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Principles of Economics II Assignment Final Exam.......................................

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Question;Principles of Economics IIPart I (6 points: 2 points each)All of the questions in this Part refer to the market for jelly doughnuts. All questions are concerned only with the short run. Each situation is not related to the others. Analyze each question separately.Assume that the supply and demand curves are normally shaped. In each question, at most one curve will shift. Use the following code to indicate each of your answers:a. Demand increases.b. Demand decreases.c. Supply increases.d. Supply decreases.e. Neither demand nor supply changes.--------------------------------------------------------1. The price of coffee doubles.2. The price of jelly used as filling in jelly doughnuts rises by 20%.3. A significant number of people decide to go on ?low carb? diets.Part II (6 points: 2 points each)All of the questions in this Part refer to the market for gasoline. All questions are concerned only with the short run. Each situation is not related to the others. Analyze each question separately.Assume that the supply and demand curves are normally shaped. In each question, at most one curve will shift.Use the following code to indicate each of your answers:a. Demand increases.b. Demand decreases.c. Supply increases.d. Supply decreases.e. Neither demand nor supply changes.--------------------------------------------------------1. Huge new crude oil reserves are discovered in the western United States.2. The price of train and air transportation doubles because of Homeland Security charges.3. The price of new automobiles falls by20%.Part III (6 points: 2 points each)All of the questions in this Part refer to the market for cigars in the United States. All questions are concerned only with the short run. Each situation is not related to the others. Analyze each question separately.Assume that the supply and demand curves are normally shaped. In each question, at most one curve will shift.Use the following code to indicate each of your answers:a. Demand increases.b. Demand decreases.c. Supply increases.d. Supply decreases.e. Neither demand nor supply changes.--------------------------------------------------------1. The price of the tobacco used in cigars falls by 25%.2. Smoking of cigars is banned from all public areas in the United States.3. The price of cigars in the United States rises by 20%.Part IV (8 points: 2 points each)Use the following figures of firms in long-run equilibrium to answer questions 1 through 4:1. Perfect competition is portrayed in the above figures by:A) Figure A. B) Figure B. C) both Figures B and D. D) Figure D,2. Refer to the above figures. We would expect industry entry and exit to be relatively easy in:A) Figure A. B) Figure B. C) both Figures B and D. D) Figure D,3. Monopolistic competition is portrayed in the above figures by:A) Figure A. B) Figure B. C) both Figures B and D. D) Figure D,4. Refer to the above figures. Products which are identical are most likely to be produced in:A) Figure A. B) Figure B. C) both Figures B and D. D) Figure D,Part V (6 points: 2 points each)Use the following diagram to answer questions 1 through 3:1. Refer to the above diagram for a monopolist. Monopoly price will be:A) e. B) c. C) b. D) a.2. Refer to the above diagram for a monopolist. Monopoly output will be:A) between f and g. B) h. C) g. D) f.3. Refer to the above diagram for a monopolist. Monopoly profit:A) cannot be determined from the information given.B) will be ae per unit.C) will be bc per unit.D) will be ac per unit.Part VI (52 points): Short Answer Questions1. 10 pts. (4+2+4)(a) Draw a simple demand curve and a simple supply curve. Label each curve and each axis. Identify the area that represents consumer surplus. Identify the area that represents producer surplus.(b) Describe briefly in words how a price floor can cause a ?deadweight loss?.(c) Define ?price discrimination? and list the three conditions that must be met for a firm to successfully practice price discrimination.2. 10 pts. (2 each)(a) Write in words (or in mathematical symbols) the formula for the coefficient of price elasticity of demand.(b) What are the numbers or ranges of numbers that correspond to (1) perfectly elastic demand, (2) elastic demand?(c) Give a realistic example of a good with perfectly elastic demand(d) Write in words (or in mathematical symbols) the formula for the coefficient of cross elasticity of demand.(e) Is the coefficient of cross elasticity of demand of a pair of complementary goods ?positive?, ?zero?, or ?negative?? (Answer with one word.)3. 14 pts. (4+6+4)(a) Define (1) ?cartel, (2) natural monopoly.(b) Define: (1) ?rent seeking?, (2) ?the principle of diminishing returns?.(c) Define ?4-firm concentration ratio? and give one real-world example of an industry with a high 4-firm concentration ratio.4. 10 pts. (4+6)(a) Text, page 677, #1.4(b) Text, page 678, #4.65. 