Question

1. Imperfect competition is characterized by firms competing on price.

True

False

2.

The shape of the demand curve facing the perfectly competitive firm is downward sloping.

True

False

3.

An employer operating under conditions of a perfectly competitive labour market will hire labour up to the point where the marginal product of labour equals the wage rate.

True

False

4.

If the price of a product rises, which of the following statements regarding the perfectly competitive firm is correct.

a. Its total revenue curve will be steeper.

b. Its total revenue curve will be flatter.

c. Its average revenue curve will be flatter.

5.

Suppose that a country has a comparative advantage in the production of wheat. Which of the following statements is true?

a. The purchasing power parity theory must also be in its favour.

b. Specialization is wise only if exchange rates are fixed.

c. It must also have an absolute advantage in the production of wheat.

d. Specialization is wise only up to a point because of the law of increasing costs.

d. Its average revenue curve will be steeper.

6.

Suppose, BC's current import of wine is 8000 litres. Government introduces a tariff of $5 per litre of wine, as a result, the volume of wine imports cuts down to half. What is the value of tariff revenue collected by the government?

Select one:

a. $2000

b. Cannot be determined

c. $40000

d. $20000

e. $1600

Answer 1

1. True.

Imperfectly competitve market firms sells differenciated products. Products are close substitutes, but they are different from each other. Thus they compete by charging different prices. In perfect competition, products are homogeneous, thus they are price takers and they do not compete with prices.

2. false.

Firms in the Perfectly competitve market are price takers. They sell products at price determined by the market demand and supply curve. the demand curve is horizontally sloped. The seller can sell any quantity at given prices.

3. True.

Demand cueve of labour is also a marginal product curve of labour. The employer always pay a wage equal to its marginal product. If the marginal product of labour is greater than wage, employer employs more amount of labour which decreases marginal product of labour and it gets equalised to wage rate

4. A. Total revenue curve become steeper.

In the figure below new price line is P1. Old price line P and corresponding TR curve is TR. WITH price rise demand curve shifts upwards corresponging to which TR curve shifta to TR1

5.

ANSWER :Specialization is wise only up to a point because of the law of increasing costs.

With specialisation this country produces only wheat. With massive production of wheat, country may surpass economies of scale range, where average cost of production decreases with increase in output. Over production of wheat may leads to country face diseconomies of scale where average cost of production increases with increase in output, corresponding to the upward sloping portion of the demand curve.

WRONG OPTIONS:
a. The purchasing power parity theory must also be in its favour.: It measures the living staandard to two countries

b. Specialization is wise only if exchange rates are fixed. :

c.It must also have an absolute advantage in the production of wheat: According to comparative advanage theory even if a country does not have absolute advantage in the production of commodties over its tarding partner trade is possible. They specialise in the production commodities where absolute disadvantage is least.

6. answer :d

With tariff import quantity becomem 4000 litres.

TOTAL REVENUE= 5*4000

=$20000