Question

table 7-2 21. This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. Buyer Willingness To Pay David $8.50 Laura $7.00 Megan $5.50 Mallory $4.00 Audrey $3.50

Refer to Table 7-2. Which of the following is not true?

a. At a price of $9.00, no buyer is willing to purchase Vanilla Coke.

b. At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying one.

c. At a price of $4.00, total consumer surplus in the market will be $9.00.

d. All of the above are correct.

22. A firm produces 400 units of output at a total cost of $1,200. If fixed costs are $200,

a. average fixed cost is $2.

b. average variable cost is $2.50.

c. average total cost is $4.

d. average total cost is $5.

23. Select the type of market that is described by the following attributes: many firms, differentiated products, and free entry.

a. natural monopoly

b. perfectly competition

c. monopolistic competition

d. monopoly

24. Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

a. True b. False

25. If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

a. True b. False

Answer 1

21) (D) all of the above are true. Because at market price $9 no buyer is willing to purchase because all buyers willingness to pay is less than $9 so statement (A) is true.option (B ) is also true because at $5.50 Megan is indifferent because his willingness to pay is equal to this price so he is indifferent. Option (C) is also correct because at $4 price consumer surplus is ($4.50 +$3 +$1.5) is $9. So all statements are true,therefore option (D) is correct answer.

22) Total cost = $1200

Total fixed cost = $200

Total variable cost(TVC) = 1200 - 200 =$1000

At 400 units Average variable cost = TVC/Q

Average variable cost = 1000/400 = $2.50

Therefore,option (B) is correct answer.

23) (C) Monopolistic competition.

In Monopolistic competition has all the given characteristics i.e many firms, differentiated products, and free entry.

24) True , given statement is true i.e  Free entry eliminates long-run profits for firms in competitive and monopolistic industries. Because in short run in both market has some positive profit but as firm enter in the market reduces the profit and in long run in both market profit will be zero.

25) False, Beacuse govt set a price more than equilibrium price and if anyone sell the airline ticket at equilibrium price then he face loss and no one want to face loss so no one sell at equilibrium price.