Econ assignment

Intermediate Microeconomics (Econ 021)

July/22/2020

Quiz 3 (Time Allotted: 30 minutes)

Student Name: ___________________________________ Score:_____/20

Answer all QUESTIONS

Part I: Answer all questions in this part. All questions carry equal marks. (5 marks)

1. A perfectly competitive firm

a. chooses its price to maximize profits.

b. sets its price to undercut other firms selling similar products.

c. takes its price as given by market conditions.

d. picks the price that yields the largest market share.

2. A competitive firm maximizes profit by choosing the quantity at which

a. average total cost is at its minimum.

b. marginal cost equals the price.

c. average total cost equals the price.

d. marginal cost equals average total cost.

3. A competitive firm’s short-run supply curve is its _______ cost curve above its

______ cost curve.

a. average total, marginal

b. average variable, marginal

c. marginal, average total

d. marginal, average variable

4. If a profit-maximizing, competitive firm is producing a quantity at which marginal cost

is between average variable cost and average total cost, it will

a. keep producing in the short run but exit the market in the long run.

b. shut down in the short run but return to production in the long run.

c. shut down in the short run and exit the market in the long run.

d. keep producing both in the short run and in the long run.

5. In the long-run equilibrium of a competitive market with identical firms, what is the relationship

between price (P), marginal cost (MC), and average total cost (ATC)?

a. P > MC and P > ATC.

b. P > MC and P = ATC.

c. P = MC and P > ATC.

d. P = MC and P = ATC.

PART II Total marks: 15

QUESTION 1: (10 marks)

1. In the market for Duck neck (kao ya) in China, consumers will buy all quantities supplied at a certain price. The following quantity demanded and supplied functions are given:

Qd = 580 – 35p Qs = 150 + 50p

Where Qd is the demand function and Qs is the supply function

From the given equations,

a. Calculate the equilibrium quantity (4 marks)

b. Represent your answer on a graph (3 marks)

c. Explain the implication of this situation (3 marks)

QUESTION 2 5 Marks

Consider the following pairs of goods. For which of the two goods would you expect the demand to be

more price elastic? Why?

a. Water or diamonds

b. Insulin or nasal decongestant spray

c. Food in general or breakfast cereal

d. Gasoline over the course of a week or gasoline over the course of a year

e. Personal computers or IBM personal computers