# Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9

Save this PDF as:

Size: px
Start display at page:

Download "Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9"

## Transcription

2 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 2 of 9 NOTE: #1: An exam statement is not false merely because of the contents of a parenthetical comment in two contexts. First, all a.k.a. (i.e., also known as) parentheticals; second, formulas within parentheticals merely slavishly repeat text that is outside the parentheses. Thus, if what is outside of the parenthetical is true, what is inside is true; if what is outside of the parenthetical is false, what is inside is false. For other types of parentheticals the content of the parenthetical might render the exam statement false; for example, falsely an "i.e.," might be used when truth required an "e.g.,". Read carefully. #2: Bubble A for True bubble B for False. QUESTIONS: 1. T F The law of increasing opportunity costs asserts that to consume a greater amount of good ABC only can be obtained with an increasing sacrifice of good XYZ not being consumed. (1:7) 2. T F All of the Elements Functions of Capitalism private property embodies self interest; prices measure self interest; markets coordinate self interest, competition regulates self interest. (1:10) 3. T F A change in the price of Product A causes a motion on the dem curve of Product A (i.e., change in quantity demed); whereas a change in a non-price determinant of dem of Product A causes a motion of the dem curve of Product A (i.e., change in dem). (1:18)

3 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 3 of 9 4. T F Product "A" is a complement of Product "C" Product "A" is a substitute for Product "S". If the price of Product "A" increases, the quantity sold of Product "C" will increase the quantity sold of Product "S" will decrease. (1:20) 5. T F Externalities (a.k.a., spillovers) exist when some person either is not willing to or is not able to participate in a market. Externalities prevent the market price from being a genuine equilibrium price. (1:24) 6. T F The principal - agent problem never exists in private corporations. The principal - agent problem always exists with government employees. (1:25) 7. T F Both private goods public goods exhibit a strong characteristic of rivalry of consumption; but, only private goods exhibit a strong characteristic of exclusivity of possession. (1:28) 8. T F The gains from trade available from international trade are due each nation having a different absolute advantage in the total quantity of production. (1:30) 9. T F All tariffs all quotas always change the market price. (1:32) 10. T F International trade agreements focus on changing each nation's comparative advantage. (1:33) 11. T F There is a list of the non-price determinants of supply a list of the non-price determinants of dem. Those two lists share some similarities (e.g., prices of related goods; expectations), but those two lists also have major differences (e.g., technology is on dem's list but taxes are on supply's list). 12. T F The elasticity of dem describes the responsiveness of quantity demed to changes in price (i.e., E d = [%ΔQd / %ΔP] = [{1 / slope} P / Q]).

4 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 4 of T F Since the dem curve has a positive slope all elasticity of dem (E d ) numerical values always have a positive sign. 14. T F The numerical value of the elasticity of dem (E d ) ranges from E d = 0 (i.e., a perfectly inelastic vertical dem curve [i.e., slope = ]) to E d = (i.e., a perfectly elastic horizontal dem curve [i.e., slope = 0]). Most frequently, however, Ed values are between An elasticity of dem value of less than one (E d < 1) is inelastic. An elasticity of dem value of more than one (E d > 1) is elastic. 15. T F All sellers maximize total revenue at unitary elasticity (i.e., TR E d = 1). 16. T F Elasticity is a general concept that can be applied in a variety of ways. For example, a good's income elasticity distinguishes inferior goods from luxury goods. Also for example, the sign on the cross elasticity of dem (i.e., E XY = %ΔQd X / %ΔP Y ) is negative for a substitute good but is positive for a complement good. 17. T F Economics has multiple measures of efficiency. Productive efficiency is to produce at the good at its lowest cost (i.e., P = ATC min ). Allocative efficiency is to produce the least costly array of goods (i.e., P = MC). There is zero dead weight loss if the firm achieves both productive efficiency allocative efficiency. 18. T F If the market price is the equilibrium price (P e ), consumers will be both willing able to pay more, but do not have to, thus consumers get the consumer surplus; producers will be both willing able to sell for less but do not have to, thus producers get the producer surplus.

