Question # 1

A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is called.

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a competitive equilibrium

An open market solution

The Nash equilibrium

The cartel equilibrium

The price of Ketchup at a market increases by 12.5% per can, which results in a decrease in quantity purchased by 40% per week, the demand is.

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Relatively elastic

Relatively inelastic

Perfectly elastic

Perfectly iinelastic

If a monopolist's demand curve is downward sloping and linear, then its total revenue curve must be.

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Identical to the demand curve

A ray from the origin with a slope equal to price

negative sloped with twice the slope of the demand curve

A rising function of output that increases at a decreasing rate , reaches a maximum, then falls.

Which of the following groups is most hurt by unexpected inflation.

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Workers with cost of living adjustments in their labor contracts

Home owners

People with large debts to pay for their homes and cars

People with large retirement savings held in savings accounts.

Firms in monopolistic competition compete on

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Price

Quality

Advertising

All of the above are correct

The income elasticity of demand

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Is negative for normal goods

Is positive for normal goods

Equals the relative change in demand for a good divided by the relative change in the iincome of consumers all else being equal

Is correctly described by all of the above

In perfect competition the transpiration cost

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Excluded from the total cost

Is important figure in total cost

Is ignored

All of these

The Marginal cost of product W exhibiting positive externalities is McW = 25 + 5 Qs, the competitive price for each unit of W (Pw) is Rs. 175 and the positive externality is worth Rs. 100 to society for each unit produced. Society considers product W under produced by how many units.

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10 Units

15 Units

20 Units

5 units

If the price of factor A is Rs.8.00 per hour, and its marginal product is 10 units, and the price of factor B is Rs. 5.00 and its marginal product is 9, is the producer is likely to.

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Hire more of A and less of B

Hire more of B and less of A

Start paying factor A more

Try to use factor B more productively

The supply curve of a perfectly competitive firm

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Includes the upward sloping portion of the marginal cost

Is equal to entire margin cost

Includes the downward sloping portion of marginal cost

None of these

The elasticity of demand for cigarettes by a non smoker is.

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Unitary price elastic

Relatively price elastic

Perfectly price elastic

Perfectly price inelastic

Firm A's margin of safety is.

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0.10

0.40

0.20

0.30

Goods which can be consume directly are

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Producer goods

Consumer goods

Free goods

Economics goods

If the estimated values of Y and Py in 1987 are Rs. 30,000 and Rs. 8 respectively the marginal revenue of X is.

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260 - 160 x

420 - 4Qx

240 - 16 Px

80 - 4Qx

Price discrimination occurs when

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A commodity has different elasticity in different markets

Same elasticity in different markets

Unitary elasticity different markets

Noe of these

The firm under monopolistic competition is likely to produce less and set a higher price than under perfect competition because.

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The firm faces decreasing returns to scale

The firm faces increasing costs

The firm must incur selling expenses including advertising.

The firm faces a downward sloping demand curve

As long as the principle of diminishing marginal utility is operating any increased consumption of good.

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Lowers total utility

Produces negative total utility

Lower marginal utility and therefore total utility

Lowers marginal utility, but may raise total utility.

The marginal rate of substitution of two goods can be obtain from

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Slope of budget line

Slope of demand curve

Slope of indifference curve

None of these

Average fixed cost

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Is U shaped

Declines over the entire output range.

Is a long run concept only

Is influenced by diminishing returns to production

A firm that is a price taker faces a perfectly

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Elastic supply curve

Inelastic demand curve

Elastic demand curve

In elastic supply curve

When the price of an inferior goods falls ceteris paribus the substitution effect leads to ________ in the quantity purchased and the income effect leads to _______ in the quantity purchased.

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An increase an increase

An increase, a decrease

A decrease, an increase

A decrease, a decrease

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