Question

1.

Which is statement is true?

I. A single-price monopolist charges a price equal to the marginal cost of the last unit sold.
II. A monopolist with positive marginal costs and facing a linear demand curve always sets a quantity (or price) such that it sells on the elastic section of the demand curve.
III. A monopolist regulated by marginal-cost pricing regulation sells at a price that covers its variable and fixed costs of production, but it still causes a deadweight loss to arise.

Group of answer choices

only III is correct

only II is correct

None of the other answers are correct

only I and II are correct

only I is correct

2.

Consider a perfectly competitive market where the demand for skipping ropes is given by P = 60 – 2Qd and the supply of skipping ropes is given by P = 2Qs. The price of skipping ropes is set at $30. Which of the statements about the market is true?

Group of answer choices

There is excess supply

The price is below the market price

There is excess demand

The market is in the equilibrium

None of the other answers is correct.

3.

Which of the following accurately describes the fundamental problem at the core of all economic analysis? The fundamental problem is:

Group of answer choices

None of the other answers is correct

finding the way in which society can eliminate scarcity.

making sure that all firms in the market maximize their profits

understanding how resources can be used without creating scarcity.

the creation of non-scarce goods and the elimination of scarce goods.

4.

Suppose that ice-cream is a substitute good for chocolate. Which of the statements below is for sure true?

Group of answer choices

The cross-price elasticity of demand for ice-cream and chocolate is negative.

None of the other answers is correct

Increasing the price of chocolate, decreases the demand for ice-cream.

Ice-cream is a normal good.

The cross-price elasticity of demand for ice-cream and chocolate is positive.

5.

Which statement is true?

Group of answer choices

In the short run fixed costs must exceed variable costs

None of the other answers are correct

Ceteris paribus, a good's demand curve will be more inelastic the more substitutes it has.

Perfectly competitive firm charges a price equal to the marginal cost for the last unit produced.

Producer surplus is the same as profit

6.

Which of the statements about the short-run are true?

Group of answer choices

Average fixed cost is always declining in output

When marginal cost is below the average total cost, the average total cost is increasing as quantity increases

As output increases, average variable cost always increases

Because of diminishing marginal product, average fixed cost is eventually upward-sloping

None of the other answers is correct

7.

Consider a natural monopoly with the following total cost function: TC= 1000 + 20Q and the demand given by P = 140 - 2Q. If you would like to eliminate the deadweight loss completely, what pricing would you suggest that the government imposes on this monopoly.

Group of answer choices

None of the other answers is correct

P=80 and no subsidy since the monopolist profit is maximized

P=MC=20Q and a subsidy to make sure that the monopoly can cover the fixed cost

P=AC=20 and a tax to move the quantity traded to the efficient level

P=MC=20 and a subsidy to make sure that the monopoly can cover the fixed cost

8.

Suppose there are only two markets in NSW which face identical downward sloping and linear demand conditions and have identical marginal cost curves: the market for beer and the market for bicycles. Suppose further that the market for beer in Sydney is a single-price monopolist while the market for bicycles is in perfect competition. The government of NSW is looking for new ways to raise revenue. Which of the following raises relatively more tax revenue assuming the same per-unit tax in both markets?

Group of answer choices

Impose a subsidy on the beer market.

Impose half the tax on the bicycle market and half of the tax on the beer market.

Impose a subsidy on the bicycle market.

Impose a tax on the bicycle market.

Impose a tax on the beer market.

9.

Which of the following statements about the game below is true?

Firm 2

Firm 1	Heads	Tails
Head	(4,-4)	(-3,3)
Tails	(-3,3)	(4,-4)

i. There is no (pure strategy) Nash Equilibrium.
ii. There is a first-mover advantage.
iii. This is type of game is called a prisoners’ dilemma game.

Group of answer choices

Statement i.

None of the other answers is correct.

Statement iii.

All the statements are true.

Statement ii.

10.

Assume that the labour market is perfectly competitive. A local government is considering increasing the minimum wage. For the new minimum wage to have any effect, what must be true?

