Question

Please answer all, thank you.

1. If cats become a more popular pet in the United States than they are now, what can we expect to happen to the market for cat food workers?
   1. wage decreases
   2. MP increases    
   3. MRP decreases
   4. MRP increases

2. Which of the following could be a perfectly competitive market?
   1. the market for patented pharmaceuticals            
   2. the market for restaurants with permits to sell alcohol   
   3. the market for tradable stocks  
   4. the market for licensed electricians

3. Suppose the price of HD televisions decreases. As a result, the
   1. MRP of the workers making HD televisions will increase.
   2. MP of the workers making HD televisions will increase.  
   3. MRP of the workers making HD televisions will decrease.             
   4. MFC of the workers making HD televisions will increase.

4. Suppose the Tidy Laundry Detergent Company, which sells 40% of all detergent, is thinking about raising its price. Before Tidy makes the change, they analyze the likely responses of the All-Clean Detergent Company, which sells 35% of all detergent, and Cheerful Detergent Company, which sells 20% of all detergent. Tidy's behavior shows
   1. nonprice competition.  
   2. collusion.            
   3. mutual interdependence in pricing decisions.     
   4. difficult entry in oligopolies.       

5. If the marginal cost of the 5,000th unit is $0.06 and the average total cost of the 5,000th unit is $0.10:
   1. average total cost is falling.         
   2. total cost is falling.          
   3. average variable cost is falling.  
   4. average fixed cost is rising.

6. What is the largest possible loss that is consistent with a firm producing in a perfectly competitive market in long-run competitive equilibrium?
   1. an amount equal to total fixed cost         
   2. zero      
   3. an amount equal to total variable            
   4. an amount equal to price minus average variable cost

7. Which of the following is not one of the work disincentive criticisms of welfare programs?
   1. Welfare provides income that is easier to obtain than by working, so poor are induced to reduce their work effort.
                     
      b. The more a welfare recipient earns from a job, the fewer the benefits he or she receives.         
   2. Because welfare benefits are paid for with money collected from taxes and these taxes reduce take home pay for those working, the reward for work is reduced.     
   3. Bureaucracy associated with welfare results in more money in the hands of bureaucrats than in the hands of the poor.

8. Suppose there are four buyers all considering purchasing round-trip airfare from Boston to Miami with the following price elasticities of demand for this purchase: Buyer A: 1.5, Buyer B: 0.7, Buyer C: 1.0, Buyer D: 2.3. If the airline knows of these elasticities and practices price discrimination, which buyer will pay the highest price for the airfare?
   1. Buyer C
   2. Buyer D
   3. Buyer A
   4. Buyer B

9. Why do economies of scale and monopoly power exist with network goods?
   1. As the number of people connected to a network increases, the greater the benefits each person gets and the smaller the cost per unit to supply.         
   2. Many small firms must develop to serve all of the consumers willing to pay for access to the network good, so their costs are driven down.     
   3. Network goods require a group of sellers working together and this cooperation reduces the firms' cost per unit.     
   4. Just as the value of a network good decreases to each user as the total number of users increases, so does the long run average cost decrease as output increases.     

10. What happens to the marginal product of labor when the market price of the good produced increases?
    1. Decreases proportional to price.               
    2. Stays the same.
    3. Falls because quantity demanded falls.
    4. Increases proportional to price.

Answer 1

1. If cats become a more popular pet in the United States than they are now, what can we expect to happen to the market for cat food workers?
   1. wage decreases
   2. MP increases    
   3. MRP decreases
   4. MRP increases

Correct option is : Option d. MRP (Marginal product) increases. As product is getting popular then it means that each additional labor will generate more revenue.

1. Which of the following could be a perfectly competitive market?
   1. the market for patented pharmaceuticals            
   2. the market for restaurants with permits to sell alcohol   
   3. the market for tradable stocks  
   4. the market for licensed electricians

Perfect market is a market which is price taker and entry/exit is free. Patents/licences and permits create imperfect markets. Hence correct option is C. as it is free to enter and exit.

1. Suppose the price of HD televisions decreases. As a result, the
   1. MRP of the workers making HD televisions will increase.
   2. MP of the workers making HD televisions will increase.  
   3. MRP of the workers making HD televisions will decrease.             
   4. MFC of the workers making HD televisions will increase.

Correct option : Demand for labour depends on the marginal revenue product of a worker. If demand for HD tvs decreases then MRP will decrease.

4. Suppose the Tidy Laundry Detergent Company, which sells 40% of all detergent, is thinking about raising its price. Before Tidy makes the change, they analyze the likely responses of the All-Clean Detergent Company, which sells 35% of all detergent, and Cheerful Detergent Company, which sells 20% of all detergent. Tidy's behavior shows
   1. nonprice competition.  
   2. collusion.            
   3. mutual interdependence in pricing decisions.     
   4. difficult entry in oligopolies.
   5. Correct option is : C. As market is oligopoly ( 2-10 sellers), each firm has to consider rivals business decision.