue is equal to marginal cost

3. The market for good X was in a situation of perfect competition, until a license to operate was delivered to only one firm, making it a monopoly. What will be the impact on the market (assuming the cost of producing the good is the same for the firm with the license as for all other firms that are now excluded from producing)?

1. The quantity produced of good X will decrease
2. Producer surplus of the licensed firm will be higher
3. Consumer surplus will be lower
4. All of the other answers
5. Consumers will face a higher price for good X