True, False, Explain : Indicate if you believe each statement is true or false,
ID: 1125812 • Letter: T
Question
True, False, Explain: Indicate if you believe each statement is true or false, then give a short explanation for your answer.
1. A sales tax which is the same for all goods (example 5% added to the sale price of anything bought anywhere) can be considered a regressive tax.
2. In a perfectly competitive market, if a single firm’s supply decreases, the price will increase.
3. In the short run, producers cannot change any of their production costs.
4. The same good can be rival or non-rival depending on the number of consumers using it.
5. Because a monopolist has market power, they can choose both the price they charge and the quantity that is sold for their good.
Short Answer: 1.
Table: (Demand for Economics Tutoring)
Quantity of Economics Tutoring Demanded (hours)
Price of Economics Tutoring (per hour)
0
1
2
3
4
5
6
6
5
4
3
2
2
1
Suppose Eric is the only economics person who can help others on homework in town and therefore holds a monopoly on the sale of economics tutoring. The table shows the demand schedule for his tutoring. Eric can offer additional hours of tutoring at a constant marginal cost of $1.50 per hour and he has no fixed costs.
a) If Eric acts as a monopolist, how many hours will he offer and what price will he charge?
b) Calculate Eric's monopoly profit.
2.
Quantity of Labor (workers)
Quantity of Textbooks
0
1
2
3
4
5
6
0
20
80
130
170
200
220
Marie has a small publishing company that produces textbooks. She has fixed costs of $1800 per month and hires workers (assume the only thing necessary to produce more books is to hire more labor) for $2,000 per month. The table shows Marie's monthly production function. With as much precision as possible, calculate the following:
a) total cost of production when four workers are employed
b) the output level that produces the lowest average total cost
c) the price that Marie must charge in order to break even on the production of 130 textbooks
Quantity of Economics Tutoring Demanded (hours)
Price of Economics Tutoring (per hour)
0
1
2
3
4
5
6
6
5
4
3
2
2
1
Explanation / Answer
1. False
It is a flat rate tax as a flat rate is being charged across all prices.
2. False.
A single's firm's output does not affect the market price in perfect competition as all firms enjoy a very low market share and no firm has market power.
3. False
Average production cost can be decreased in the short run by increasing production.
4. True
A road is generally a non-rival good but it very busy road can be rival as additional commuters make the road less available for others.
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