5 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 5 of T F Utils are a theoretical unit of measure for the individual's subjective value of utility. Dollar prices make objective that subjective value. In this way the inherently normative foundation of economics is transformed into a positivist fact. 20. T F The law of diminishing marginal utility gives shape to the indifference curves. The marginal rate of substitution (MRS) is the slope of the indifference curve. To maximize utility the indifference curve that is tangent to the budget line is selected. At that point of tangency, the ratio of prices will equal the ratio of marginal utilities (i.e., MRS = P B /P A = MU B / MU A ). And, with algebraic transformation, we can obtain the general rule for optimization: MU A / P A = MU B / P B. 21. T F A dem curve can be derived from the indifference curves their tangent budget lines. These also allow us to see the income effect the substitution effect. The income effect is that a change in a product's price is experienced as a change in real income. The substitution effect is that a change in a product's price changes the relative prices (i.e., opportunity costs) of substitutes thus shifts the substitute's dem curve. 22. T F Sunk costs are opportunity costs. 23. T F Accounting strives for objectivity by focusing upon explicit costs (e.g., arms' length transactions). Economics strives for a different type of objectivity by focusing upon both explicit costs (e.g., wages) implicit costs (e.g., normal profit).

6 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 6 of T F Normal profit is the value necessary to attract to keep entrepreneurial ability. The necessary mathematical relationship between accounting profit (π A ) normal profit (π N ) is that π A < π N because accounting profit does not include normal profit. 25. T F Total cost can be viewed in more than one way. Total cost can be viewed from the perspective of the economic resources purchased (e.g., l), or from the perspective of the payment made for the economic resources purchased (e.g., interest). Total cost also can viewed as fixed costs plus variable costs (TC = FC + VC). Economics views the long run as starting once fixed costs equal zero (FC = 0). 26. T F Economics focuses upon marginal analysis in the long run. Since fixed costs are sunk costs, economic analysis recommends ignoring sunk costs when making a decision about what to do next. 27. T F Economics assume all firm seek to profit maximize. Profit (π) is equal to total revenue (TR) minus total cost (TC) (i.e., π = TR - TC), If TR < TC, the firm is earning an economic loss (π L ). 28. T F Economics assume all firm seek to profit maximize. To profit maximize all firms must achieve marginal revenue equals marginal cost (i.e., to π max must achieve MR = MC). 29. T F Since total revenue equals price times quantity (i.e., TR = P * Q), the Shut Down Rule can be stated while focusing either on TR or on price. If TR < VC or if P < AVC, the firm will minimize its losses by exiting the market; otherwise, to minimize its losses the firm must remain in the market earn π L.

7 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 7 of T F Routinely, when graphing a firm's supply curve the supply curve is labeled as its marginal cost curve (S = MC). However, the firm's MC curve is much longer than its S curve. The firm's S curve only is that fraction of the firm's MC curve that is above the firm's minimum AVC. 31. T F All average values (e.g., cost; product) are optimized at the quantity where the marginal curve intersects the average curve (e.g., ATC ATC = MC). 32. T F All total values (e.g., cost; revenue) are optimized at the quantity where the marginal curve intersects the horizontal axis (e.g., TR MR = 0). 33. T F If E d = 1, MR = T F Both the law of diminishing marginal utility economies of scale both are applicable both in the short run the long run. 35. T F Economies of scale exist if all inputs are increased proportionally if total costs do not increase less proportionally; thus, average total costs decline. 36. T F Breakeven for an economist means TR = TC, thus the firm earns a normal profit (π N ). The economist's breakeven is the same as breakeven as used in accounting in finance.