8 pts. (2+6)Text, page 701, #2.9.PART VII (16 points): Multiple Choice QuestionsFOR EACH OF THE FOLLOWING QUESTIONS, SELECT THE ONE BEST ANSWER. WRITE DOWN THE LETTER CORRESPONDING TO THAT ANSWER. (1 point each)1. By an increase in demand, we mean that:A) product price has fallen, so consumers move down to a new point on the demand curve.B) the quantity demanded at each price in a set of prices is greater.C) the quantity demanded at each price in a set of prices is smaller.D) a leftward shift of the demand curve has occurred.2. Assume that a 3 percent increase in income produces a 1 percent decline in the quantity demanded of good X. The coefficient of income elasticity of demand for good X is:A) negative, thus, X is an inferior good. C) positive, thus, X is an inferior good.B) negative, thus, X is a normal good. D) positive, thus, X is a normal good.3. In the short run, a monopolist's economic profits:A) are always positive because the monopolist is a price-maker.B) are usually negative because of government price regulation.C) are always zero because consumers prefer to buy from competitive sellers.D) may be positive or negative depending on market demand and cost.4. Monopolistic competition resembles perfect competition because:A) both industries emphasize nonprice competition.B) in both instances, in the long run, firms will operate at the minimum point on their long-run average total cost curves.C) both industries entail the production of differentiated products.D) barriers to entry are either weak or nonexistent.5. If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes:A) the likelihood of realizing economic profits in the long run would be enhanced.B) individual firms would operate at outputs where their average total costs would be higher.C) the industry would more closely approximate perfect competition.D) the likelihood of price fixing would increase.6. A significant difference between a monopolistically competitive firm and a perfectly competitive firm is that the:A) former does not seek to maximize profits.B) latter recognizes that price must be reduced to sell more output.C) former sells similar, although not identical, products.D) former's demand curve is perfectly inelastic.7. In comparing the demand curve of a monopolist with that of a monopolistically competitive firm, we would expect the monopolistic competitor to have a:A) perfectly elastic D curve and the monopolist to have a perfectly inelastic D curve.B) generally more elastic D curve.C) generally less elastic D curve.D) D curve whose elasticity coefficient is 1 at all possible prices.8. A positive externality or spillover benefit occurs when:A) product differentiation increases the variety of products available to consumers.B) the benefits associated with a product exceed those going to people who consume it.C) a firm produces at the P = MC output.D) economic profits are zero in the long run.9. The retail clothing industry is best described as:A) monopolyB) monopolistic competition.C) perfect competition.D) oligopoly.10. The narrower the definition of a product:A) the larger the number of substitutes and the larger the price elasticity of demand.B) the smaller the number of substitutes and the larger the price elasticity of demand.C) the larger the number of substitutes and the smaller the price elasticity of demand.D) the smaller the number of substitutes and the smaller the price elasticity of demand.11. A firm that sells computers bought an IBM division that makes computers. This acquisition is:A) horizontal, B) forward vertical, C) backward vertical, D) conglomerate.12. Which of the following will not produce an outward shift of the production possibilities curve?A) an upgrading of the quality of a nation's human resourcesB) the reduction of unemploymentC) an increase in the quantity of a society's labor forceD) the improvement of a society's technological knowledge13. A nation's production possibilities curve is bowed out from the origin because:A) resources are not equally efficient in producing every good.B) the originator of the idea drew it this way and modern economists follow this convention.C) resources are scarce.D) wants are virtually unlimited.14. A decrease in the demand by sport fishermen for recreational fishing boats with outboard motors might be caused by an increase in the:A) income of sport fishermen. C) size and number of fish available.B) price of outboard motors. D) price of boats that have sails, but no motors.15. To maximize utility, a consumer should allocate money income so that the:A) elasticity of demand of all products purchased is the same.B) marginal utility of the last unit of all products purchased is the same.C) total utility derived from each product purchased is the same.D) marginal utility obtained from the last dollar spent on each product is the same.16. When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes:A) an inferior good. C) the income effect.B) the rationing function of prices. D) the substitution effect.

 

Paper#56121 | Written in 18-Jul-2015

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