Question 1

Under perfect competition,if an industry is characterized by positive economic profits in the short run

Accepted Answer

A)  firms will leave the market in the long run and the short-run supply curve will shift outward.
B)  firms will enter the market in the long run and the short-run supply curve will shift outward.
C)  firms will enter the market in the long run and the short-run supply curve will shift inward.
D)  firms will leave the market in the long run and the short-run supply curve will shift inward. B

Question 2

Suppose demand for a good is QD= 100 - P and supply is QS = -20 + P.What is the equilibrium quantity?

Accepted Answer

A)  20
B)  40
C)  60
D)  80 B

Question 3

A deadweight loss of consumer and/or producer surplus occurs when

Accepted Answer

A)  producers fail to maximize profits.
B)  mutually beneficial transactions cannot be completed.
C)  consumers do not maximize their utility.
D)  the price of inputs increases. B

Question 4

One example of Ricardian rent is

Accepted Answer

A)  rent paid to landlords under price controls.
B)  the difference between the wage of a star baseball player and what he could earn outside of baseball.
C)  the amount paid to a seller above the equilibrium price of tourist class tickets in order to receive higher quality seats in first class.
D)  the price rise of wool from a disease among sheep.

Question 5

In the opening of free trade,if world prices of a good are less than domestic prices of that same good,

Accepted Answer

A)  domestic consumers will experience a loss of surplus.
B)  domestic prices will drop to the world price level.
C)  all domestic producers of that good will try to find another market because they can't compete with foreign producers.
D)  domestic producers will increase the quantity supplied in order to crowd out the foreign-produced good.

Question 6

Suppose demand for a good is QD = 100 - P and supply is QS = -20 + P.What is the amount consumers pay producers?

Accepted Answer

A)  60
B)  2400
C)  3600
D)  6400

Question 7

Price controls

Accepted Answer

A)  are always popular with consumers because they lower prices.
B)  create shortages.
C)  increase producer surplus because firms can now sell a greater quantity of a good at a lower price.
D)  are necessary to preserve equity.

Question 8

One way to minimize the deadweight loss resulting from a specific tax is to

Accepted Answer

A)  tax only wealthy firms and individuals.
B)  spread the tax over many goods and services.
C)  tax goods for which either supply or demand is inelastic.
D)  tax luxury items such as yachts and sports cars.

Question 9

When prices drop in response to a decline in demand for an increasing cost industry

Accepted Answer

A)  producer surplus will increase but rents may decrease.
B)  rent earned by elastically supplied inputs will decline by more than rent earned by inelastically supplied inputs.
C)  rent earned by elastically supplied inputs will decline by less than rent earned by inelastically supplied inputs.
D)  both producer surplus and rents will increase.

Question 10

If the market for bottled spring water is characterized by a very elastic supply curve and a very inelastic demand curve,an outward shift in the supply curve would be reflected primarily in the form of

Accepted Answer

A)  higher prices.
B)  higher output.
C)  lower prices.
D)  lower output.

Question 11

In a competitive market,an efficient allocation of resources is characterized by

Accepted Answer

A)  a price greater than the marginal cost of production.
B)  the possibility of further mutually beneficial transactions.
C)  the largest possible sum of consumer and producer surplus.
D)  a value of consumer surplus equal to that of producer surplus.

Question 12

If a 1 percent increase in price leads to a .7 percent increase in quantity supplied in the short run,the short-run supply curve is

Accepted Answer

A)  elastic.
B)  inelastic.
C)  unit elastic.
D)  perfectly inelastic.

Question 13

In the long run,the greater burden of a specific tax will usually be absorbed by

Accepted Answer

A)  consumers.
B)  the party consumers or producers with the more elastic demand/supply curve.
C)  the party with the least elastic demand/supply curve.
D)  shareholders and employees of the firm in the form of reduced dividends and wages.

Question 14

In the short run,specific taxes on a firm result in

Accepted Answer

A)  price increases that may not persist in the long run.
B)  an increase in consumer surplus because the tax permits spending in additional government services.
C)  shortages of the good being taxed.
D)  an increase in producer surplus because of the rise in price.

Question 15

Per-unit transaction costs

Accepted Answer

A)  may cause the demand and supply curves to shift either inward or outward depending on the value obtained from transaction agents.
B)  refer only to the commission paid to a third party for each transaction made.
C)  are absorbed by the party seeking the transaction.
D)  have the same effect on behavior as do lump-sum transaction costs; the difference in terminology is purely definitional.

Question 16

Suppose demand for a good is QD = 100 - P and supply is QS = -20 + P.Suppose that a nationwide quota (of 20)is enforced so that more can be used in a war effort.What is the consumer surplus?

Accepted Answer

A)  200
B)  400
C)  600
D)  800

Question 17

Suppose there are 100 firms each with a short run total cost of STC = q2 + q + 10,so that marginal cost is MC = 2q +1.If market demand is given by QD = 1050 - 50P,what is the equilibrium price?

