Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

Practice for Final

Multiple Choice

Identify the choice that best completes the statement or answers the question.

____ 1. Suppose that Dent Carr’s long-run total cost of repairing s cars per week is c(s) = 3s2 + 75 for s > 0 and c(0) = 0. If the price he receives for repairing a car is $18, then in the long run, how many cars will he fix per week if he maximizes profits?

a. 3

b. 0

c. 6

d. 4.50

e. 9

____ 2. Suppose that Dent Carr’s long-run total cost of repairing s cars per week is c(s) = 3s2 + 27 for s > 0 and c(0) = 0. If the price he receives for repairing a car is $27, then in the long run, how many cars will he fix per week if he maximizes profits?

a. 3

b. 0

c. 6

d. 4.50

e. 9

____ 3. A competitive firm has a long-run total cost function c(y)  3y 2  675 for y > 0 and c(0) = 0. Its long-run supply function is described as:

a. y = p/6 if p > 90, y = 0 if p < 90.

b. y = p/3 if p > 88, y = 0 if p < 88.

c. y = p/3 if p > 93, y = 0 if p < 93.

d. y = p/6 if p > 93, y = 0 if p < 93.

e. y = p/3 if p > 90, y = 0 if p < 90.

____ 4. The bicycle industry is made up of 100 firms with the long-run cost curve c(y) = 2 + ( y 2 2) and 120 firms with the long-run cost curve c(y) = y2/4. No new firms can enter the industry. What is the long-run industry supply curve at prices greater than $2?

a. S(p) = 170p.

b. S(p) = 360p.

c. S(p) = 240p.

d. S(p) = 340p.

e. S(p) = 375p.2

____ 5. The bicycle industry is made up of 100 firms with the long-run cost curve c(y) = 2 + ( y2/2) and 120 firms with the long-run cost curve c(y) = y2/4. No new firms can enter the industry. What is the long-run industry supply curve?

a. S(p) = 340p for p > 0.

b. S(p) = 340p for p ≤ 1, S(p) = 100p for p > 1.

c. S(p) = 240p for p ≤ 1, S(p) = 340p for p > 1.

d. S(p) = 240p for p ≤ 2, S(p) = 340p for p > 2.

e. S(p) = 340p for p ≤ 2, S(p) = 100p for p > 2.

____ 6. Which of the following supply functions constitute the industry supply function if there are 100 firms each with supply function s1(p) = 2p - 6 and 200 firms each with supply function s2(p) = p - 4?

(1) S(p) = 0 for p ≤ 3.

(2) S(p) = 200p - 800 for 3 < p ≤ 4.

(3) S(p) = 200p - 600 for 3 < p ≤ 4.

(4) S(p) = 400p - 1400 for p > 4.

(5) S(p) = 500p - 1600 for p > 4.

a. 3 and 4 together.

b. 1, 3, and 5 together.

c. 1, 2, and 4 together.

d. 1, 3, and 4 together.

e. 1, 2, and 5 together.

____ 7. The cheese business in Lake Fon-du-lac, Wisconsin, is a competitive industry. All cheese manufacturers have the cost function c(y) = y2 + 4 for y > 0 and c(0) = 0, while demand for cheese in the town is given by D(p) = 120 – p. The long-run equilibrium number of firms in this industry is

a. 29.

b. 58.

c. 56.

d. 120.

e. 59.

____ 8. The inverse demand function for bagels is p = 27 - 3q. The price of bagels is initially $15 per dozen and increases to $21 per dozen. The change in consumer’s surplus is closest to

a. –$12.

b. –$24.

c. –$18.

d. $24.

e. $18.

