Economics quiz 3 | Economics homework help

 

 

 

QUIZ 3

 

 

Please put your answers to multiple choice questions in the proper cell of the Excel file under the link Quiz 3 MC Answer Sheet

and provide your answers to short-answer questions/prob of transaction costs

 lems in a separate Word file.

 

 

 

MULTIPLE CHOICE QUESTIONS (2 pts. EACH)

 

1.    Characteristics of a perfectly competitive market include

A. The absence of transaction costs

 

B. Differentiated products

 

C. Few sellers, some with a large market share

D. All of the above

 

2.    Suppose Julia and Zach are the only consumers of milk. Julia’s demand for milk is defined as

at prices below $4 and zero for prices above $4. Zach’s demand for milk is

defined as                             at prices below $5 and zero for prices above $5. If the market price

for milk is $4.50, market demand is

A. Zero

 

B. 1.5

C. 1

 

D. 10

 

3.  Milky Moo and Mega Cow are the only sellers of milk. Milky Moo’s supply function is

at prices above $0.50 and zero at prices below $0.50. Mega Cow’s supply

function is                             at prices above $0.33 and zero at prices below $0.33. At a price of

$0.45

 

A.  Milky Moo is the only supplier of milk

B.  Mega Cow is the only supplier of milk

 

C.  Both Milky Moo and Mega Cow supply milk

 

D.  Neither Milky Moo nor Mega Cow supply milk

 

4.  With free entry

A.  The long run market supply curve is horizontal at the market price

B.  The long run market supply curve is vertical at the market price

 

C.  The short and long run market supply curves are the same

 

D.  A and D

5.  The market demand for milk is

. Additionally, suppose that a dairy’s variable

costs are

(where Q is the number of gallons of milk produced each day), its marginal

cost is

and there is an avoidable fixed cost of $50 per day. In the long run there is free

     

entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, what is each of the active firms’ profit per unit in the short run equilibrium?

 

A. $4

B. $20

 

C. $24

D. $10

 

6.  A monopoly market is

A.  A market with many sellers

B.  A market with a single seller

 

C.  A market with a few sellers

 

D.  B and C

7. Suppose Kate’s Great Crete (KGC) has annual variable costs of

and

marginal costs of

, where Q is the number of cubic yards of concrete it

     

produces per year. In addition, it has an avoidable fixed cost of $50,000 per year. KGC’s demand

function is

. What is the profit maximizing sales quantity?

A. 20

 

B. 2,000

 

C. 8,000

 

D. 0

 

 

8.  A firm’s markup over its marginal cost is greater

A. The more elastic is the demand curve

B. The less elastic is the demand curve

C. The lower its fixed costs

 

D. The lower its average costs

 

9.  The Solo Coal Mine is the only employer in the small town of Way out there. The market

supply of coal miners is

 and , where W is the annual wage of a coal miner and Q is the number of coal miners. What is the profit maximizing number of coal miners for the coal mine to hire?

 

A. 100

B. 150

 

C. 50

D. 233.34

10.  A market is a natural monopoly when

A. A good is produced most economically by several firms B. A good is produced most economically by one firm

 

C. The government grants a firm a patent on a good

D. The firm’s average cost function is everywhere upward sloping

 

11. Price discrimination is based on observable customer characteristics

A. When a firm can distinguish consumers with a high versus low willingness to pay

 

B. When a firm offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay

 

C. A monopolist knows perfectly the customer’s willingness to pay for each unit its sells and can charge a different price for each unit

 

D. B and C

 

12.  A movie monopolist sells to students and adults. The demand function for students is

and the demand function for adults is . The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. What is the monopolist’s profit from students?

