11

Which of following is an example of a cartel?

A.)automotive industry

B.)health care industry

C.)airline industry

D.)OPEC

^

12

Perfectly competitive market structures have an incentive to enter or exit the market in the long run

True

False

^

14

When firms set diffrent prices for the same goods or services this is an example of price DISCRIMINATION?

True

False

^

15

For substitute goods is the cross price elasticity is:

A.) A positive value

B.) equal to one

C.) a negative value

D.) not enough information is given

16

A perfectly competitive market structure faces:

A.) A price floor

B.) market shortage

C.) A price ceiling

D.) market surplus

17

Oligoplistic market structures do not engage in game theory?

True

False

18

A perfectly competitive market structure and a monopolistic market structure are diffrent in terms of:

A.) Profit maximization

B.) Size of the firm

C.) Demand curve

D.) Efficiency

19

How does a monopolistic competitive market structure differ froma perfectly competitive market structure

A.) A monopolstic market structure is a price taker

B.) A monopolistic competitive market structure has many sellers and buyers

C.) A monopolistic competitive market structure faces a downward sloping demand curve and differentiated products or services

D.) A monopolistic competitive market structure and a perfectly competitive market structure maximize profits diffrently

20

All of teh following are characteristics of a perfectly competitive market structure except:

A.) Goods and services are differentiated

B.) All firms are price takers

C.) Little to no barriers to entry

D.) Similar vendors

21

Goods and services thatare essential to ones well being and daily life, the elasticity of demand would be:

A.) Positive

B.) Elastic

C.) negative

D.) inelastic

22

An oligopololistic market structure faces a(n):

A.) Downward sloping demand curve

B.) Upward sloping demand curve

C.) Kinked demand curve

D.) Inelastic demand curve

23

High barries to entry is at highest level, marginal utility is:

A.) Equal to zero

B.) Falling

C.) Equal to one

D.) Rising

24

Total surplus is equal to:

A.) Total surplus minus producer suplus

B.) Producer surplus minus consumer surplus

C.) Consumer surplus plus producer surplus

D.) Total surplus minus consumer surplus

25

What is the cause of scarcity?

A.) OPEC limiting the supply of oil

B.) Based on consumers who have unlimited wants

C.) Firms that employ first degree price discrimination

D.) based on consumers who have limited wants.

Question 2.

1). The market demand function for a good is given by Q = D(p) = 800 ? 50p. For each firm that produces the good the total cost function is TC(Q) = 4Q+( Q2/2) . Recall that this means that the marginal cost is MC(Q) = 4 + Q. Assume that firms are price takers.

(a) What is the efficient scale of production and the minimum of average cost for each firm?

Hint: Graph the average cost curve first.

(b) What is the supply function of each firm?

(c) If there are currently 100 firms producing the good, what is the market supply function? What is the short-run competitive equilibrium in this market with 100 firms? What is the profit of each firm?

(d) What is the long-run competitive equilibrium price and quantity in this market?

2). Consider the market of the previous question in the short run (with 100 firms), and assume that the government imposes a tax of $3 per unit.

(a) What would be the new equilibrium quantity supplied after the tax is imposed?

(b) What would be the price consumers pay and the price sellers receive with the tax? Explain how the burden of the tax is shared between consumers and producers.

(c) Compute consumer and producer surplus before and after the tax. How much government revenue is generated by the tax? How large is the deadweight loss?

(d) What would be the long-run equilibrium quantity in this market with the tax? What are the prices that consumers pay and sellers receive? Compare this to the long-run equilibrium without the tax and determine how much of the burden of the tax is borne by consumers and producers..

1. Answer all ports (aj-(d) of this question. Let the utility function be given by 15051.32): \\/a:1+ 332- Let m be the income of the consumer, p1 and m the prices of good 1 and good 2, respectively. To simplify, normalize the price of good 1, that is p1 = .81. (a) [5 marks] Write down the budget constraint and illustrate the set of feasible bundles using a gure. (b) [11 marks] Suppose that m = .8103 and that p2 = .810. Find the optimal bundle for the consumer. In other words, nd the combination of 3:1 and 1:2 that maximizes the consumer's utility when the prices are m = .610, p1 = .61 and her income is m. 2 100. (c) [11 marks] Suppose still that m = .6100 but now the price of good 2 has increased to p2 = .630. Find the optimal bundle for the consumer. In other words, nd the combination of 3:1 and 3:2 that maximizes the consumer's utility when the prices are p; = .830, p1 = .E l and her income is m = .8100. (d) [6 marks] How can we explain the drastic change in demand for the goods when the price of good 2 increased from .810 to 30? (1)(a) A company in a competitive market with a cost function C(q) = 100 + 10q- q^2 + (1/3) q^3 has learned that it will now have to face a specific tax of t = $10 (per unit). This specific tax means that for every unit of output the firm sells it has to pay a tax of t dollars. If the firm sells q units, it pays a total tax of qt. (i) What is the firm's cost function including the tax? (ii) What is this firm's short-run profit-maximizing output if the market price is p? (Hint: the solution has to be expressed as a function of p and has to be defined for values that make economic sense, e.g. only positive quantities.) (b) You are given the following information about a particular perfectly competitive industry with identical firms: Market demand: QP = 6500 - 100P Market supply: Q = 1200P Firm total cost function: C(q) = 722 + 9 200 (i) Find the equilibrium in this industry: market price, market quantity, output supplied by each firm, the profit earned by each firm, and the total number of firms. (ii) Would you expect to observe new firms entering this industry in the long run? In what direction would the market equilibrium price and quantity change? (iii) What is the lowest price at which an individual firm would choose to sell output in the long run? What is the firm's profit at this price? (Assume that the short and long run cost curves are the same) (iv) What is the lowest price at which a firm would sell output in the short run? Why? What is the firm's profit at this price