ECP3704 SET QUESTIONS AND ANSWERS SURE
A+
✔✔Suppose Darius had $1,000 to spend. He choose to spend the money on new
clothes (his first choice) rather than on 1,000 lottery tickets (his second choice) or a new
surfboard (his third choice). - ✔✔His opportunity cost of spending the money on clothes
is not buying the 1,000 lottery tickets.
✔✔According to The Nature of Man, the U.S. government decreasing the national
speed limit to 55 mph in the 1970's resulted in: - ✔✔increased use of radar detectors
✔✔The substitution affect isolates the change in the consumption of a good caused by:
- ✔✔the change in the relative prices of two goods.
✔✔Given that income is $1000, the price of good Y is $80, and the horizontal intercept
is 20 for the budget line on a normal X-Y graph. How many units of Y can be purchased
when 4 units of X are being purchased? - ✔✔10
✔✔Suppose that sellers value a good car at $10,000 and a bad car at $6,000, and
quality is not observed by the buyers. What is the highest price that risk-neutral buyers
should offer for a used car if 80% of the cars are good and 20% are bad? - ✔✔$9,200
✔✔The Nature of Man article argues that the most accurate model of human behavior is
the - ✔✔Resourceful, Evaluative, Maximizing Model
✔✔Suppose that good X is a complement to good Y. Then an increase in the price of
good Y leads to - ✔✔A decrease in the demand of good X
✔✔A decrease in the supply for a good will tend to cause - ✔✔an increase in the
equilibrium price and a decrease in the equilibrium quantity.
, ✔✔Which of the following is true for a monopoly in equilibrium? - ✔✔P > MC
✔✔If a monopolistically competitive firm's marginal cost increases, then in order to
maximize profits the firm will - ✔✔Reduce output and increase price
✔✔Which of the following is true? - ✔✔In the short run a monopolist will shutdown if P <
AVC
✔✔In the long-run, monopolistically competitive firms charge prices - ✔✔Above the
minimum of average total cost
✔✔Differentiated goods are not a feature of a - ✔✔Perfectly competitive market and
monopolistic market
✔✔One of the sources of monopoly power for a monopoly may be - ✔✔Patents
✔✔A perfectly competitive firm faces a: - ✔✔Perfectly elastic demand function
✔✔Which of the following features is common to both monopolistic markets and
monopolistically competitive markets? - ✔✔Many buyers
✔✔Which of the following is a correct representation of the profit maximization condition
for a monopoly? - ✔✔MC = MR
✔✔Suppose that initially the price is $50 in a perfectly competitive market. Firms are
making zero economic profits. Then, several firm owners decide to retire and shut down
their firms. When the industry returns back to the long-run equilibrium conditions, what
will be the new equilibrium price, assuming cost conditions in the industry remain
constant? - ✔✔$50
✔✔The primary difference between Monopolistic Competition and Perfect Competition
is - ✔✔product differentiation
✔✔Firms can have market power in: - ✔✔Monopolistically competitive markets and
monopolistic markets
✔✔Which of the following is an example of monopoly? - ✔✔Local utility industry in a
small town
✔✔Which of the following market structures would you expect to yield the greatest
product variety? - ✔✔Monopolistic Competition
A+
✔✔Suppose Darius had $1,000 to spend. He choose to spend the money on new
clothes (his first choice) rather than on 1,000 lottery tickets (his second choice) or a new
surfboard (his third choice). - ✔✔His opportunity cost of spending the money on clothes
is not buying the 1,000 lottery tickets.
✔✔According to The Nature of Man, the U.S. government decreasing the national
speed limit to 55 mph in the 1970's resulted in: - ✔✔increased use of radar detectors
✔✔The substitution affect isolates the change in the consumption of a good caused by:
- ✔✔the change in the relative prices of two goods.
✔✔Given that income is $1000, the price of good Y is $80, and the horizontal intercept
is 20 for the budget line on a normal X-Y graph. How many units of Y can be purchased
when 4 units of X are being purchased? - ✔✔10
✔✔Suppose that sellers value a good car at $10,000 and a bad car at $6,000, and
quality is not observed by the buyers. What is the highest price that risk-neutral buyers
should offer for a used car if 80% of the cars are good and 20% are bad? - ✔✔$9,200
✔✔The Nature of Man article argues that the most accurate model of human behavior is
the - ✔✔Resourceful, Evaluative, Maximizing Model
✔✔Suppose that good X is a complement to good Y. Then an increase in the price of
good Y leads to - ✔✔A decrease in the demand of good X
✔✔A decrease in the supply for a good will tend to cause - ✔✔an increase in the
equilibrium price and a decrease in the equilibrium quantity.
, ✔✔Which of the following is true for a monopoly in equilibrium? - ✔✔P > MC
✔✔If a monopolistically competitive firm's marginal cost increases, then in order to
maximize profits the firm will - ✔✔Reduce output and increase price
✔✔Which of the following is true? - ✔✔In the short run a monopolist will shutdown if P <
AVC
✔✔In the long-run, monopolistically competitive firms charge prices - ✔✔Above the
minimum of average total cost
✔✔Differentiated goods are not a feature of a - ✔✔Perfectly competitive market and
monopolistic market
✔✔One of the sources of monopoly power for a monopoly may be - ✔✔Patents
✔✔A perfectly competitive firm faces a: - ✔✔Perfectly elastic demand function
✔✔Which of the following features is common to both monopolistic markets and
monopolistically competitive markets? - ✔✔Many buyers
✔✔Which of the following is a correct representation of the profit maximization condition
for a monopoly? - ✔✔MC = MR
✔✔Suppose that initially the price is $50 in a perfectly competitive market. Firms are
making zero economic profits. Then, several firm owners decide to retire and shut down
their firms. When the industry returns back to the long-run equilibrium conditions, what
will be the new equilibrium price, assuming cost conditions in the industry remain
constant? - ✔✔$50
✔✔The primary difference between Monopolistic Competition and Perfect Competition
is - ✔✔product differentiation
✔✔Firms can have market power in: - ✔✔Monopolistically competitive markets and
monopolistic markets
✔✔Which of the following is an example of monopoly? - ✔✔Local utility industry in a
small town
✔✔Which of the following market structures would you expect to yield the greatest
product variety? - ✔✔Monopolistic Competition
