Fresh Taste, Inc produces organic breakfast cereals. The market for breakfast cereals is monopolistically competitive.
The figure above shows the demand curve that Fresh Taste faces (D), the company's marginal revenue curve (MR), its marginal cost curve (MC), and its average total cost curve (ATC). If Fresh Taste and other firms in the market are currently producing their profit maximizing quantities of cereals, then the market is A) in both short-run equilibrium and long-run equilibrium.
B) in short-run equilibrium but not in long-run equilibrium.
C) in long-run equilibrium but not in short-run equilibrium.
D) neither in short-run equilibrium nor in long-run equilibrium.
Ques. 2The table above shows the production possibilities frontier for the nation of Isolanda.
a) Find the marginal cost of a pound of fish using the above PPF.
b) How does the marginal cost of a pound of fish change as more fish are caught?
Ques. 3In the figure above, if the market is unregulated,
A) more than the efficient amount of output will be produced.
B) less than the efficient amount of output will be produced.
C) the allocation of resources will be efficient because the efficient amount of output will be produced.
D) the deadweight loss will be zero.
Ques. 4In the above figure, if the market was a single-price monopoly rather than perfectly competitive, which area shows the transfer of consumer surplus from consumers to producers?
A) A + B
B) C + D
C) C + D + E
D) E + H
Ques. 5Suppose that newspaper companies are now required to use recycled paper, which is more expensive than new paper. Which of the following is most likely to result if the newspaper industry is highly competitive?
A) The firms' costs rise, resulting in positive economic profit in the short run and, hence, the industry supply curve shifts rightward in the long run.
B) The firms' costs rise, resulting in economic losses in the short run and, hence, the industry supply curve shifts rightward in the long run.
C) The firms' costs rise, resulting in economic losses in the short run and, hence, the industry supply curve shifts leftward in the long run.
D) The industry supply curve shifts leftward in the short run, causing permanent long-run economic losses.
Ques. 6Why does the problem of the big tradeoff arise when the government engages in the process of redistributing income using taxes and transfers?
What will be an ideal response?
Quick Reply
