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Question;Identify the letter of the choice that best completes the;statement or answers the question.;1. Consider a profit?maximizing monopoly pricing under the;following conditions. The;profit?maximizing price charged for goods produced is $12.;The intersection of the marginal;revenue and marginal cost curves occurs where output is 10;units and marginal cost is $6. The;socially efficient level of production is 12 units. The;demand curve and marginal cost curves are;linear. What is the deadweight loss?;a. $4;b. $6;c. $12;d. $16;2. Which of the following curves is not affected by the;existence of diminishing returns?;a. the average fixed cost curve;b. the average variable cost curve;c. the average total cost curve;d. the marginal cost curve;3. Assume the federal government determines the total level;of pollutants that can be discharged;by city industries. A city is able to exchange the rights to;this total discharge level with other;cities. This is an example of;a. emissions taxes.;b.Pigouvian;taxes.;c.tradable;emissions permits.;d.environmental;standards.;4.Table;2.The Chicken Game is;named for a contest in which drivers test their courage by driving straight at;each other. John and Paul have a common interest to avoid crashing into each;other, but they also have a personal, competing interest to not turn first to;demonstrate their courage to those observing the contest. The payoff table for;this situation is provided below. The payoffs are shown as (John, Paul).;Paul;Turn Drive Straight;John;Turn(10, 10);(5, 20);Drive Straight(20, 5) (0, 0);Refer to Table 2.;What is (are) the Nash equilibrium (equilibria) in this Chicken game?;a.John: Turn;Paul: Turn;b.John: Turn;Paul: Drive Straight;c.John: Drive;Straight;Paul: Turn;d.Both b and;c are Nash equilibria;5.In 1992;New Zealand sheep herders slaughtered 10,000 sheep and buried them in large;open pits rather than truck them to the market to be sold. This behavior is;most likely explained by;a.irrational;behavior of sheep herders.;b.average;revenue per sheep was less than average cost of transporting it to;market.;c.sheep;herders trying to use sheep carcasses as fertilizer to enhance the;productivity of the land.;d.the marginal;cost of producing sheep was rising.;6.Farm programs that pay farmers not to;plant crops on all their land;a.hurt;farmers by lowering their total revenue, and hurt consumers by causing;shortages of some food items.;;farmers by cutting costs, which helps consumers by lowering food prices;;farmers by increasing total revenue in the market, but hurt consumers by;raising prices.;;farmers directly since they receive government payments, But has no real effect;on consumers.;7.When we;compare economic welfare in a monopoly market to a competitive market, the;profits earned by the monopolist represent;a.a transfer;of benefits from the consumer to the producer.;b.a loss in;total welfare.;c.the higher;marginal costs incurred by the monopolists in comparison to competitive firms.d.the higher marginal revenues gained by the monopolists in comparison;to competitive firms.;8.Suppose that 50 candy bars are demanded;at a particular price. If the price of candy bars rises from that price by 5;percent, the number of candy bars demanded falls to 48. Using the;midpoint approach to calculate the price elasticity of demand, it;follows that the;a.demand for;candy bars in this price range is unit elastic.;b.price;increase will decrease the total revenue of candy bar sellers.;c.price;elasticity of demand for candy bars in this price range is about 1.22.;d.price elasticity of demand for candy bars in this price range is about;0.82.;9.When firm are said to be price takers;it implies that if a firm raises its price;a.buyers will go elsewhere.;b.buyers will pay the higher price in the short run.;c.competitors will also raise their prices.;d.firms in the industry will exercise market power.;10.Dick owns a;dog whose barking annoys Dick's neighbor Jane. Suppose that the benefit of;owning the dog is worth $700 to Dick and that Jane bears a cost of;$500 from the barking.;Assuming Dick has the legal right to keep the dog, a possible private solution;to this problem is that;a.There is no;private solution that would improve this situation.;b.Jane pays;Dick $650 to get rid of the dog.;c.Jane pays;Dick $800 to get rid of the dog.;d.Dick pays;Jane $600 for her inconvenience.;11.Which one;of the following descriptions about a Giffen good is incorrect?;a.A Giffen;good has a negative income effect.;b.The demand;curve for a Giffen good has a negative slope.;c.A Giffen;good is an inferior good.;d.The Engel;curve for a Giffen good has a negative slope.;12.The;fundamental reason that marginal cost eventually rises as output increases is;because of;a.economies;of scale.;b.diseconomies;of scale.;c.diminishing;marginal product.;d.rising;average fixed cost.


Paper#57945 | Written in 18-Jul-2015

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