Which of the following is a tool of commercial policy?
a. Corporate income tax
b. Payroll tax
c. Excise duty
d. Tariff
e. Octroi duty
QUESTION 2Assume that there are two types of perfectly competitive firms whose cost of production differ. An increase in input prices will lead to an exodus of high cost firms before low cost ones.
Indicate whether the statement is true or false
QUESTION 3Which of the following statements is true in the context of the long run?
a. All the factors of production are fixed.
b. No new firms enter the market.
c. The producer can vary all the factors of production.
d. The firms earn positive economic profit.
e. Large firms tend to acquire market power.
QUESTION 4A profit-maximizing monopolist operates where demand is:
a. inelastic.
b. unit elastic.
c. elastic.
d. infinitely elastic.
QUESTION 5Suppose the production of helicopters is an industry characterized by increasing returns to scale and an Argentine firm, Cicare, is the only player in this market. The firm caters to the global market and earns a profit of 10 million. Flettner, a German firm has been considering entering this market for a while, but it is aware that its entry will cause each firm to lose about 4 million. Although a government subsidy allows Flettner to enter the helicopter market, the company is unable to reap profits in the long run. Which of the following could have led to this outcome?
a. Flettner experienced high production costs due to inadequate supply of inputs.
b. New firms entered the helicopter industry.
c. The German government ran a balance of payment deficit.
d. The Argentine government retaliated by subsidizing Cicare.
e. There was very low investment in research and development in this industry.
QUESTION 6If the cost of production of the firms in a perfectly competitive market differs the resulting long-run supply curve will be an upward rising step function.
Indicate whether the statement is true or false
QUESTION 7A perfectly competitive firm's supply curve is the portion of the:
a. TC curve that lies above the TR curve.
b. MR curve that lies above the MC curve.
c. AFC curve that lies above the AR curve.
d. AVC curve that lies above the ATC curve.
e. MC curve that lies above the AVC curve.
QUESTION 8If a monopoly firm is at a level of output where MC equals 10 and is increasing, MR equals 10, and average variable cost equals 9 . To maximize profits, the firm should:
a. increase both output and price.
b. increase output but decrease the price.
c. decrease output and increase the price.
d. not change either the output or the price.
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