Question

Question 8

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

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

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

C) None of the other answers is correct.

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

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

Question 9

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

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

B) The market supply must be perfectly inelastic.

C) The equilibrium wage must be above the new minimum wage.

D) The market demand must be perfectly inelastic.

E) None of the other answers is correct.

Question 10

Consider a single-price monopolist facing a demand curve of P = 160 – 2q, where P is market price and q is quantity. The monopolist has a total cost curve TC=40q. What is the deadweight loss created by the monopolist?

Group of answer choices

A) 0

B)900

C)None of the other answers is correct

D)1,800

E) 3,600

Q11

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 second-mover advantage.
iii. This is type of game is called a zero-sum game.

Group of answer choices

A) Statement ii.

B) Statement iii.

C) None of the other answers is correct.

D) Statement i.

E) All the statements are true.

Answer 1

Q 8. E.  The demand for dogs will increase, leading to a higher price for dogs.

reason: When the health benefits are made public, more people will start buying dogs. Thus demand increases, shifting the demand curve to the right, indicating an increased quantity and increased price for dogs.

Q 9. C. The equilibrium wage must be above the new minimum wage.

reason: If the equilibrium wage  is below the new minimum wage, then the supply of labor will be more than the demand for labor. There will be surplus of labor. Then the quantity of labor hired at the minimum wage will be less than at the equilibrium level. This will indicate an increase in unemployment rates.

Q 10. B. 900

reason: demand : P = 160-2q, So, MR = 160 - 4q (double slope); TC = 40q. So, MC = 40

Monopolist's quantity is where MC = MR; 160-4q = 40 So, q = 30 P = 160 - 2q = 160 - 2*30 = 100; P = 100

Competitive quantity = 160 - 2q = 40 = 60

DWL = ½(Price - MC) * (competitive quantity - monopoly quantity) = ½*(100-40)*(60-30) = ½*60*30 = 900

Q 11. E.  All the statements are true.

reson: The game of matching pennies is a zero sum game as one player's loss is the other palyer's gain. Literally, when we addd up the payoffs in one cell, they amount to zero. Secondly, there is no Pure strategy Nash equilirium in this game because there is simply no best response to any best responses of either player. Thirdly, this game has second mover's advantage because the player moving second can see what the first player has moved and choose a strategy and turn the game to his advantage.