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Microeconomics Review. K.Peren Arin. Question 1. Which of the following would NOT shift the demand curve for fish? An increase in consumer income A decrease in price of ham A change in tastes for Turkey A decrease in the price of fish. Question 2.

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Microeconomics Review

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Microeconomics review l.jpg

Microeconomics Review

K.Peren Arin


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Question 1

  • Which of the following would NOT shift the demand curve for fish?

  • An increase in consumer income

  • A decrease in price of ham

  • A change in tastes for Turkey

  • A decrease in the price of fish


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Question 2

  • If the market price for pencil sharperners is less than the equilibrium price, then, there is excess_______of/for pencil sharperners, and the price will__________in a competitive market

  • demand, rise

  • demand. fall

  • supply, rise

  • supply, fall


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Question 3

  • Which of the following would shift the demand curve for Pepsi to the right?

  • A consumer boycott

  • A decrease in national income

  • An increase in price of Coke

  • A decrease in price of Pepsi


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Question 4

  • A Vertical demand curve has

  • unit elasticity

  • infinite elasticity

  • zero elasticity

  • varying elasticity


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Question 5

  • Which of the following is likely to have the lowest price elasticity of demand?

  • An automobile

  • A Ford

  • A Ford Mustang

  • A ford Mustang without AC


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Question 6

  • The cross elasticity of demand between Coca-Cola and Pepsi-Cola is

  • positive- that is, Coke and Pepsi are complements

  • positive- that is, Coke and Pepsi are substitutes

  • negative- that is, Coke and Pepsi are complements

  • negative- that is, Coke and Pepsi are substitutes


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Question 7

  • The local pizza restaurant makes such great bread sticks that consumers do not respond much to a change in the price. If the owner is only interested in increasing revenue, he should:

  • reduce costs

  • b) lower the price

  • c) raise the price

  • d) not change the price


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Question 8

  • If the minimum wage is above the equilibrium wage,

  • anyone who wants a job at the minimum wage can find one

  • the quantity demanded of labor will be greater than the quantity supplied

  • the quantity demanded of labor will be equal the quantity of labor supplied

  • the quantity demanded of labor will be less than the quantity supplied


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Question 9

  • Economies of scale occur when

  • Average fixed cost increases as output increases

  • Average total cost declines as output increases

  • Average variable cost increases as output increases

  • Average fixed cost declines as output increases


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Question 10

  • For a firm that operates in a perfectly competitive market

  • Marginal Revenue is below price

  • as quantity produced rises, the price of final product must also rise

  • the price of the product will decrease as production increases

  • the price it charges for its product is not dependent on quantity sold


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Question 11

  • When free entry is one of the attributes of a market structure, economic profits are

  • eventually driven to zero

  • negative for all firms

  • sacrificed to excess capacity

  • always positive

  • greater than accounting profits


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Question 12

  • When a firm has a natural monopoly, other firms do not enter the market because

  • by definition natural monopolies are protected by the government

  • the owners of natural monopolies have exclusive rights to key resources

  • new firms cannot achieve the same low costs as the current monopolist

  • None of the above is correct


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Taxing a Monopoly

$

MXX

EconomicProfits

EconomicProfits

after unittax

c

a

P0

ATCX

Pn

i

f

g

d

h

b

ATC0

DX

DX’

MRX

X per year

X0

X1

MRX’


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Question 13

  • Consider the market for CDs. The equilibrium price is $15 and the equilibrium quantity is 1000. The government introduces a $2 tax on each CD sold. The quantity in the market decreases to 900 as a result of the tax. Assuming that the demand and supply has the same elasticity,

  • Calculate the price buyers pay

  • Calculate the price sellers receive

  • Does it matter if the tax is imposed on the producer or the consumer?

  • Calculate the tax revenue

  • Calculate the deadweight loss.


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Question 14

  • Suppose that there are two firms in the market: Firm A and Firm B. They have to choose the level of output. If they produce together the monopoly output, each firm can make $20 mln. If firm A produces half the monopoly output, and firm B produces 2/3 of it, Firm B will have $22 mln, and Firm A will have a profit of $15 mln. If Firm B produces half the monopoly output and Firm B produces 2/3 of it, the reverse is true. If both firms produce 2/3 of the monopoly output, each of them will make a profit of $17 mln.

  • Draw the decision box of this game

  • What is the Nash equilibrium for this game?

  • Is there an outcome that would be better than Nash equilibrium for both firms? Can it be achieved? How?

  • If Nash equilibrium quantity is Oligopoly quantity, compare it with monopoly quantity and perfect competition quantity.

  • If Nash equilibrium price is Oligopoly price, compare it with monopoly price and perfect competition price.


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