Question

In the short run, the industry supply curve is the sum of the positively-sloped portions of the member firms' average cost schedules.
A) True
B) False

Figure and Table: The Changing Slope of an Indifference Curve

Consumption bundle	Quantity of rooms	Quantity of restaurant meals
V	2	30
W	3	20
X	4	15
Y	5	12
Z	6	10

50. (Figure and Table: The Changing Slope of an Indifference Curve) When going from bundle W to bundle X, there is a decrease in _____. But when going from bundle W to bundle V, there is _____.

A) the quantity of Meals; an increase in (MUMeals / MURooms)

B) (MUMeals / MURooms); an decrease in (MURooms / MUMeals)

C) the quantity of Meals; a decrease in the (MURooms / MUMeals)

D) the MRS; a decrease in the (MURooms / MUMeals)

E) (MURooms / MUMeals); an increase in the MRS

If the supply curve is given by the equation P = 10 + 4Q, and the competitive market equilibrium price is $60, then a price-ceiling set at Pmax = $50 will result in a dead-weight loss for the producers of _____.
A) $8.50

B) $10.00 C) $2.00 D) $12.50

Answer 1

(Question 1) False

Short-run industry supply curve is horizontal summation of firm supply curves, which are the upward-rising portions of firm Marginal cost curves.

(Question 50) (C)

At bundle X, number of meals is less than that at bundle W.

At Bundle X, (MUrooms / MUmeals) = [(4 - 3) / (15 - 20)] = 1 / (-5) = -0.2

At Bundle V, (MUrooms / MUmeals) = (2 - 3) / (30 - 20) = (-1) / 10 = -0.1

So at bundle V, (MUrooms / MUmeals) is lower than (MUrooms / MUmeals) at bundle W.

(Question 3) (D)

In equilibrium price of $60, from supply curve:

60 = 10 + 4Q

4Q = 50

Q = 12.5

When Pmax = $50,

50 = 10 + 4Q

4Q = 40

Q = 10

Deadweight loss = (1/2) x Change in price x Change in quantity = (1/2) x $(60 - 50) x (12.5 - 10) = (1/2) x $10 x 2.5

= $12.5