Question

Which of the following statements is TRUE?

Select one:

a. A firm should enter an industry if average costs are less than producer surplus.

b. Fixed costs fall as firms produce more output, the so-called “spreading of the costs.”

c. Entry and exit from an industry depend on the firm's market share.

d. High profits in an industry give entrepreneurs an incentive to enter that industry.

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Question 32

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(This question refers to the MRU video 'The Monopoly Markup'.) The monopoly markup is the difference between:

Select one:

a. the monopoly price and the monopoly quantity.

b. the monopoly price and the average cost.

c. the total monopoly revenue and the total monopoly cost.

d. the monopoly price and the marginal cost.

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Question 33

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Figure: Smoking Ban Policy Spectrum

Reference: Ref 20-2

(Figure: Smoking Ban Policy Spectrum) Refer to the figure. If there are only two candidates, A and B, and a smoking ban is the only issue being debated in this election, which one of the voters is the median voter?

Select one:

a. Abdul

b. Victoria

c. O'Rourke

d. Edward

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Question 34

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(This question refers to the MRU video 'Who Pays the Tax?'.) Who bears more of the burden of Social Security taxes?

Select one:

a. Workers do, because the supply of labor is less elastic than the demand.

b. Employers do, because the demand for labor is less elastic than the supply.

c. Workers do, because the supply of labor is more elastic than the demand.

d. Employers do, because the demand for labor is more elastic than the supply.

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Question 35

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(This question refers to the MRU video 'Tax Revenue and Deadweight Loss'.) Consumer surplus falls after a tax because the price buyers pay _______ and the quantity exchanged _______.

Select one:

a. rises; falls

b. rises; rises

c. falls; rises

d. falls; falls

Answer 1

Ans) 1) When existing firms earn positive economic profit, more firms enter into the market. When existing firms earn negative economic profit, some firms will exit the market.

Option d.

2) Markup is the difference between marginal cost and the price charged by the monopolist.

Option d.

3) Figure missing.

4) Less elastic side of the market bears greater burden of tax. Since, in general, labour supply is less elastic than labour demand, employees bear greater burden of social security tax.

Option a.

5) When government imposes tax, price paid by buyers increases, due to which consumer surplus decreases. And price received by sellers decreases, due to which producer surplus decreases. Also the quantity exchanged reduces.

Option a.