21) 21) In perfect competition, an individual firm A) sets the price but does no

Question

21) 21) In perfect competition, an individual firm A) sets the price but does not determine the quantity it sells in the marketplace. B) sets the price and determines the quantity it sells in the marketplace. can not affect its price nor determine the quantity it sells in the marketplace. the quantity it sells in the marketplace but has no influence over its price. 24 20 16 12 Meals (per month 22) and the price of a restaurant movies and restaurant meals. The price of a movie ticket is meal is A) S10, S10 B) 57; $15 C) $20$5 55, $20 )Which of the following statements is true? 23) As more of a good is consumed, its total utility increases, even if the good is subject to diminishing marginal utility. B) As more of a good is consumed, its total utility increases, unless the good is subject to diminishing marginal utility C) No two people have identical utility functions, just as no two people have identical D) Both A and C above. Water has a -marginal utility and brings a- -consumer surplus; diamonds have a 24) marginal utility and bringaconsumer surplus. 'small; large: large; small C) large; small; small; large B) small; small: large; large D) large: large; small; small ortunity ost differs from the costs measured by an accountant because opportunity cost 25) includes all B) conventional depreciation. D) economic profit. A) profits. implicit costs

Explanation / Answer

21). In PC there are many buyers and many seller each produce an identical product, they do not have any power to influence the entire market individually, so they determine their optimum production given “P”.

=> “D”, determine the quantity it sells in market place but has no influence over its price.

22). Here Tanya have $100 to spend, now, let’s assume that “Pv=Price of Movie tickets”, now ”Pm=Price of meal”. If Tanya want to spend totally on “Movie”, => Tanya can able to purchase “20 tickets”, => 100/Pv=20, => Pv=100/20=5. ”. If Tanya want to spend totally on “Meals”, => Tanya can able to purchase “5Meals”, => 100/Pm=5, => Pm=100/5=20. So, Pv=5 and Pm=20.

=>”22 (D).

23). As we know that from the cardinal utility theory, the “total utility” function is “concave” innature,=> as we consume more and more of a goods total utility will increase but at a decreasing rate, because of diminishing MU.

=> 23(A).

24).

Water has a “lower” MU and bring “large” CS, diamond have a “large” MU and bring “lower” CS.

=> 24(A).

Since “price of diamond” is more than “price water”, => MUd > MUw. Now, at the very low level of water MUw > Mud, => given the price CSw > CSd.

25). OC differ from the cost measured by an accountant because OC includes all “implicitecosts”.

Accounting cost includes only explicit costs, such as direct cost to employee wages for raw materials etc. OC includes implicit costs in terms of revenue lost by forgoing an alternative.

=> 25(C)

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