8 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 8 of T F If a Firm #1 currently inside Market A is earning expects to continue to earn a normal profit (π N ) but if Firm #1 looks into Market B sees that Firm #1 can expect to earn an economic profit (i.e., π E when TR > TC) upon entry in to Market B, Firm #1 will exit Market A will enter Market B. 38. T F If a Firm #1 inside of Market A has earned expects again to earn an economic loss (i.e., π L when TR < TC), Firm #1 will exit Market A. 39. T F In a purely competitive market the industry's market price will be the equilibrium price (P e ) thus will clear the purely competitive industry's market (i.e., S = D). 40. T F In a purely competitive market all firm's sell at the industry's market equilibrium price: P e. 41. T F In a purely competitive market all firm's profit maximize at each firm's MR = MC. 42. T F In a purely competitive market all firms sell at the allocative efficiency price of P e = MC. 43. T F In a purely competitive market the industry sells at, but fewer than all firms sell at, the productive efficiency price of P e = ATC min. 44. T F In a purely competitive market the industry will profit maximize. 45. T F In a purely competitive market the competitive industry sells at unitary elasticity thus maximizes total revenue. 46. T F In a pure monopoly market the monopoly firm does not confront any close substitutes as competitors. 47. T F Barriers to entry can create monopoly power; but, not all markets with major barriers to entry contain monopolists.

9 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 9 of T F In a pure monopoly market the monopoly firm sets quantity so that MR = MC. This quantity also maximizes the monopolist's total revenue. 49. T F All monopolists earn an economic profit. 50. T F If a seller sells to two different buyers at two different prices, that is economic price discrimination. 51. T F A seller can not engage in effective price discrimination unless that seller has monopoly power, the ability to segregate buyers according to their elasticities of dem, the ability to prevent arbitrage. 52. T F Both multinational corporations outsourcing jobs illegal immigration are arbitrage.

10 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 10 of 9 ANSWER KEY: Exam #2: ECON 2200: Spring true. 2. FALSE. 3. true. 4. true. 5. true. 6. FALSE. 7. FALSE. 8. FALSE. 9. FALSE. 10. FALSE. 11. FALSE. 12. true. 13. FALSE. 14. true. 15. true. 16. FALSE. 17. true. 18. true. 19. true. 20. true. 21. true. 22. FALSE. 23. true. 24. FALSE. 25. true. 26. true. 27. true. 28. FALSE. 29. true. 30. true. 31. true. 32. true. 33. true. 34. FALSE. 35. true. 36. FALSE. 37. true. 38. FALSE. 39. true. 40. true. 41. true. 42. true. 43. FALSE. 44. FALSE. 45. true. 46. true. 47. true. 48. FALSE. 49. FALSE. 50. FALSE. 51. true. 52. true.

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 11 Perfect Competition - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition is an industry with A) a

### Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013

Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on

### ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 23 Chapter 8 WRITE [4] Use the demand schedule that follows to calculate total revenue and marginal revenue at each quantity. Plot

### Problems on Perfect Competition & Monopoly

Problems on Perfect Competition & Monopoly 1. True and False questions. Indicate whether each of the following statements is true or false and why. (a) In long-run equilibrium, every firm in a perfectly

### PART A: For each worker, determine that worker's marginal product of labor.

ECON 3310 Homework #4 - Solutions 1: Suppose the following indicates how many units of output y you can produce per hour with different levels of labor input (given your current factory capacity): PART

### UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES. Monopolistic Competition

UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES Monopolistic Competition Market Structure Perfect Competition Pure Monopoly Monopolistic Competition Oligopoly Duopoly Monopoly The further right on

### ECON 202: Principles of Microeconomics. Chapter 11 Firms in Perfectly Competitive Markets

ECON 202: Principles of Microeconomics Chapter 11 Firms in Perfectly Competitive Markets Firms in Perfectly Competitive Markets 1. Market Structures. 2. Perfectly Competitive Markets. 3. Maximizing Profit

### Chapter 6 Competitive Markets

Chapter 6 Competitive Markets After reading Chapter 6, COMPETITIVE MARKETS, you should be able to: List and explain the characteristics of Perfect Competition and Monopolistic Competition Explain why a

### Pre-Test Chapter 21 ed17

Pre-Test Chapter 21 ed17 Multiple Choice Questions 1. Which of the following is not a basic characteristic of pure competition? A. considerable nonprice competition B. no barriers to the entry or exodus

