sus a the p?ice of $6 each and charge $16 for the machine. C. 8 capsules at the
ID: 1155825 • Letter: S
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sus a the p?ice of $6 each and charge $16 for the machine. C. 8 capsules at the price of $2 each and charge $32 for the machine D. 8 capsules at the price of $2 each and charge $64 for the machine here are only three markets on the Isle of Goldilocks: the market for big goods, the market o small goods, and the market for just right goods. If the market for big goods and the mar for small goods are both in equilibrium A. there may be an excess demand in the market for just right goods. B. the market for just right goods must be in equilibrium. C. there may be an excess supply in the market for just right goods D. there is insufficient information to determine the situation in the market for just rig goods 10. Which of the following assumptions is needed for the first welfare theorem? A. Consumers are homogeneous. BEach consumer is endowed with a strictly positive amount of each good. C. Each consumer is a price-taker. D. Lump-sum transfers between consumers is possible. EXAMINATION CONTINUES ON NEXT PAGE Page 5 of 10Explanation / Answer
9. Walras' law states that for n markets, if n-1 markets are in equilibrium then the nth market is also in equilibrium.
Answer - (B) the market for just right goods must be in equilibrium.
10. The first welafre theorem states that any competitive equilibrium leads to a pateto efficient allocation of resources. There's no monopoly.
Answer - (C) Each consumer is a price taker.
6. A monopolist has to reduce the price of the commodity in order to sell more and more units. Now, as price decreases, it decreases not only for the additional unit but for all the units. So, marginal revenue decreases more than price (demand).
Answer - (D) below the demand curve because a monopolist needs to reduce its price to sell an extra unit.
7. A monopoly always operates where demand is elastic. If demand is inelastic, it can always increase its price to increase revenue.
Answer - (A) the price elasticity of demand at the market quantity is elastic.
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