1. We all complain about high gasoline prices and some politicians would impose

Question

1. We all complain about high gasoline prices and some politicians would impose a $1 subsidy (tax reduction) per gallon during the summer. Given that gasoline is very inelastic in the short run, most of the $1 subsidy per gallon would go to (Points : 3)

       consumers
       gas stations
       the government
       middle east oil producers

Question 2. 2. A price floor means that: (Points : 3)

       inflation is severe in this particular market.
       monopolistic sellers are artificially restricting supply to raise price.
       government is imposing a legal price that is below the equilibrium price.
       government is imposing a legal price that is above the equilibrium price.

Question 3. 3. An effective price ceiling will: (Points : 3)

       force some firms in this industry to go out of business.
       result in a product surplus.
       result in a product shortage.
       clear the market.

Question 4. 4. Suppose a good was put on "sale", but the total revenue remained unchanged. This means the elasticity of demand for that good was (Points : 3)

       zero
       less than 1
       more than 1
       equal to 1

Question 5. 5. If the cross price elasticity of demand of two goods is zero, the goods are (Points : 3)

       substitute goods
       complementary goods
       normal goods
       none of the above

Question 6. 6. Sales tax is regarded as a: (Points : 3)

       proportional tax
       progressive tax
       regressive tax
       direct tax

Question 7. 7. In general we should expect that for the case of cigarette sales tax: (Points : 3)

       buyers pay the full tax amount because demand is perfectly elastic
       buyers pay the full tax amount because supply is perfectly inelastic
       sellers pay the full tax amount because supply is perfectly elastic
       sellers pay the full amount because demand is perfectly elastic

Question 8. 8. A monopolistically competitive firm may charge a price equal to (Points : 3)

       MR = MC price
       AR
       Demand price
       all of the above

Question 9. 9. Which of the following is the general distinction between price taker firms and monopolistic competitive firms? (Points : 3)

       pure competitors must compete with rival sellers, while monopolistically competitive firms cooperate each other.
       monopolistically competitive firms can raise their price without losing sales; pure competitive firms cannot.
       pure competition firms make economic losses, but monopolistic competitive firms make economic profits.
       pure competitors confront a perfectly elastic demand curve, while monopolistic competitive firms face a downward-sloping demand curve.

Question 10. 10. The PC computer industry is monopolistically competitive. So, we should expect that PC computer manufacturers cannot make economic profits in the long-run because (Points : 3)

       entry barriers into these markets are high, raising the costs of each firm.
       the government will dictate moderate prices for these firms.
       marginal revenue is always less than marginal cost when barriers to entry are low.
       competition among suppliers and low entry barriers will force prices down to the level of production costs.

Question 11. 11. What would be the effect on prices, quantity and quality of products if the computer industry shifts from monopolistic competitive to purely competitive (price taker)? (Points : 3)

       higher prices, higher quantities, higher quality and variety.
       lower prices, higher quantities, higher quality and variety
       lower prices, higher quantities, less quality and variety.
       lower prices, fewer quantities, less quality and variety.

Question 12. 12. The MR = MC rule to maximize profits applies: (Points : 3)

       only to pure competitive firms.
       only to pure monopoly firms.
       only to competitive firms in the long run.
       to monopoly, monopolistic competition and perfectly competitive firms.

Question 13. 13. Based on the characteristics of the oil industry, you would say this industry is an example of: (Points : 3)

       pure competition.
       monopolistic competition.
       oligopoly.
       monopoly.

Question 14. 14. Oligopoly is difficult to analyze primarily because: (Points : 3)

       the number of firms is too large to make collusion understandable.
       the price and output decisions of any one firm depend on the reactions of its rivals.
       output may be either homogenous or differentiated.
       neither allocative nor productive efficiency is achieved.

Question 15. 15. one positive aspect of oligopolistic industry is (Points : 3)

       oligopolistic firms would be better off if they collude, but each has an incentive to cheat on the collusive agreement.
       equitable income distribution
       oligopolistic firms never have an incentive to cheat on collusive agreements
       research and development

Question 16. 16. When oligopolistic firms collude to maximize their joint profits, in comparison with the situation in competitive markets, their actions generally lead to: (Points : 3)

       a larger output and lower prices.
       a smaller output and higher prices.
       a smaller output and lower prices.
       equivalent output and prices.

