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##### Economic Multiple Choice questions and a few simple problems-Fixed costs exist only in:

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solution

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Question;1.;Fixed costs exist only in;the;long run.;capital-intensive;markets.;the;short run.;labor-intensive;markets.;2. If apples;have an own price elasticity of?1.2 we know the demand is;unitary.;indeterminate.;elastic.;inelastic.;3. A consumer spends;more time searching for a good when her reservation price is;increased.;reduced.;fixed.;None;of the statements is correct.;4. You are the;manager of a monopoly that faces a demand curve described by P = 230? 20Q.;Your costs are C = 5 + 30Q. The profit-maximizing price is;150.;90.;130.;110.;5. The optimal;amount of studying is determined by comparing;marginal;benefit and the total cost of studying.;marginal;benefit and the total benefit of studying.;marginal;benefit and the marginal cost of studying.;total;benefit and the total cost of studying.;6. Other things;held constant, the lower the price of a good;the;lower the demand.;the;higher the demand.;the;greater the consumer surplus.;the;lower the consumer surplus.;7. You are the;manager of a monopoly that faces a demand curve described by P = 85? 5Q. Your;costs are C = 20 + 5Q. The profit-maximizing price is;45.;55.;60.;50.;8. The optimal;bid in a first-price, sealed-bid auction with independent private values is to bid;the;true value of the item.;more;than the true value of the item.;less;than the true value of the item.;the true value;of the item and more than the true value of the item, depending upon whether;value estimates are affiliated.;9. The Lerner;index in the paper industry is 0.58. Based on this information, a firm charging;$3.25 per ream of paper should have a marginal cost of;$0.;$1.365.;$1.885.;$3.25.;10. The change;in net benefits that arises from a one-unit change in quantity is the;marginal;net benefits.;total;net benefits.;variable;benefits.;present;value benefits.;11. Firms have market power in;perfectly;competitive markets.;monopolistically;competitive markets.;monopolistic;markets.;monopolistically;competitive markets and monopolistic markets.;12Which of the;following features is common to both perfectly competitive markets and;monopolistically competitive markets?;Firms;produce homogeneous goods.;There;is free entry.;Long-run;profits are zero.;There;is free entry and long-run profits are zero.;14. The optimal bid for an individual participating in;a first-price, sealed-bid auction with independent private values is to bid;more;than the individual's valuation of the item.;less;than the individual's valuation of the item.;exactly;the individual's valuation of the item.;There;is not an optimal bid strategy for all individuals when independent private;values exist.;15. You are the;manager of a Mom and Pop store that can buy milk from a supplier at $3.00 per;gallon. If you believe the elasticity of demand for milk by customers at your;store is?4, then your profit-maximizing price is;$2.00.;$2.50.;$4.00.;$5.00.;16Other things;held constant, the lower the price of a good;the;lower the producer surplus.;the;greater the producer surplus.;the;higher the supply.;the;lower the supply.;17. You are the manager of a monopoly that sells a;product to two groups of consumers in different parts of the country. Group 1?s;elasticity of demand is -3, while group 2?s is -6. Your marginal cost of;producing the product is $80.;a. Determine your optimal markups and prices under;third-degree price discrimination.;Instruction: Round your answers to two decimal places.;Markup for group 1;Price for group 1: $;Markup for group 2;Price for group 2: $;b. Which of the following are necessary conditions for;third-degree price discrimination to enhance profits.;Instructions: You may select more than one answer.;Click the box with a check mark for the correct answers and click twice to;empty the box for the wrong answers. You must click to select or deselect each;option in order to receive full credit.;We;are able to prevent resale between the groups.;At;least one group has elasticity of demand greater than 1 in absolute value.;There;are two different groups with different (and identifiable) elasticities of;demand.;At;least one group has elasticity of demand less than one in absolute value.;18.The demand curve;for product X is given by QXd = 500 - 5PX.;a. Find the inverse demand curve.;PX = - QXd;Instructions: Round your answer to the nearest penny;(2 decimal places).;b. How much consumer surplus do consumers receive when;Px = $50?;$;c. How much consumer surplus do consumers receive when;Px = $30?;$;d. In general, what happens to the level of consumer;surplus as the price of a good falls?;The level of consumer surplus decrease/increase/does;not change as the price of a good falls.;19. Suppose the own;price elasticity of market demand for retail gasoline is -0.5, the Rothschild;index is 0.3, and a typical gasoline retailer enjoys sales of $1,700,000;annually. What is the price elasticity of demand for a representative gasoline;retailer?s product?;Instruction: Round your answer to 2 decimal places.

Paper#55399 | Written in 18-Jul-2015

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