A company could produce 100 units of a good for 320 or produce 101 units of the same good for 324. The 4 difference in costs is
A) the marginal benefit of producing the 101st unit.
B) the marginal cost of producing the 101st unit.
C) both the marginal benefit and the marginal cost of producing the 101st unit.
D) neither the marginal benefit nor the marginal cost of producing the 101st unit.
Ques. 2In monopolistic competition, there are ________.
A) many firms selling products for which no good substitutes exist
B) many firms selling similar but slightly different products
C) many firms, each selling an identical product
D) a small number of firms, each selling an identical product
Ques. 3Suppose a tax is imposed on sellers. The more inelastic the demand for the taxed item, the
A) greater the share of the tax paid by sellers.
B) smaller the deadweight loss from the tax.
C) larger the decrease in consumption because of the tax.
D) All of the above answers are correct.
Ques. 4In the short run, a firm in a monopolistic competition will produce the amount of output where its
A) marginal revenue equals marginal cost and will set its price according to the demand for that amount of output.
B) marginal revenue equals marginal cost and takes the market price as given.
C) average revenue equals average cost and will set its price according to the demand for that amount of output.
D) average revenue equals its average cost and takes the market price as given.
Ques. 5Free riding is not a problem in the market for a private good because
A) people who do not pay for the good can be excluded from consumption.
B) the good is a rival good.
C) the market eliminates the problem of externalities.
D) The question errs because free riding is a problem in providing private goods.
Ques. 6The table above shows Tom's total utility from milkshakes and sodas. Tom's total budget for milkshakes and sodas is 10.00 per week. Milkshakes cost 2.00 each and sodas cost 1.00 each.
What quantity of milkshakes does Tom purchase at his consumer equilibrium? A) one
B) two
C) three
D) four
Ques. 7What area in the above figure is the producer surplus at the efficient quantity?
A) A
B) A + B + C
C) F
D) D + E + F
Ques. 8For a good whose production creates a pollution, when marginal social cost equals marginal social benefit, then
I there is no pollution.
II resources are utilized efficiently.
A) I only
B) II only
C) neither I nor II
D) both I and II
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