Accepted Answer

A)  5
B)  10
C)  11
D)  50

Question 18

The short-run market supply curve is

Accepted Answer

A)  the horizontal summation of each firm's short-run supply curve.
B)  the vertical summation of each firm's short-run supply curve.
C)  the horizontal summation of each firm's short-run average cost curve.
D)  the vertical summation of each firm's short-run average cost curve.

Question 19

In the very short run

Accepted Answer

A)  new firms may enter the industry.
B)  existing firms may change the quantity they are supplying.
C)  price and quantity supplied is absolutely fixed.
D)  quantity supplied is absolutely fixed.

Question 20

Suppose demand for a good is QD= 100 - P and supply is QS = -20 + P.What is the consumer surplus?

Accepted Answer

A)  200
B)  400
C)  600
D)  800

Exam 9: Perfect Competition in a Single Market

Under perfect competition,if an industry is characterized by positive economic profits in the short run

Suppose demand for a good is Q_D= 100 - P and supply is Q_S = -20 + P.What is the equilibrium quantity?

A deadweight loss of consumer and/or producer surplus occurs when

One example of Ricardian rent is

In the opening of free trade,if world prices of a good are less than domestic prices of that same good,

Suppose demand for a good is Q_D = 100 - P and supply is Q_S = -20 + P.What is the amount consumers pay producers?

Price controls

One way to minimize the deadweight loss resulting from a specific tax is to

When prices drop in response to a decline in demand for an increasing cost industry

If the market for bottled spring water is characterized by a very elastic supply curve and a very inelastic demand curve,an outward shift in the supply curve would be reflected primarily in the form of

In a competitive market,an efficient allocation of resources is characterized by

If a 1 percent increase in price leads to a .7 percent increase in quantity supplied in the short run,the short-run supply curve is

In the long run,the greater burden of a specific tax will usually be absorbed by

In the short run,specific taxes on a firm result in

Per-unit transaction costs

Suppose demand for a good is Q_D = 100 - P and supply is Q_S = -20 + P.Suppose that a nationwide quota (of 20) is enforced so that more can be used in a war effort.What is the consumer surplus?

Suppose there are 100 firms each with a short run total cost of STC = q² + q + 10,so that marginal cost is MC = 2q +1.If market demand is given by Q_D = 1050 - 50P,what is the equilibrium price?

The short-run market supply curve is

In the very short run

Suppose demand for a good is Q_D= 100 - P and supply is Q_S = -20 + P.What is the consumer surplus?

Exam 9: Perfect Competition in a Single Market

Under perfect competition,if an industry is characterized by positive economic profits in the short run

Suppose demand for a good is QD= 100 - P and supply is QS = -20 + P.What is the equilibrium quantity?

A deadweight loss of consumer and/or producer surplus occurs when

One example of Ricardian rent is

In the opening of free trade,if world prices of a good are less than domestic prices of that same good,

Suppose demand for a good is QD = 100 - P and supply is QS = -20 + P.What is the amount consumers pay producers?

Price controls

One way to minimize the deadweight loss resulting from a specific tax is to

When prices drop in response to a decline in demand for an increasing cost industry

If the market for bottled spring water is characterized by a very elastic supply curve and a very inelastic demand curve,an outward shift in the supply curve would be reflected primarily in the form of

In a competitive market,an efficient allocation of resources is characterized by

If a 1 percent increase in price leads to a .7 percent increase in quantity supplied in the short run,the short-run supply curve is

In the long run,the greater burden of a specific tax will usually be absorbed by

In the short run,specific taxes on a firm result in

Per-unit transaction costs

Suppose demand for a good is QD = 100 - P and supply is QS = -20 + P.Suppose that a nationwide quota (of 20) is enforced so that more can be used in a war effort.What is the consumer surplus?

Suppose there are 100 firms each with a short run total cost of STC = q2 + q + 10,so that marginal cost is MC = 2q +1.If market demand is given by QD = 1050 - 50P,what is the equilibrium price?

The short-run market supply curve is

In the very short run

Suppose demand for a good is QD= 100 - P and supply is QS = -20 + P.What is the consumer surplus?

Suppose demand for a good is Q_D= 100 - P and supply is Q_S = -20 + P.What is the equilibrium quantity?

Suppose demand for a good is Q_D = 100 - P and supply is Q_S = -20 + P.What is the amount consumers pay producers?

Suppose demand for a good is Q_D = 100 - P and supply is Q_S = -20 + P.Suppose that a nationwide quota (of 20) is enforced so that more can be used in a war effort.What is the consumer surplus?

Suppose there are 100 firms each with a short run total cost of STC = q² + q + 10,so that marginal cost is MC = 2q +1.If market demand is given by Q_D = 1050 - 50P,what is the equilibrium price?

Suppose demand for a good is Q_D= 100 - P and supply is Q_S = -20 + P.What is the consumer surplus?