Question

13-)

In a Cournot duopoly, firms 1 and 2, produce Y1 and Y2, respectively. They have identical total cost function C(Yi) = 2 Yi, i = 1, 2. The market demand function is Y = 20 - p, where Y = Y1 + Y2. The market price p in a Cournot equilibrium is:

Select one:

a. 8

b. 20

c. 12

d. 4

14-)

Which of the following is not a decision faced by a firm in a perfectly competitive industry?

Select one:

a. how to produce

b. what price to charge

c. how much of each input to use

d. how much to produce

15-)

One of the following will not, “ceteris paribus,” cause the demand curve for good A to shift

Select one:

a. a change in the price of A

b. a change in the price of B, a complement

c. a change in the price of C, a substitute

d. an increase in average income

16-)

A monopolist has inverse demand function p = 80 - q where q is the quantity to be produced, and cost function C (q) = 40. What is monopolist's total revenue R, if he produces the profit maximizing output?

Select one:

a. 900

b. 1260

c. 1600

d. 1200

17-)

Marginal Cost

Select one:

a. can be calculated by multiplying ATC (average total cost) by the number of units produced

b. is the increase in total costs that results from increasing production by one unit

c. can be calculated by multiplying AVC (average variable cost) by the number of units produced

d. is the increase in fixed costs that results from increasing production by one unit

Answer 1

14. In a perfectly competitive market, firms are price- taker. Hence they take the market price as given. Hence the answer will be:

b. what price to charge.

15. Ceteris Paribus means "all other things equal". Here as demand curve for good A shifts, we consider the change in the price of B, a complement, a change in the price of C, a substitute and an increase in average income as given. However, the price good A will change due to this shift. Hence the answer will be:

a. a change in price of A

17. Marginal cost is the change in total cost by changing output by one unit. Hence the answer will be:

b. is the increase in total costs that results from increasing production by one unit