Question 1

Pierre is a photographer in a perfectly competitive market. The graph shown above gives his MC, ATC and AVC curves. Pierre will decide to shut down in the short run if the market price is below _____.

Question 1 options:

A	$4.50
B	$5.50
C	$6.50
D	$7.50

Question 2

Pierre is a photographer in a perfectly competitive market. The graph shown above gives his MC, ATC and AVC curves. Suppose the market price is $10.50. How much profit does Pierre make?

Question 2 options:

A	22.5
B	24
C	20
D	18

Question 3

Pierre is a photographer in a perfectly competitive market. The graph shown above gives his MC, ATC and AVC curves.

Suppose all firms face the same costs. Originally, the market price is $10.50. Which of the following accurately describes the transition to long run equilibrium?

Question 3 options:

A	In the short run, firms are making positive profits and there will be entry. The long run equilibrium price will also be $10.50.
B	In the short run, firms are making positive profits. There will be entry in the market as long as price is above $7.50.
C	In the short run, firms are making zero profits. There will be neither exit nor entry in the market.
D	In the short run, firms are making positive profits. There will be entry in the market as long as price is above $5.50.

Question 4

In perfect competition, the demand curve faced by the individual firm is _______and the demand curve faced by the whole industry is_____.

Question 4 options:

A	Downward sloping, downward sloping
B	Downward sloping, perfectly elastic (horizontal)
C	Perfectly elastic (horizontal) , downward sloping
D	Perfectly elastic (horizontal), U-shaped

Question 5

According to the optimal output rule, a price taking firm's profit is maximized by producing the quantity at which:

Question 5 options:

A	The total revenue is equal to the total cost of production
B	The market price is equal to the marginal cost
C	The marginal revenue is equal to the variable cost
D	The market price is equal to the variable cost

Question 6

Consider a duopoly setting with where each firm can choose either to produce at the collusion level Q_Cor at the Non Collusion level Q_NC. The payoff matrix for the two firms is given above.

What is the dominant strategy for each firm?

Question 6 options:

A	Both firms produce QC
B	Both firms produce QNC
C	Firm A produces QCand Firm B produces QNC
D	Firm B produces QCand Firm A produces QNC

Question 7

Consider a duopoly setting with where each firm can choose either to produce at the collusion level Q_Cor at the Non Collusion level Q_NC. The payoff matrix for the two firms is given above.

Suppose the firms reach an agreement and both firms pledge to produce at Q_C. Which firm has an incentive to cheat and produce Q_NCinstead (assuming the other firm stays true to the agreement)?

Question 7 options:

A	Firm A
B	Firm B
C	Neither firm
D	Both firms

Question 8

Suppose you are an analyst and your job is to determine whether the orange juice market is competitive. To do this, you compute the Herfindahl-Hirschman Index (HHI) and report it to your boss.

If there are only 5 producers of orange juice and each supplies 200,000 cartons of juice in equilibrium, what is the HHI Index for this industry?

Question 8 options:

A	6000
B	2000
C	4000
D	There is not enough information to calculate the HHI

Question 9

Which of the following statements is TRUE? In an oligopoly,

Question 9 options:

A	firms always collude to keep prices high.
B	firms always engage in non-cooperative behavior
C	firms always produce some quantity strictly less than perfectly competitive and strictly greater than the monopoly quantity
D	multiple outcomes are possible depending on how firms interact with each other

Question 10

Price	Quantity Demanded
10	0
9	15
8	20
7	25
6	30
5	35
4	40
3	45
2	50
1	55
0	60

There are two companies offering satellite radio. The aggregate demand schedule for hours of satellite radio listening is shown above, and it is a zero marginal cost industry.

If the two companies form a cartel and split production evenly, how much willeachfirm produce and what price will they charge?

(Hint: The cartel will select a quantity that maximizes its combined profits)

Question 10 options:

A	40 hours; $6 per hour
B	15 hours; $6 per hour
C	15 hours; $3 per hour
D	12.5 hours; $7 per hour

Question 11

Consider the costs demand and marginal revenue of a profit-maximizing monopolist shown above. What quantity will the monopolist produce?

Question 11 options:

A	160
B	220
C	250
D	300

Question 12

Consider the costs, demand and marginal revenue of a profit-maximizing monopolist shown above. What price will the monopolist charge?

Question 12 options:

A	8
B	18
C	29
D	20

Question 13

Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect:

Question 13 options:

A	price to rise, output to fall, consumer surplus to rise
B	price to rise, output to fall, consumer surplus to fall
C	price to rise, output to rise, consumer surplus to fall
D	price to fall, output to rise, consumer surplus to rise

Question 14

A price discriminating monopolist will adjust prices so that customers with more ___________ demand pay ______ prices than other customers.

Question 14 options:

A	inelastic; lower
B	elastic; lower
C	elastic; the same
D	elastic; higher

Question 15

Consider the cost curves of a natural monopoly along with its demand and marginal revenue curves shown in the graph above. What aspect of the graph results in us denoting this as a "natural" monopoly?

Question 15 options:

A	Marginal cost is upward sloping
B	Demand intersects the downward sloping portion of average total cost
C	Marginal cost intersect average total cost at the minimum average total cost
D	Monopolist makes a profit when marginal revenue is equal to marginal cost