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 11 Monopoly practice Davidson spring2007 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly industry is characterized by 1) A)

### Chapter 6. Elasticity: The Responsiveness of Demand and Supply

Chapter 6. Elasticity: The Responsiveness of Demand and Supply Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 202 504 Principles of Microeconomics Elasticity Demand curve:

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

Principles of Microeconomics Fall 2007, Quiz #6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) A monopoly is

### Market Structure: Perfect Competition and Monopoly

WSG8 7/7/03 4:34 PM Page 113 8 Market Structure: Perfect Competition and Monopoly OVERVIEW One of the most important decisions made by a manager is how to price the firm s product. If the firm is a profit

### Unit 5.3: Perfect Competition

Unit 5.3: Perfect Competition Michael Malcolm June 18, 2011 1 Market Structures Economists usually talk about four market structures. From most competitive to least competitive, they are: perfect competition,

### Eco 200 Group Activity 4 Key Chap 13 & 14 & 15

Eco 200 Group Activity 4 Key Chap 13 & 14 & 15 Chapter 13: 1. 4 th Edition: p. 285, Problems and Applications, Q4 3 rd Edition: p. 286, Problems and Applications, Q4 a. The following table shows the marginal

### 11 PERFECT COMPETITION. Chapter. Competition

Chapter 11 PERFECT COMPETITION Competition Topic: Perfect Competition 1) Perfect competition is an industry with A) a few firms producing identical goods B) a few firms producing goods that differ somewhat

### Learning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to:

Learning Objectives After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Discuss three characteristics of perfectly competitive

### Unit 7. Firm behaviour and market structure: monopoly

Unit 7. Firm behaviour and market structure: monopoly Learning objectives: to identify and examine the sources of monopoly power; to understand the relationship between a monopolist s demand curve and

### Practice Questions Week 8 Day 1

Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants

### Pricing and Output Decisions: i Perfect. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young

Chapter 9 Pricing and Output Decisions: i Perfect Competition and Monopoly M i l E i E i Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young Pricing and

### SUPPLY AND DEMAND : HOW MARKETS WORK

SUPPLY AND DEMAND : HOW MARKETS WORK Chapter 4 : The Market Forces of and and demand are the two words that economists use most often. and demand are the forces that make market economies work. Modern

### A. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost.

1. The supply of gasoline changes, causing the price of gasoline to change. The resulting movement from one point to another along the demand curve for gasoline is called A. a change in demand. B. a change

### Monopoly. Problem 1 (APT 93, P3) Sample answer:

Monopoly Problem 1 (APT 93, P3) A single airline provides service from City A to City B. a) Explain how the airline will determine the number of passengers it will carry and the price it will charge. b)

### Econ 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam.

, Fall 2007 Version A Special Codes 00000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 201 Final Exam 1. For a profit-maximizing monopolist, a. MR

### Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!!

Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!! For more, please visit: http://courses.missouristate.edu/reedolsen/courses/eco165/qeq.htm Market Equilibrium and Applications

### A2 Micro Business Economics Diagrams

A2 Micro Business Economics Diagrams Advice on drawing diagrams in the exam The right size for a diagram is ½ of a side of A4 don t make them too small if needed, move onto a new side of paper rather than

### Summary Chapter 12 Monopoly

Summary Chapter 12 Monopoly Defining Monopoly - A monopoly is a market structure in which a single seller of a product with no close substitutes serves the entire market - One practical measure for deciding

### LECTURE #13: MICROECONOMICS CHAPTER 15

LECTURE #13: MICROECONOMICS CHAPTER 15 I. WHY MONOPOLIES ARISE A. Competitive firms are price takers; a Monopoly firm is a price maker B. Monopoly: a firm that is the sole seller of a product without close

### Chapter. Perfect Competition CHAPTER IN PERSPECTIVE

Perfect Competition Chapter 10 CHAPTER IN PERSPECTIVE In Chapter 10 we study perfect competition, the market that arises when the demand for a product is large relative to the output of a single producer.

