.

Which of the following statements best describes the game played by the

employer and the employee in the labour discipline model?

(E)

The game is a simultaneous game in which the

employer chooses the wage

level and the employee chooses the effort level simultaneously.

(b)

The game is a one

-

off game in which the wage and effort levels are

determined once and for all.

(c)

The worker selects the effort level that balances his

desire to keep his job

with his desire to not exhaust himself on the job.

(d)

The employer will attempt to maximise the firm's profits by offering a wage

equal to the worker's reservation wage.

If firms exit a perfectly competitive industry, the:

(a)

profits of the remaining firms decrease;

(b)

industry supply curve shifts leftward;

(c)

price of the product falls;

(d)

output of the industry increases.

If a

production process creates pollution, a competitive market produces

excessive pollution because:

(a)

the firms place too high a price on society's cost of inflation;

(b)

the firms do not include the social cost of the pollution in their

profit

-

maximising decisions;

(c)

zero pollution is optimal;

(d)

people living near these firms are not injured by the pollution.

9.

Suppose

that Ronaldo's preferences over chocolate cake and strawberry ice

cream are such that

he likes chocolate cake but neither likes nor dislikes

strawberry ice cream

.

If chocolate cakes are plotted on the horizontal axis and

strawberry ice cream on the vertical axis, then

Ronald

o's indifference curves for

chocolate cake and strawberry ice crea

m

are:

(a)

bowed (curved) inward towards the origin

;

(b)

vertical straight lines

;

(c)

negatively sloped straight lines

;

(d)

L shaped

.

10

.

Among the factors that create a deadweight loss and inefficiency are

:

(a)

minimum wages, but

not taxes

;

(b)

taxes, but not minimum wages or rent ceilings

;

(c)

minimum wages, rent ceilings, and taxes

;

(d)

rent ceilings, but not taxes

.

in perfect competition, the elasticity of demand for the product of a single firm is:(a)infinite, because many other firms produce identical products;(b)zero, because many other firms produce identical products;(c)zero, because the firm produces a unique product;(d)infinite, because the firm produces a unique product.13

.In the case of a perfectly competitive firm, the:(a)firm's marginal revenue exceeds the price of the product;(b)firm's marginal revenue is less than average revenue;(c)change in the firm's total revenue equals the price of the product multiplied by the change inquantity sold;(d)firm's marginal revenue fallswhen the quantity the firm sells doubles.

.If demand is inelastic, a leftward shift of the supply curvein a perfectly competitive marketwill:(a)have no effect on total revenue;(b)decrease total revenue;(c)shift the demand curve leftward;(d)increase total revenue.

In a perfectly competitive market for a good, the supply is perfectly

price

elastic

and the demand curve is downward sloping.

Imposing

a per

-

unit tax

:

(a)

will reduce producer surplus and create a deadweight loss;

(b)

will reduce

consum

er

surplus and create a deadweight loss;

(c)

will reduce producer surplus

but not

create a deadweight loss;

(d)

will

not

reduce producer surplus

but

create a deadweight loss

.