____ 9. The supply function for video games is q = 5p - 15. The price is initially $5 per unit and increases to $6 per unit. The change in producer’s surplus is

a. –$12.5.

b. $25.

c. $10.

d. -$25.

e. $12.5.3

____ 10. The inverse demand function for grapes is described by the equation p = 676 – 9q, where p is the price in dollars per crate and q is the number of crates of grapes demanded per week. When p = $28 per crate, what is the price elasticity of demand for grapes?

a. –9 676

b. –9 72

c. –72 28

d. –252 72

e. –28 648

____ 11. When the price of bananas is 60 cents a pound, the total demand is 30 pounds. If the price elasticity of demand for bananas is – 1/2, what quantity would be demanded if the price fell to 52 cents a pound?

a. 40 pounds

b. 30 pounds

c. 34 pounds

d. 32 pounds

e. 28 pounds

____ 12. From the demand equation for airline tickets (where Qx is the quantity demanded of airline tickets, Px is the price of an airline ticket, Py is the price of a bus ticket, Pz is the price of gasoline, and I is income), we can say that:

Qx = 10 - 0.1Px + 0.4Py - 0.25Pz + 0.05I

a. airline tickets and bus tickets are substitutes, while airline tickets and gasoline are complements.

b. airline tickets and bus tickets are complements, while airline tickets and gasoline are substitutes.

c. airline tickets and bus tickets are substitutes, airline tickets and gasoline are also substitutes.

d. airline tickets and bus tickets are complements, airline tickets and gasoline are also complements.

e. none of the above statements is true.

____ 13. The demand for a good is Q = 1,000 – 150P + 25I. Assume that per capita disposable income I is $900. At a price P of $50, the income elasticity of demand is

a. 1.

b. 5.

c. 2.50.

d. 25.

e. 1.41.

____ 14. The inverse supply function for mead is given by the equation p = 70 + 2q. What is the price elasticity of supply when the price of mead is $80?

a. 8

b. 4

c. 16

d. 2

e. 0.03

____ 15. If at current prices, the demand for a good is price-elastic, then for movements along the demand curve,

a. increasing the price will increase revenue.

b. decreasing the price will decrease revenue.

c. increasing the quantity sold will increase revenue.

d. increasing the quantity sold will decrease revenue.

e. More than one of the above statements are true.

____ 16. If the demand function for tickets to a play is q = 7,500 – 75p, at what price will total revenue be maximized?

a. $100

b. $200

c. $50

d. $25

e. $150

____ 17. The inverse demand function for coffee is p = 50,000 – 2q, where q is the number of tons produced and p is the price per ton. Total revenue from coffee sales be maximized when the output level is

a. 25,000 tons.

b. 15,000 tons.

c. 17,500 tons.

d. 12,500 tons.

e. 6,250 tons.

____ 18. If the marginal cost of making a photocopy is 2 cents and the elasticity of demand is –3, the profit-maximizing price is

a. 5 cents.

b. 4 cents.

c. 3.33 cents.

d. 3 cents.

e. 6 cents.

____ 19. If the marginal cost of brewing beer is 40 cents and the profit-maximizing price is 90 cents, then the price elasticity of demand is

a. –0.66.

b. –1.8.

c. –2.

d. –2.33.

e. –3.

____ 20. The inverse demand function for mangos is defined by the equation p = 91 – 5q, where q is the number of crates that are sold. The inverse supply function is defined by p = 3 + 6q. In the past there was no tax on mangos but now a tax of $44 per crate has been imposed. What are the quantities produced before and after the tax was imposed?

a. 16 crates before and 5 crates after

b. 16 crates before and 9 crates after

c. 14 crates before and 7 crates after

d. 8 crates before and 4 crates after

e. 8 crates before and 5 crates after

____ 21. The inverse demand function for cases of whiskey defined by p = 160 – 6q, and the inverse supply function is defined by p = 61 + 3q. Originally there was no tax on whiskey. Then the government began to tax suppliers of whiskey $27 for every case they sold. How much did the price paid by consumers rise when the new equilibrium was reached?

a. It rose by $27.

b. It rose by $29.

c. It rose by $18.

d. It rose by $16.

e. It rose by $24.

Use the following information to answer Questions 22 and 23:

The inverse demand function for eggs is p = 84 – 9q, where q is the number of cases of eggs. The inverse supply is p = 7 + 2q. In the past, eggs were not taxed, but now a tax of 33 dollars per case has been introduced.