### AP Microeconomics Chapter 12 Outline

I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.

### Chapter 6. Non-competitive Markets 6.1 SIMPLE MONOPOLY IN THE COMMODITY MARKET

Chapter 6 We recall that perfect competition was theorised as a market structure where both consumers and firms were price takers. The behaviour of the firm in such circumstances was described in the Chapter

economicsentrance.weebly.com Basic Exercises Micro Economics AKG 09 Table of Contents MICRO ECONOMICS Budget Constraint... 4 Practice problems... 4 Answers... 4 Supply and Demand... 7 Practice Problems...

### Managerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets I. Perfect Competition Overview Characteristics and profit outlook. Effect

### The Revenue of a Competitive In perfect competition, average revenue equals the price of the good. Total revenue Average Revenue = = The Revenue of a

In this chapter, look for the answers to these questions: What is a perfectly competitive market? What is marginal revenue? How is it related to total and average revenue? How does a competitive firm determine

### Test 3: April 5, 2002

Test 3: April 5, 2002 Multiple Choice 50 points (1 each) Answer the questions on the Scantron sheet. Select the best answer for each question. (See answers on the last page) 1. If the supply curve shifts

### Microeconomics Instructor Miller Practice Problems Monopolistic Competition

Microeconomics Instructor Miller Practice Problems Monopolistic Competition 1. A monopolistically competitive market is described as one in which there are A) a few firms producing an identical product.

### Monopoly. Key differences between a Monopoly and Perfect Competition Perfect Competition

Monopoly Monopoly is a market structure in which one form makes up the entire supply side of the market. That is, it is the polar opposite to erfect Competition we discussed earlier. How do they come about?

### Firms in Perfectly Competitive Markets

Chapter 11 Firms in Perfectly Competitive Markets Chapter Summary Economists group industries into one of four market structures: Perfect competition, monopolistic competition, oligopoly, and monopoly.

### BUSINESS ECONOMICS CEC & 761

BUSINESS ECONOMICS CEC2 532-751 & 761 PRACTICE MICROECONOMICS MULTIPLE CHOICE QUESTIONS Warning: These questions have been posted to give you an opportunity to practice with the multiple choice format

### b. Cost of Any Action is measure in foregone opportunities c.,marginal costs and benefits in decision making

1 Economics 130-Windward Community College Review Sheet for the Final Exam This final exam is comprehensive in nature and in scope. The test will be divided into two parts: a multiple-choice section and

### Number of Workers Number of Chairs 1 10 2 18 3 24 4 28 5 30 6 28 7 25

Intermediate Microeconomics Economics 435/735 Fall 0 Answers for Practice Problem Set, Chapters 6-8 Chapter 6. Suppose a chair manufacturer is producing in the short run (with its existing plant and euipment).

### Pre-Test Chapter 22 ed17

Pre-Test Chapter 22 ed17 Multiple Choice Questions 1. Refer to the above diagram. At the profit-maximizing level of output, total revenue will be: A. NM times 0M. B. 0AJE. C. 0EGC. D. 0EHB. 2. For a pure

### 1. a. What are the three sources of the barriers to entry that allow a monopoly to remain the sole seller of a product?

Chapter 15 1. a. What are the three sources of the barriers to entry that allow a monopoly to remain the sole seller of a product? A key resource is owned by a single firm (monopoly resource), the government

### Monopoly WHY MONOPOLIES ARISE

In this chapter, look for the answers to these questions: Why do monopolies arise? Why is MR < P for a monopolist? How do monopolies choose their P and Q? How do monopolies affect society s well-being?

### CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY

CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY EXERCISES 3. A monopolist firm faces a demand with constant elasticity of -.0. It has a constant marginal cost of \$0 per unit and sets a price to maximize

### CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION

CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION Chapter in a Nutshell Now that we understand the characteristics of different market structures, we ask the question

### Market Structure: Monopolistic Competition

WSG9 7/7/03 4:34 PM Page 131 9 Market Structure: Monopolistic Competition OVERVIEW Although the conditions necessary for the existence of perfect competitive and monopoly are unlikely to be found in the

### Econ Dept, UMR Presents. Perfect Competition-- --A Model of Markets

Econ Dept, UMR Presents Perfect Competition-- --A Model of Markets Starring The Perfectly Competitive Firm Profit Maximizing Decisions In the Short Run In the Long Run Featuring An Overview of Market Structures

### ECON Chapter 4 review quiz

1) The price elasticity of demand measures: ECON 1900-02 Chapter 4 review quiz a) the percentage change in quantity demanded as a result of a 1 percent change in supply b) the change in quantity demanded

### AP Microeconomics Review

AP Microeconomics Review 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with Fair-Return

### An increase in the number of students attending college. shifts to the left. An increase in the wage rate of refinery workers.

1. Which of the following would shift the demand curve for new textbooks to the right? a. A fall in the price of paper used in publishing texts. b. A fall in the price of equivalent used text books. c.

### Monopoly and Perfect Competition Compared

Monopoly and Perfect Competition Compared I. Definitions of Efficiency A. Technological efficiency occurs when: Given the output produced, the costs of production (recourses used) are minimized. or Given

### Price. Elasticity. Demand

+ Price Elasticity of Demand + n Elasticity = measure the responsiveness of one variable to changes in another variable. n Price elasticity of demand measures the responsiveness of demand to changes in

### Lab #11. Chapter 11 Perfect Competition

University of Lethbridge Department of Economics ECON 1010 Introduction to Microeconomics Instructor: Michael G. Lanyi Lab #11 Chapter 11 Perfect Competition 1) Perfect competition occurs in a market where

### Elasticity. I. What is Elasticity?

Elasticity I. What is Elasticity? The purpose of this section is to develop some general rules about elasticity, which may them be applied to the four different specific types of elasticity discussed in

### Technology, Production, and Costs

Chapter 10 Technology, Production, and Costs 10.1 Technology: An Economic Definition 10.1 LEARNING OBJECTIVE Learning Objective 1 Define technology and give examples of technological change. A firm s technology

### 1 st Exam. 7. Cindy's cross-price elasticity of magazine demand with respect to the price of books is

1 st Exam 1. Marginal utility measures: A) the total utility of all your consumption B) the total utility divided by the price of the good C) the increase in utility from consuming one additional unit

### Exam 1. Corn (bushels)

ECONOMICS 10-008 Dr. John Stewart Feb. 13, 2001 Exam 1 Instructions: Mark the letter for your chosen answer for each question on the computer readable answer sheet using a No.2 pencil. Please note that

### CHAPTER 10: PURE MONOPOLY

CHAPTER 10: PURE MONOPOLY Introduction While the perfectly competitive firm has no power over prices in the marketplace, the monopoly has the power necessary to determine both the price and output of the

### C H A P T E R 4: The Price System, Demand and Supply, and Elas ticity. The Price System: Rationing and Allocating Resources

C H A P T E R 4 The Price System, Demand and Supply, and Elasticity Prepared by: Fernando Quijano and Yvonn Quijano Karl Case, Ray Fair The Price System: Rationing and Allocating Resources The market system,

### Chapter 5 Applications of Supply and Demand

1. Elasticity of Demand (E d ) Chapter 5 Applications of Supply and Demand Measures the responsiveness of Q d to a change in price. How much does Q d change (%) when P changes (%)? We can use a formula

### Understanding Economics 2nd edition by Mark Lovewell and Khoa Nguyen

Understanding Economics 2nd edition by Mark Lovewell and Khoa Nguyen Chapter 5 Perfect Competition Chapter Objectives! In this chapter you will: " Consider the four market structures, and the main differences

### 1. An economic institution that combines factors of production into outputs for consumers is a(n): A) industry. B) plant. C) firm. D) multinational.

