ECC1000 Sample Exam with 100%
Correct Solutions
how changes in opportunity cost are related to decision-making behaviour - ANS-the
lower the opportunity cost of doing activity X, the more likely activity X will be done
optimal decisions are made up to the point where - ANS-marginal benefits are equal to
marginal costs
ceteris paribus - ANS-When the variables that are not mentioned remain constant
one reason that economists make assumptions when designing models is to - ANS-
Exclude variables that do not add predictive power to the model
a model without any simplifying assumptions - ANS-is highly complex and likely
unworkable
When the perfectly competitive firm is at its breakeven point in the long run - ANS-It is
operating at the lowest point on its ATC curve
the short run market supply shifts right, causing individual firms profits to decrease -
ANS-when a firm enters a market
play a crucial role in signaling where to guide resources in markets - ANS-entry by firms
and exit by firms
Three natural barriers to entry - ANS-conomies of scale, customer loyalty, and high
R&D costs
Monopolies are inefficient - ANS-they can earn excessive long-run profits
Deadweight loss exists in a monopoly because the monopolist - ANS-charges a price
that is above marginal cost
A firm operating in an oligopolistic market - ANS-has less market power compared to a
monopolist
Loss-aversion tends to cause people to - ANS-behave too conservatively and not take
enough risks
Correct Solutions
how changes in opportunity cost are related to decision-making behaviour - ANS-the
lower the opportunity cost of doing activity X, the more likely activity X will be done
optimal decisions are made up to the point where - ANS-marginal benefits are equal to
marginal costs
ceteris paribus - ANS-When the variables that are not mentioned remain constant
one reason that economists make assumptions when designing models is to - ANS-
Exclude variables that do not add predictive power to the model
a model without any simplifying assumptions - ANS-is highly complex and likely
unworkable
When the perfectly competitive firm is at its breakeven point in the long run - ANS-It is
operating at the lowest point on its ATC curve
the short run market supply shifts right, causing individual firms profits to decrease -
ANS-when a firm enters a market
play a crucial role in signaling where to guide resources in markets - ANS-entry by firms
and exit by firms
Three natural barriers to entry - ANS-conomies of scale, customer loyalty, and high
R&D costs
Monopolies are inefficient - ANS-they can earn excessive long-run profits
Deadweight loss exists in a monopoly because the monopolist - ANS-charges a price
that is above marginal cost
A firm operating in an oligopolistic market - ANS-has less market power compared to a
monopolist
Loss-aversion tends to cause people to - ANS-behave too conservatively and not take
enough risks