 

A. $400

B. $2400

 

C. $2500 D. $0

 

13.  Mixed bundling

A. Is the practice of selling several products together as a package

B. Is the practice of selling the same good to different types of consumers at different prices

C. Is the practice of selling several products together as a package while also offering those products for sale individually

 

D. Is the practice of selling goods in bulk at a reduced per unit price

 

14. With a two-part tariff

A. Consumers simply pay a fixed fee if they buy anything at all

 

B. Consumers pay a fixed fee if they buy anything at all, plus a separate per-unit price for each unit they buy

 

C. Consumers pay a fixed fee if they buy anything at all, plus an annual fee for the right to purchase anything

 

D. Consumers simply pay a fee for the right to buy anything 15. At the Nash equilibrium of an oligopoly market

 

A.  Only one firm is able to earn profits

B.  Each firm is making a profit-maximizing choice, regardless of the choices of its rivals

 

C.  Each firm is making a profit-maximizing choice given the choices of its rivals

 

D.  Each firm produces the same quantity

16.  A residual demand curve

A. Shows the relationship between the market price and the quantity demanded by consumers at each price

 

B. Shows the relationship between a firm’s output and the market price given the prices charged by the firm’s rivals

 

C. Shows the relationship between a firm’s output and the market price given the outputs of the firm’s rivals

 

D. Shows the remaining demand for a good after a firm’s rivals have sold their output

 

17. Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is

where P is the price of a cubic yard of concrete and Qd  is the number of

cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model

 

describes the competition in this market. What is Alice’s inverse residual demand function?

A.                                                      , Where the term in parentheses is constant

B.                                                     , Where the term in parentheses is constant

C.                                                      , Where the term in parentheses is constant

D.                                                      , Where the term in parentheses is constant

 

18.  Kate and Alice are small-town ready-mix concrete duopolists. The market demand function

Is

where P is the price of a cubic yard of concrete and Qd  is the number of

cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model

describes the competition in this market. How much does Alice produce in the Nash

equilibrium?

 

 

A. 2,000

 

 

B. 1,333.33

 

 

C. 800

 

 

D. 4,000

 

 

19.  Suppose the daily demand for Coke and Pepsi in a small city are given by

 

And

where QC and QP  are

the number of cans Coke and Pepsi sell, respectively, in thousands per day. PC and PP are the

prices of a can of Coke and Pepsi, respectively, measured in dollars. The marginal cost is $0.45 per can. If PC = $0.60, what is Pepsi’s demand function?

A.

B.

C.

D.

 

20.  Firms engage in tacit collusion when

A.  They predict what the other will do and attempt to undercut them

 

B.  They collude without communicating, sustaining a price above the noncooperative price that would arise in a single competitive interaction

 

C.  They communicate to reach an agreement about the prices they will charge

 

D.  They communicate what type of good they will produce

SHORT ANSWER QUESTIONS / PROBLEMS

 

 

 

  1. (10 points) Suppose the wiz-pop market is in long-run equilibrium. Suddenly, fixed costs decrease, although variable costs remain unchanged. Discuss the short-run and long-run changes in market equilibrium.

     

  2. (10 points) After Apple introduced its new iPhone, the price of standard cell phones rose. A consumer advocacy group that has long claimed that standard cell phone producers are colluding like a monopolist asserts that this is further evidence of that fact. You’ve noticed that the elasticity of demand for standard cell phones increased after Apple’s entry. Does this shed any light on the group’s claim?

     

  3. (20 pts.) Suppose Always There Wireless serves 100 high-high demand wireless consumers,

    each of whose monthly demand curve for minutes of wireless service is

    and 300 low-demand consumers, each of whose monthly demand curve for minutes of wireless is

    , where P is the per-minute price in dollars. Its marginal cost is $0.25 per minute. Suppose Always There Wireless charges $0.25 per minute.

     

 

  1. How many minutes will high-demand consumers purchase?

  2. How many minutes will low-demand consumers purchase?

  3. How much can Always There Wireless charge as a fixed fee without losing the low-demand consumers?

  4. What are the profits from sales to each of the low-demand consumers?

     

     

    4. (20 pts.) a. Define the Bertrand model and its assumptions. Explain why the model predicts the perfectly competitive outcome despite the number of sellers. Discuss the limitations of the model.

     

     b. Compare and contrast the Bertrand and Cournot models of oligopoly. Your discussion should include assumptions made, goals of the firms and the resulting outcomes.

 

 

 

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more