Miami Dade College ECO 2023 Principles of Microeconomics Summer B 2014 Practice Test #3 1. An economic institution that combines factors of production into outputs for consumers is a(n): A) industry. B)

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MPP 801 Perfect Competition K. Wainwright Study Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Refer to Figure 9-1. If the price a perfectly

### Learning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly

Chapter 6 The Two Extremes: Perfect Competition and Pure Monopoly Learning Objectives List the four characteristics of a perfectly competitive market. Describe how a perfect competitor makes the decision

### Chapter 9 examines firms under severe competition while chapter 11 illustrates monopoly firms that face no competition.

The Firm and the Industry under erfect Competition The decisions of firms depend on consumer demand and production costs. Yet, they also depend on the behavior, the number, and the size of other firms

### ECON 600 Lecture 3: Profit Maximization Π = TR TC

ECON 600 Lecture 3: Profit Maximization I. The Concept of Profit Maximization Profit is defined as total revenue minus total cost. Π = TR TC (We use Π to stand for profit because we use P for something

### Economics 165 Winter 2002 Problem Set #2

Economics 165 Winter 2002 Problem Set #2 Problem 1: Consider the monopolistic competition model. Say we are looking at sailboat producers. Each producer has fixed costs of 10 million and marginal costs

### Where are we? To do today: finish the derivation of the demand curve using indifference curves. Go on then to chapter Production and Cost

Where are we? To do today: finish the derivation of the demand curve using indifference curves Go on then to chapter Production and Cost Utility and indifference curves The point is to find where on the

### Labour is a factor of production, and labour, like other factors, such as capital (machinery, etc) are demanded by firms for production purposes.

Labour Demand Labour is a factor of production, and labour, like other factors, such as capital (machinery, etc) are demanded by firms for production purposes. The quantity of labour demanded depends on

### AP MICRO Week 4 Practice Quiz: M, 20

1 1. A marketing survey shows that gate receipts would increase if the price of tickets to a summer rock concert increased, even though the number of tickets sold would fall. What does this imply about

### ELASTICITY AND ITS APPLICATION

5 ELASTICITY AND ITS APPLICATION CHAPTER OUTLINE: I. The Elasticity of Demand A. Definition of elasticity: a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants.

### Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets McGraw-Hill/Irwin Copyright 2010 by the McGraw-Hill Companies, Inc. All

### Monopoly. Chapter 13. Monopoly and How It Arises. Single-price Monopoly. Monopoly and Competition Compared. Price Discrimination

CHAPTER CHECKLIST Monopoly Chapter 13 1. Explain how monopoly arises and distinguish between single-price monopoly and price-discriminating monopoly. 2. Explain how a single-price monopoly determines its

### Microeconomics Instructor Miller Perfect Competition Practice Problems

Microeconomics Instructor Miller Perfect Competition Practice Problems 1. Perfect competition is characterized by all of the following except A) heavy advertising by individual sellers. B) homogeneous

### Defn. Market power the abiliby of a single economic actor (or small group of actors) to have a substantial influence on market prices.

Notes for Chapter 15 Monopoly Firms in perfect competition face the most competition. (They have no market power.) Monopolies face the least competition. (They have the most market power.) Defn. Market

### A Detailed Price Discrimination Example

A Detailed Price Discrimination Example Suppose that there are two different types of customers for a monopolist s product. Customers of type 1 have demand curves as follows. These demand curves include

### LIST OF MEMBERS WHO PREPARED QUESTION BANK FOR ECONOMICS FOR CLASS XII TEAM MEMBERS. Sl. No. Name Designation

LIST OF MEMBERS WHO PREPARED QUESTION BANK FOR ECONOMICS FOR CLASS XII TEAM MEMBERS Sl. No. Name Designation 1. Mrs. Neelam Vinayak V. Principal (Team Leader) G.G.S.S. Deputy Ganj, Sadar Bazar Delhi-110006

### 5. The supply curve of a monopolist is A) upward sloping. B) nonexistent. C) perfectly inelastic. D) horizontal.

Chapter 12 monopoly 1. A monopoly firm is different from a competitive firm in that A) there are many substitutes for a monopolist's product but there are no substitutes for a competitive firm's product.