Group of answer choices

The old minimum wage must be above the new minimum wage.

The equilibrium wage must be above the new minimum wage.

The market demand must be perfectly inelastic.

None of the statements are true.

The old minimum wage must be below the equilibrium wage.

11.

Recently, the minister of health described the health benefits of owning a dog. Assuming that before the minister’s announcement the perfectly competitive market for dogs was in the equilibrium, what do you expect to happen in the short run?

Group of answer choices

The demand for dogs will increase, leading to a lower price for dogs.

The quantity demanded of dogs will increase, leading to a lower price for dogs.

The demand for dogs will increase, leading to a higher price for dogs.

None of the other answers is correct.

Nothing will change in the market if it is was in equilibrium before the minister’s announcement.

12.

Which of the following statements is true:

Group of answer choices

In the long run, under perfect competition; price equals the minimum of the marginal cost

In the long run, under perfect competition; firms experience a perfectly inelastic demand curve

In the long run, under perfect competition; there are no fixed costs

In the long run, under perfect competition; price equals the maximum of the marginal cost

None of the other answers is correct.

13.

Two firms are trying to decide whether to invest in advertising (Ad) or not (NoAd). Firm 1 moves first, and Firm 2 observes Firm 1’s action and then makes a choice. Find that Subgame Perfect Nash Equilibrium (SPNE) of the game below.

Firm 2

Firm 1	Ad	NoAd
Ad	(30,30)	(50,10)
NoAd	(20, 45)	(60,70)

Group of answer choices

None of the other answers is correct.

{ Ad; Ad, Ad}

{Ad; Ad (if Ad)}

{Ad; Ad (if (Ad), No Ad (if No Ad)}

{No Ad, No Ad (if No Ad)}

14.

Consider a perfectly competitive market, with demand given by and supply given by The government imposes a per unit tax of T=2. What is the total surplus after the imposition of the tax?

Group of answer choices

40.5

99

18

None of the other answers is correct.

81

14.

Which of the following statements is true?
i. A Subgame Perfect Nash Equilibrium (SPNE) always corresponds to a Nash Equilibrium from the normal form of the game
ii. A Subgame Perfect Nash Equilibrium (SPNE) does not necessarily correspond to Nash Equilibrium in every subgame
iii. A Subgame Perfect Nash Equilibrium (SPNE) does not need to be a complete contingent plan

Group of answer choices

None of the other answers is correct.

All the statements are true.

Statement i.

Statement ii.

Statement iii.

15.

Per capita real GDP is highly correlated across countries with:

Group of answer choices

None of the other answers is correct.

Health, happiness and education levels

Population growth, education levels and happiness

Happiness, education levels and literacy

Life expectancy, education levels and literacy

16.

According to Okun’s law, if the unemployment rate is expected to increase by 5 percentage points between this year and next year then we would expect GDP growth, relative to potential GDP growth, to:

Group of answer choices

Increase by 10 percentage points

None of the other answers is correct

Increase by 2.5 percentage points

Decrease by 10 percentage points

Decrease by 2.5 percentage points

17.

Macroeconomic policymakers try to:

Group of answer choices

Eliminate cyclical and frictional unemployment

Eliminate structural unemployment

Eliminate frictional unemployment

Eliminate cyclical unemployment

Eliminate cyclical and structural unemployment

18.

Answer 1

1. Only I is correct.

2. Excess Demand

3. None of the other ans. is correct

4. The cross Ed for icecreme &chocolate is positive.

5. None of the other ans. is correct.

6. None of the other ans. is correct.

7. P= MC= 20 Q and a subsidy to nake sure that the monopolist is able to cover the fixed cost.

8. Impose subsidy on bicycle market.

9. All statements are correct.

10. The equilibrium wage must be above the new minimum wage.

11. The demand for dogs will increase leading to higher price for dogs.

12. Nome of the other ans is correct.

13.None of the other ans. is correct.

14. None of the other ans is correct.

15. Life expectancy,education level and Literacy

16.Decrease by 10%.

17.Eliminate structural Unemployment.