PART A ? Questions 1 ? 7

Consider a market where demand is D: P = 30 ? Q and supply is S: P = 0.5Q.

• Equilibrium quantity Qe is
• 17
• 18
• 19
• 20
• Equilibrium is price Pe
• $10
• $11
• $12
• $13
• Consumer surplus CS is
• $199
• $200
• $201
• $202
• Producer surplus PS is
• $98
• $99
• $100
• $101
• Total surplus TS is
• $220
• $300
• $323
• $444
• When the government imposes a price ceiling = $20, disequilibrium between quantity demanded and quantity supplied results in
• Deficit = 10
• Surplus = 10
• Deficit = 30
• Surplus = 30
• Total surplus TS? with the price floor is
• $220
• $225
• $230
• $235

PART B ? Questions 8 ? 28

Consider a market where demand is D: P = 40 ? Q and supply is S: P = Q.

• Equilibrium quantity Qe is
• 16
• 18
• 20
• 22
• Equilibrium price Pe is
• $18
• $20
• $22
• $24
• Consumer surplus CS is
• $198
• $199
• $200
• $201
• Producer surplus PS is
• $198
• $199
• $200
• $201
• Total surplus TS is
• $390
• $394
• $396
• $400

Impose a specific tax T = $4 on each unit sold in the above market.

• Post-tax quantity Q? is
• 16
• 18
• 20
• 22
• Post-tax price P? is
• $18
• $20
• $22
• $24
• Consumer surplus CS? is
• $156
• $158
• $160
• $162
• Producer surplus PS? is
• $156
• $158
• $160
• $162
• Tax revenue TR of the government is
• $68
• $70
• $72
• $74
• Total surplus TS? is
• $390
• $394
• $396
• $400

Consider a market where demand is: P = 70 ? Q and supply is S: P = Q.

• Equilibrium quantity Qe is
• 35
• 36
• 45
• 56

• Equilibrium price Pe is
• $34
• $35
• $36
• $37
• Consumer surplus CS is
• $610
• $612.5
• $615
• $648
• Producer surplus PS is
• $610
• $612.5
• $615
• $648
• Total surplus TS is
• $1,222
• $1,223
• $1,224
• $1,225

Construct a budget neutral subsidy in the above market.

Post-subsidy quantity Q? is35364556Post-subsidy price P? is$34$35$36$37Consumer surplus CS? is$610$612.5$615$648Producer surplus PS? is$610$612.5$615$648Total surplus TS is (do not forget to account for the subsidy expenditure SE)$1,222$1,223$1,224$1,225The basic characteristic of the long run is that: A. barriers to entry prevent new firms from entering the industry. B. the firm has sufficient time to change the size of its plant. C. the firm does not have sufficient time to cut its rate of output to zero. D. a firm does not have sufficient time to change the amounts of any of the resources it employs.The law of diminishing returns indicates that: A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. B. because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped. C. the demand for goods produced by purely competitive industries is downsloping. D. beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.Variable cost is: A. the cost of producing one more unit of capital, say, machinery. B. any cost which does not change when the firm changes its output. C. average total cost multiplied by the firm's output. D. any cost that rises with output in the short run.In the above figure, curves 1, 2, 3, and 4 represent the: A. ATC, MC, AFC, and AVC curves respectively. B. MC, AFC, AVC, and ATC curves respectively. C. MC, ATC, AVC, and AFC curves respectively. D. ATC, AVC, AFC, and MC curves respectively.

• Refer to the above data. If product price is $60, the firm will: A. shut down. B. produce 4 units and realize a $120 economic profit. C. produce 6 units and realize a $100 economic profit. D. produce 3 units and incur a $40 loss.

• Refer to the above diagram for a pure monopolist. Monopoly price will be: A. e. B. c. C. b. D. a.
• Refer to the above diagram for a pure monopolist. Monopoly output will be: A. between f and g. B. h. C. g. D. f.

Consider a market with the market demand D: P = 100 ? Q, which is served by two Cournot duopolistic producers with the constant marginal cost MC = $10 and no fixed cost.

• In Nash equilibrium, the output of each firm, is
• 20
• 30
• 40
• 50

• In Nash equilibrium, the market output is
• 40
• 60
• 80
• 100

• In Nash equilibrium, the market price is
• $30
• $40
• $50
• $60

• In Nash equilibrium, profit of each firm is
• $900
• $1000
• $1100
• $1200

• When these two firms collude to form a cartel, the market output is
• 10
• 20
• 35
• 45

• When these two firms collude to form a cartel, the market price is
• 45
• 55
• 60
• 70

• When these two firms collude to form a cartel, the profit of each firm is
• $1012.50
• $1450.50
• $1560.25
• $1860.25

• Under pure competition a large number of identical firms in this market would produce a market output of
• 80
• 90
• 100
• 110

• Under pure competition the market price in this market would be
• $10
• $14
• $15
• $18