____ 22. What is the effect of the tax on the quantity of eggs supplied?

a. Quantity drops by 2 cases.

b. Quantity drops by 3 cases.

c. Quantity drops by 6 cases.

d. Quantity drops by 4 cases.

e. Quantity drops by 5 cases.

____ 23. How much did the price recived by suppliers fall when the new equilibrium was reached?

a. It fell by $6.

b. It fell by $8.

c. It fell by $7.

d. It fell by $5.

e. It fell by $9.

____ 24. The demand function for orange juice is q = 247 – 8p and the supply function is q = 19 + 4p, where q is the number of units sold per year and p is the price per unit, expressed in dollars. The government decides to support the price of orange juice at a price floor of $27 per unit by buying orange juice and destroying all that it has purchased. How many units must the government destroy per year?

a. 105

b. 104

c. 40

d. 96

e. 101

____ 25. In a certain kingdom, the demand function for rye bread was q = 181 – 8p and the supply function was q = 13 + 6p, where p is the price in zlotys and q is loaves of bread. The king made it illegal to sell rye bread for a price above 6 zlotys per loaf. To avoid shortages, he agreed to pay bakers enough of a subsidy for each loaf of bread so as to make supply equal demand. How much would the subsidy per loaf have to be?

a. 21 zlotys

b. 20 zlotys

c. 14 zlotys

d. 15 zlotys

e. 18 zlotys

Use the following information to answer Questions 26 and 27:

The inverse demand function for video games is p = 16 – q and the inverse supply function is p = 1 + 2q.

____ 26. When the government imposes a $6 tax on each video game purchased,

a. consumer’s surplus falls by more than producer’s surplus.

b. producer’s surplus falls by more than consumer’s surplus.

c. consumer’s surplus and producer’s surplus fall by the same amount.

d. consumer’s surplus falls and producer’s surplus increases.

e. producer’s surplus falls and consumer’s surplus increases.

____ 27. What is the Tax Revenue (TR) and deadweight loss (DWL) resulting from the $6 tax?

a. TR =$9 and DWL = $6

b. TR =$18 and DWL = $12

c. TR =$9 and DWL = $12

d. TR =$18 and DWL = $6

e. TR =$15 and DWL = $15

____ 28. Suppose the government applies a tax to a good where the price elasticity of demand is - 0.35, and the price elasticity of supply is 0.9. What is the tax incidence on consumers (choose the closest answer)?

a. 27%

b. 37.5%

c. 67%

d. 72%

e. 50%

Use the following information to answer Questions 29 and 30:

A monopolist faces the inverse demand function described by p = 23 – 5q, where q is output. The monopolist has no fixed cost and his marginal cost is $6 at all levels of output.

____ 29. Which of the following expresses the monopolist’s profits as a function of his output?

a. 23 – 5q – 6

b. 17q – 5q2

c. 23q – 11q2

d. 23q – 5q2 – 6

e. 23 – 11q

____ 30. To maximize profits, the monopolist should charge

a. $7.25 and his maximum profit is $14.45.

b. $15 and his maximum profit is $14.5.

c. $14.5 and his maximum profit is $14.45.

d. $14.5 and his maximum profit is $14.5.

e. $15 and his maximum profit is $14.45.

____ 31. The demand for Professor Bongmore’s new book is given by the function q = 5,000 – 200p. If the cost of having the book typeset is $7,000, if the marginal cost of printing an extra copy is $2, and if he has no other costs, then he would maximize his profits by

a. not having it typeset and not selling any copies.

b. having it typeset and selling 2,500 copies.

c. having it typeset and selling 4,600 copies.

d. having it typeset and selling 2,300 copies.

e. having it typeset and selling 1,150 copies.

____ 32. The demand for Professor Bongmore’s new book is given by the function q = 2,000 – 400p. If the cost of having the book typeset is $4,000, if the marginal cost of printing an extra copy is $1, and if he has no other costs, then he would maximize his profits by

a. having it typeset and selling 800 copies.

b. having it typeset and selling 1,000 copies.

c. not having it typeset and not selling any copies.

d. having it typeset and selling 1,600 copies.

e. having it typeset and selling 400 copies.