Question 17. 17. Which of the following are illegal under the antitrust laws of the United States? (Points : 3)

       charging prices that exceed average total costs.
       charging different prices for the same product.
       mergers that create large firms with the potential to capture less than 10% of the market.
       mergers that create large firms with the potential to monopolize the market

Question 18. 18. Which of the following is the best definition of physical capital?

       the labor utilized in the production process
       man-made resources used to produce other goods
       natural resources in their original state
       the opportunity cost of an investment decision

Question 19. 19. A price discriminating monopolist would charge the highest price when )

       in absolute terms, elasticity of demand is equal to 1
       in absolute terms, elasticity of demand is more than 1
       in absolute terms, elasticity of demand is less than 1
       in absolute terms, elasticity of demand is between 1 and 2

Question 20. 20. Due to the law of diminishing marginal returns, most industries in our economy exhibit

       increasing returns to scale
       decreasing returns to scale

       constant returns to scale

       marginal returns to scale

Question 21. 21. Which of the following best illustrates the concept of derived demand?

       a decrease in the price of glass causes the demand for plastic to decrease
       an increase in the demand for bread leads to an increase in the demand for flour
       a decrease in the price of air travel leads to an increase in quantity demanded for air travel
       an increase in the demand for peanut butter leads to an increase in the demand for jelly

Question 22. 22. The productivity of a resource, say labor, is affected by)

       technological changes like faster computers
       the amount of other resources that it is used with, for instance, more computers
       changes in the quality of the resource, for instance, a degree from National University
       all of the above

Question 23. 23. Firms should hire additional units of a resource as long as the

       marginal product of the resource is positive.
       marginal product of the resource is less than the price of the resource.
       price of the output produced is positive.
       marginal revenue product of the resource exceeds the cost of employing an additional unit of the resource.

Question 24. 24. Given the announcement of salmonella outbreak in TOMATOES, the Demand curve for TOMATOES decreases (D shifts to the left) and the Demand curve for FERTILIZERS used to grow tomatoes will

       increase or shift to the right.
       remain the same, but the quantity demanded of fertilizers will decrease
       decrease or shift to the left
       increase or decrease, depending on whether the Tomato farms are labor intensive or capital

Question 25. 25. The demand curve for a productive factor like 'painters' will be more elastic the

       more substitute resources that are available
       more difficult it is to substitute resources
       more inelastic the demand for the product the resources is used to produce
       shorter the time period

Question 26. 26. There are eight firms in an industry with equal market share. The Hirfindahl Index is

       250
       375
       800
       1250

Question 27. 27. Bilateral monopoly in the labor market exists when there is

       labor union
       monopsony
       perfect competition
       labor union and monopsony

Question 28. 28. Which one of the following resources will likely have the most inelastic supply curve in the short run?

       secretaries
       chemical engineers
       real state agents
       construction workers

Question 29. 29. Wages in the United States are higher than those in India primarily because

       the weather in U. S. is better
       a larger proportion of the labor force is unionized in the U. S.
       less capital per employee is required in the United States
       the human and physical capital of American workers exceeds that of their Indian counterparts, and this determines productivity levels.

Question 30. 30. Which of the following is more likely to increase your own labor productivity?

       more training and education investment paid by the firm
       an increase in the minimum wage paid by the firm
       the creation of a labor union with the consent of the firm
       a law that prohibits firms to layoff

1. We all complain about high gasoline prices and some politicians would impose a $1 subsidy (tax reduction) per gallon during the summer. Given that gasoline is very inelastic in the short run, most of the $1 subsidy per gallon would go to (Points : 3)

       consumers
       gas stations
       the government
       middle east oil producers

Explanation / Answer

Answers are in respective line (doubtful abt Q24.) :

consumers

government is imposing a legal price that is below the equilibrium price.

result in a product shortage.

regressive

none of the above

direct tax

buyers pay the full tax amount because supply is perfectly inelastic

MR = MC price

monopolistically competitive firms can raise their price without losing sales; pure competitive firms cannot.

competition among suppliers and low entry barriers will force prices down to the level of production costs.

lower prices, higher quantities, higher quality and variety

to monopoly, monopolistic competition and perfectly competitive firms

oligopoly

the price and output decisions of any one firm depend on the reactions of its rivals.

oligopolistic firms would be better off if they collude, but each has an incentive to cheat on the collusive agreement.

smaller output and higher prices.

mergers that create large firms with the potential to capture less than 10% of the market.

natural resources in their original state

in absolute terms, elasticity of demand is less than 1

constant returns to scale

decrease in the price of glass causes the demand for plastic to decrease

all of the above

marginal product of the resource is positive.

decrease or shift to the left

more substitute resources that are available

250

labor union and monopsony

chemical engineers (bcz production is most important)

the human and physical capital of American workers exceeds that of their Indian counterparts, and this determines productivity levels.

more training and education investment paid by the firm

Demand curve will shift towards rights. Eq. Price will decrease, quantity will increase

Shortage. Earlier revenue = 200000$. Current Revenue = 180*400 = 72000$

Cheers

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