PART A - Questions 1 - 7 Consider a market where demand is D: P = 30 - Q and supply is S: P = 0.5Q. 1. Equilibrium quantity Qe is a. 17 b. 18 c. 19 d. 20 2. Equilibrium is price Pe a. $10 b. $11 c. $12 d. $13 3. Consumer surplus CS is a. $199 b. $200 c. $201 d. $202 4. Producer surplus PS is a. $98 b. $99 c. $100 d. $101 5. Total surplus TS is a. $220 b. $300 c. $323 d. $444 6. When the government imposes a price ceiling = $20, disequilibrium between quantity demanded and quantity supplied results in a. Deficit = 10 b. Surplus = 10 c. Deficit = 30 d. Surplus = 30 7. Total surplus TS' with the price floor is a. $220 b. $225 c. $230 d. $235 PART B - Questions 8 - 28 Consider a market where demand is D: P = 40 - Q and supply is S: P = Q. 8. Equilibrium quantity Qe is a. 16 b. 18 c. 20 d. 22 9. Equilibrium price Pe is a. $18 b. $20 c. $22 d. $24 10. Consumer surplus CS is a. $198 b. $199 c. $200 d. $201 11. Producer surplus PS is a. $198 b. $199 c. $200 d. $201 12. Total surplus TS is a. $390 b. $394 c. $396 d. $400 Impose a specific tax T = $4 on each unit sold in the above market. 13. Post-tax quantity Q' is a. 16 b. 18 c. 20 d. 22 14. Post-tax price P' is a. $18 b. $20 c. $22 d. $24 15. Consumer surplus CS' is a. $156 b. $158 c. $160 d. $162 16. Producer surplus PS' is a. $156 b. $158 c. $160 d. $162 17. Tax revenue TR of the government is a. $68 b. $70 c. $72 d. $74 18. Total surplus TS' is a. $390 b. $394 c. $396 d. $400 Consider a market where demand is: P = 70 - Q and supply is S: P = Q. 19. Equilibrium quantity Qe is a. 35 b. 36 c. 45 d. 56 20. Equilibrium price Pe is a. $34 b. $35 c. $36 d. $37 21. Consumer surplus CS is a. $610 b. $612.5 c. $615 d. $648 22. Producer surplus PS is a. $610 b. $612.5 c. $615 d. $648 23. Total surplus TS is a. $1,222 b. $1,223 c. $1,224 d. $1,225 Construct a budget neutral subsidy in the above market. 24. Post-subsidy quantity Q' is a. 35 b. 36 c. 45 d. 56 25. Post-subsidy price P' is a. $34 b. $35 c. $36 d. $37 26. Consumer surplus CS' is a. $610 b. $612.5 c. $615 d. $648 27. Producer surplus PS' is a. $610 b. $612.5 c. $615 d. $648 28. Total surplus TS is (do not forget to account for the subsidy expenditure SE) a. $1,222 b. $1,223 c. $1,224 d. $1,225 29. The basic characteristic of the long run is that: A. barriers to entry prevent new firms from entering the industry. B. the firm has sufficient time to change the size of its plant. C. the firm does not have sufficient time to cut its rate of output to zero. D. a firm does not have sufficient time to change the amounts of any of the resources it employs. 30. The law of diminishing returns indicates that: A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. B. because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped. C. the demand for goods produced by purely competitive industries is downsloping. D. beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction. 31. Variable cost is: A. the cost of producing one more unit of capital, say, machinery. B. any cost which does not change when the firm changes its output. C. average total cost multiplied by the firm's output. D. any cost that rises with output in the short run. 32. In the above figure, curves 1, 2, 3, and 4 represent the: A. ATC, MC, AFC, and AVC curves respectively. B. MC, AFC, AVC, and ATC curves respectively. C. MC, ATC, AVC, and AFC curves respectively. D. ATC, AVC, AFC, and MC curves respectively. 33. Refer to the above data. If product price is $60, the firm will: A. shut down. B. produce 4 units and realize a $120 economic profit. C. produce 6 units and realize a $100 economic profit. D. produce 3 units and incur a $40 loss. 34. Refer to the above diagram for a pure monopolist. Monopoly price will be: A. e. B. c. C. b. D. a. 35. Refer to the above diagram for a pure monopolist. Monopoly output will be: A. between f and g. B. h. C. g. D. f. Consider a market with the market demand D: P = 100 - Q, which is served by two Cournot duopolistic producers with the constant marginal cost MC = $10 and no fixed cost. 36. A. B. C. D. In Nash equilibrium, the output of each firm, is 20 30 40 50 37. A. B. C. D. In Nash equilibrium, the market output is 40 60 80 100 38. A. B. C. D. In Nash equilibrium, the market price is $30 $40 $50 $60 39. A. B. C. D. In Nash equilibrium, profit of each firm is $900 $1000 $1100 $1200 40. A. B. C. D. When these two firms collude to form a cartel, the market output is 10 20 35 45 41. A. B. C. D. When these two firms collude to form a cartel, the market price is 45 55 60 70 42. A. B. C. D. When these two firms collude to form a cartel, the profit of each firm is $1012.50 $1450.50 $1560.25 $1860.25 43. Under pure competition a large number of identical firms in this market would produce a market output of A. 80 B. 90 C. 100 D. 110 44. A. B. C. D. Under pure competition the market price in this market would be $10 $14 $15 $18