54. For normal goods like cola and pizza, what happens due to the substitution effect w a. There is movement along the indifference curve, so the consumer buys price of pizza falls? more cola. b. There is a shift to a lower indifference curve, so the consumer buys more cola. C. There is movement along the indifference curve, so the consumer buys less cola. d. There is a shift to a higher indifference curve, so the consumer buys more cola. 55. If firms in a monopolistically competitive market are earning economic losses, which following scenarios would best reflect the change facing existing firms? a. a decrease in demand b. marginal revenue decreases c. an increase in demand d. economic losses increase 56. When evaluating the size of the deadweight loss due to a tax, what do we know? a. the smaller the decrease in both quantity demanded and quantity supplied, the greater the deadweight loss b. the greater the elasticities of supply and demand, the greater the deadweight loss c. the smaller the elasticities of supply and demand, the greater the deadweight loss d. the greater the elasticities of supply and demand, the smaller the deadweight loss 57. A firm is considering buying one of two technologies. Each technology will cost the fir $15,000. Technology A has an estimated marginal revenue product of capital of $3,9 year and a lifespan of 4 years; Technology B has an estimated marginal revenue pro capital of $5,200 per year and a lifespan of 3 years. The interest rate is constant at 3 annually. Which technology should the firm purchase? a. Neither technology. b. Technology A; it has the highest present value c. Technology B; it has a higher marginal revenue product than technology A. d. Technology B; it has the highest present value. Pagemarket? 58. What is one key difference between an oligopoly market and a perfectly competitive a. Oligopolistic firms sell completely unrelated products while perfectly competitive firms do not. not. b. Oligopolistic firms are interdependent while perfectly competitive firms are Oligopolistic firms are price takers while perfectly competitive firms are not. d. Oligopolistic firms sell their product at a price equal to marginal cost while perfectly competitive firms do not. 59. There are no gains from specialization and trade between two counties when good. a. neither country has a comparative advantage in the production of any b. opportunity costs differ between the two countries c. neither country has an absolute advantage in the production of any good. d. one country has an absolute advantage in the production of all goods. 60. What is the relationship between economic profit and accounting profit? a. Economic profit will never exceed accounting profit. b. Economic profit is most often equal to accounting profit. C. Economic profit is a less complete measure of profitability than accounting profit. d. Economic profit is always at least as large as accounting profit. 61. BONUS: Which of the following goods is NOT sold in a monopolistically competitive market? (You will not lose marks if you answer incorrectly). a. jeans b. hamburgers C. cookies d. wheat End of Examination Page 19 of 19