QUESTION I In the very short run: a. quantity supplied is absolut...

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QUESTION I In the very short run: a. quantity supplied is absolutely fixed. b. existing firms may change the quantity they are supplying. c. price and quantity supplied are absolutely fixed. d. new firms may enter an industry. QUESTION 2 An increase in the price of good x will be accompanied by: a' only a shift in the market demand curve for goody (a substitute for good x). b. both a shift in the market demand curve for goody (a substitute for good x) and a movement along the market demand curve for good x. c' only a movement along the market demand curve for good x. d. only a shift in the market demand curve for good x. QUESTION 3 This question refers to a market in which quantity demanded is given by q = a—bp and quantity supplied by q=c+dP. In this market, an increase in the parameter a would: • a- increase quantity and decrease price. b- decrease both price and quantity. L-3 c- increase price and decrease quantity. d- increase both price and quantity. QUESTION 4 Which of the following is not a technical barrier to entry in a monopolized market? a. Decreasing average cost b. A patent c. Increasing returns to scale d. A low cost method of production known only by monopolists QUESTION 5 This question refers to a monopoly that faces a demand curve given by Q = 1— 0.5P andhas a constant marginal cost as 0.3. In this situation the monopoly's profit maximizing output level is: a. 0.425. b. 0.725. c. 0.225. d. 0.525. QUESTION 6 The supply curve for a monopoly is given by: a. the entire demand curve above the point where price is equal to average cost. b. the firm's marginal cost curve above the average variable cost curve. c. the one point on the demand curve that corresponds to the quantity for which price is equal to MC. d. the one point on the demand curve that corresponds to the quantity for which MR equals MC. QUESTION 7 This question refers to a market in which quantity demanded is given by q = a — bp and quantity supplied by q = c +dP In this market, equilibrium price is given by: a. P. = (a— c)I(d + b) b. P* = (a— c)I(d — b) c. = a/(b + d) d. P• = cl(b+d) . QUESTION 8 A demand curve will shift inward for any of the following reasons except that: a. price of a complement rises. b. price of a substitute falls. c. preference for a good decreases. d . income rises. QUESTION 9 If a 1 percent increase in price leads to a 1.7 percent increase in quantity supplied, the short-run supply curve is: _ a. perfectly inelastic. b. elastic. c. inelastic. d. unit elastic. QUESTION 10 Long-run elasticity of supply is defined as: a. percentage change in quantity demanded in the long run divided by percentage change in price. b. percentage change in quantity supplied in the long run divided by percentage change in price. c. percentage change in price divided by percentage change in quantity demanded in the long run. d. percentage change in price divided by percentage change in quantity demanded in the long run. QUESTION 11 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: a. higher output. b. lower output. c. higher prices. d. lower prices. QUESTION 12 The market demand curve for any good is: a. derived from the firm's marginal cost of production. b. the horizontal summation of individuals' demand curves. c. the vertical summation of individuals' demand curves. d. independent of individuals' demand curves for the good. QUESTION 13 A price discriminating monopolist having identical costs in two separated markets should charge a higher price in that market: a. which has a higher marginal revenue. b. which has a more elastic demand. , c. which has a higher demand. d. which has a less elastic demand. QUESTION 14 If a monopoly is maximizing profits: a. price will always be greater than average cost. b. price will always be greater than marginal cost. c. price will always equal marginal cost. d. price will always equal marginal revenue.

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