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chap 13 Monopolistic Competition and Oligopoly These questions may include topics that were not covered in class and may not be on the exam. MULTIPLE CHOICE. Choose the one alternative that best completes

### CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition

CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition Chapter Summary Now that you understand the model of a perfectly competitive market, this chapter complicates

### Chapter 14 Monopoly. 14.1 Monopoly and How It Arises

Chapter 14 Monopoly 14.1 Monopoly and How It Arises 1) One of the requirements for a monopoly is that A) products are high priced. B) there are several close substitutes for the product. C) there is a

### Rutgers University Economics 102: Introductory Microeconomics Professor Altshuler Fall 2003

Rutgers University Economics 102: Introductory Microeconomics Professor Altshuler Fall 2003 Answers to Problem Set 10 Chapter 15 1. The following table shows revenue, costs, and profits, where quantities

### c. Given your answer in part (b), what do you anticipate will happen in this market in the long-run?

Perfect Competition Questions Question 1 Suppose there is a perfectly competitive industry where all the firms are identical with identical cost curves. Furthermore, suppose that a representative firm

### CHAPTER 9: PURE COMPETITION

CHAPTER 9: PURE COMPETITION Introduction In Chapters 9-11, we reach the heart of microeconomics, the concepts which comprise more than a quarter of the AP microeconomics exam. With a fuller understanding

### Pure Competition urely competitive markets are used as the benchmark to evaluate market

R. Larry Reynolds Pure Competition urely competitive markets are used as the benchmark to evaluate market P performance. It is generally believed that market structure influences the behavior and performance

### N. Gregory Mankiw Principles of Economics. Chapter 15. MONOPOLY

N. Gregory Mankiw Principles of Economics Chapter 15. MONOPOLY Solutions to Problems and Applications 1. The following table shows revenue, costs, and profits, where quantities are in thousands, and total

### Chapter 13 Perfect Competition

Chapter 13 Perfect Competition 13.1 A Firm's Profit-Maximizing Choices 1) What is the difference between perfect competition and monopolistic competition? A) Perfect competition has a large number of small

### Exam: Principles Micro ECO 2023.U07 Fall 2009 Name

Exam: Principles Micro ECO 2023.U07 Fall 2009 Name Panther ID Instructions: 1. Please write in your name and Panther ID on the question paper. 2. Please Bubble in your name and Panther ID on the Scantron

### Chapter 14: Firms in Competitive Markets. Total revenue = price per unit sold number of units sold = p q

Chapter 14: Firms in Competitive Markets Profit and Revenue The firm's goal is to maximize profit. Profit = total revenue - total cost (opportunity cost) Total revenue = price per unit sold number of units

### Econ 111 (04) 2nd Midterm A

Econ 111 (04) 2nd Midterm A MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which one of the following does not occur in perfect competition? A)

ANSWERS TO END-OF-CHAPTER QUESTIONS 23-1 Briefly indicate the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications

### Short-Run Production and Costs

Short-Run Production and Costs The purpose of this section is to discuss the underlying work of firms in the short-run the production of goods and services. Why is understanding production important to

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

Principles of Microeconomics, Quiz #5 Fall 2007 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) Perfect competition

### Economics 100 Exam 2

Name: 1. During the long run: Economics 100 Exam 2 A. Output is limited because of the law of diminishing returns B. The scale of operations cannot be changed C. The firm must decide how to use the current

### Measuring Elasticity of Demand

C H A P T E R E I G H T P r i c e e l a s t i c i t y o f d e m a n d Measuring Elasticity of Demand Demand curves can have many different shapes and so it is important to derive a way to convey their

### Elasticity: The Responsiveness of Demand and Supply

Chapter 6 Elasticity: The Responsiveness of Demand and Supply Chapter Outline 61 LEARNING OBJECTIVE 61 The Price Elasticity of Demand and Its Measurement Learning Objective 1 Define the price elasticity