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Question

Changes in which of the following change the demand for capital and shifts the demand curve for capital?
 
  A) current income
  B) expected future income
  C) the rental rate
  D) the marginal product of capital



Ques. 2

Prime Pharmaceuticals has developed a new asthma medicine, for which is has a patent. An inhaler can be produced at a constant marginal cost of 2/inhaler.
 
  The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above. With its patent giving it a monopoly for its new inhaler, if Prime Pharmaceuticals operates as a single-price monopoly, then consumer surplus is ________ and producer surplus is ________. A) zero; 64 million
  B) 32 million; 32 million
  C) 16 million; 32 million
  D) 16 million; 48 million.



Ques. 3

A firm experiences ________ when its ________ downward as output increases.
 
  A) diseconomies of scale; average total cost curve slopes
  B) economies of scale; long-run average cost curve slopes
  C) diminishing marginal returns; long-run average cost curve slopes
  D) diminishing marginal returns; average total cost curve shifts



Ques. 4

Kristen has an income of 450 per year to spend on music CDs and movies on DVDs. The price of a CD is 15 and the initial price of a DVD is 22.50. The indifference curves in the figure above (I1, I2, and I3 ) reflect Kristen's preferences.
 
  If the price of a DVD falls to 18, the income effect on Kristen's consumption of DVDs ________ the substitution effect, so a DVD is ________ good. A) partly offsets; an inferior
  B) partly offsets; a normal
  C) reinforces; an inferior
  D) reinforces; a normal



Ques. 5

In the above table, which tax plan is proportional?
 
  A) only plan A
  B) only plan B
  C) only plan C
  D) both plan A and plan C



Ques. 6

Why are firms in monopolistic competition unable to make an economic profit in the long run?
 
  What will be an ideal response?



Ques. 7

In order to hire an additional worker, a monopsony must pay
 
  A) a higher wage rate than it paid before.
  B) the same wage rate it paid before.
  C) a lower wage rate than it paid before.
  D) a wage rate that is sometimes higher, sometimes lower, and sometimes the same as before, depending on the elasticity of the supply of labor.



Ques. 8

Prime Pharmaceuticals has developed a new asthma medicine, for it has a patent. An inhaler can be produced at a constant marginal cost of 2/inhaler.
 
  The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above. With its patent giving it a monopoly for its new inhaler, if it is a single-price monopoly, Prime Pharmaceuticals will produce ________ inhalers and set a price of ________ for each inhaler. A) 16 million; 2
  B) 10 million; 5
  C) 8 million; 6
  D) 8 million; 2



Ques. 9

Consider a market in which there is an external benefit. The inefficient market equilibrium is such that
 
  A) too little output is produced.
  B) too much output is produced.
  C) price is too high.
  D) marginal social cost is greater than marginal social benefit.

Answer

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