____ 33. A profit-maximizing monopolist faces the demand curve q = 40 – p. It produces at a constant marginal cost of $7 per unit. A quantity tax of $6 per unit is imposed on the monopolist’s product. The price of the monopolist’s product

a. rises by $6.

b. rises by $9.

c. rises by $3.

d. rises by $2.5.

e. stays constant.

____ 34. A profit-maximizing monopolist faces a demand function given by q = 30 – p, where p is the price of her output in dollars. She has a constant marginal cost of 5 dollars per unit of output. In an effort to induce her to increase her output, the government agrees to pay her a subsidy of $2 for every unit that she produces. She will

a. decrease her price by $3 per unit.

b. decrease her price by $2 per unit.

c. decrease her price by $1 per unit.

d. decrease her price by $4 per unit.

e. not change her price..

____ 35. Roach Motors has a monopoly on used cars in Enigma, Ohio. By installing secret microphones in the showroom, the friendly salespersons at Roach are able to learn each customer’s willingness to pay and can therefore practice first-degree price discrimination, extracting from each customer his entire consumer’s surplus. The inverse demand function for cars in Enigma is P = 2,000 – 10Q. Roach Motors purchases its stock of used cars at an auction in Cleveland for $500 each. Roach motors will

a. sell 75 cars for a total profit of $56,250.

b. sell 150 cars for a total profit of $225,000.

c. sell 150 cars for a total profit of $112,500.

d. sell 180 cars and make a total profit of $135,000.

e. sell 75 cars for a total profit of $112,500.

____ 36. A monopolist sells in two markets. The demand curve for her product is given by p1 = 141 - 3q1 in the first market and p2 = 115 - 2q2 in the second market, where qi is the quantity sold in market i and pi is the price charged in market i. She has a constant marginal cost of production, MC = 3, and no fixed costs. She can charge different prices in the two markets. What is the profit-maximizing combination of quantities for this monopolist?

a. q1 = 46 and q2 = 30.

b. q1 = 51 and q2 = 23.

c. q1 = 23 and q2 = 28.

d. q1 = 33 and q2 = 26.

e. q1 = 43 and q2 = 38.

____ 37. A monopolist has a constant marginal cost of $2 per unit and no fixed costs. He faces separate markets in the United States and England. He can set one price p1 for the U.S. market and another price p2 for the English market. If demand in the United States is given by Q1 = 6,000 – 600p1 and demand in England is given by Q2 = 2,400 – 400p2, then the price in the United States will

a. be larger than the price in England by $2.

b. be smaller than the price in England by $2.

c. equal the price in England.

d. be larger than the price in England by $4.

e. be smaller than the price in England by $4.

____ 38. A price-discriminating monopolist sells in two separate markets such that goods sold in one market are never resold in the other. It charges p1 = $5 in one market and p2 = $10 in the other market. At these prices, the price elasticity in the first market is –0.40 and the price elasticity in the second market is –0.10. Which of the following actions is sure to raise the monopolist’s profits?

a. Raise p1.

b. Raise p2.

c. Raise p1 and lower p2.

d. Raise both p1 and p2.

e. Raise p2 and lower p1.

Use this information to answer questions 39 and 40:

A tennis club, which has a monopoly on tennis programs in the city, is considering changing the way it charges its customers for lessons. Elena, one of those customers, is keen on improving her tennis skills. Her inverse demand curve for tennis lessons is p  50  2q, where q is the number of one-hour lessons per month. The club has been charging her and all of its other customers the same price per lesson and has a constant marginal and average cost of $10.

____ 39. If the club were to instead charge Elena a membership fee and set her per-lesson price equal to its marginal cost, what is the profit-maximizing quantity of lessons for the club?

a. 60.

b. 20.

c. 40.

d. 120.

e. 30.

____ 40. Under two-part pricing, what membership fee would maximize profit for the club?

a. $1600.

b. $800.

c. $100.

d. $200.

e. $400.