eco 146 final

In long-run competitive equilibrium, a firm that owns factors of production will have an: A) economic profit = $0 and accounting profit > $0. B) economic profit > $0 and accounting profit = $0. C) economic and accounting profit = $0. D) economic and accounting profit > $0. E) economic and accounting profit can take any value.

a

In the short run, a perfectly competitive firm earning negative economic profit is: A) on the downward-sloping portion of its ATC curve. B) at the minimum of its ATC curve. C) on the upward-sloping portion of its ATC curve. D) above its ATC curve.

a

Suppose your firm develops a new pharmaceutical product that may be used to reduce blood cholesterol levels, so the firm is the monopoly seller of this drug. If the elasticity of demand for this new product is -4, what markup should your firm use to set the profit-maximizing price for the product? A) The price-cost markup is 25% of the price. B) The price-cost markup is 25% of the marginal cost. C) The price-cost markup is 4% of the marginal cost. D) The price-cost markup is 4% of the price.

a

The burden of a tax per unit of output will fall heavily on consumers when demand is relatively ________ and supply is relatively ________. A) inelastic; elastic B) inelastic; inelastic C) elastic; elastic D) elastic; inelastic

a

The production function for earthquake detectors (Q) is given as follows: Q = 4K^1/2*L^1/2 where K is the amount of capital employed and L is the amount of labor employed. The price of capital, PK, is $18 and the price of labor, PL, is $2. Suppose that your firm decides to double its output to 120. In the long run, to achieve this level of output the firm will have to: A) exactly double its inputs. B) more than double its inputs. C) less than double its inputs.

a

Use the following statements to answer this question: I. An increase in the firm's fixed costs will also shift the firm's short-run supply curve to the left. II. An increase in the firm's fixed costs will not shift the firm's short-run supply curve to the right or left,but it may alter how much of the marginal cost curve is used to form the short-run supply curve. A) I and II are true. B) I is true and II is false. C) II is true and I is false. D) I and II are false.

c

Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms? A) When there are few firms in the market and the demand curve faced by each firm is relatively inelastic B) When there are many firms in the market and the demand curve faced by each firm is relatively inelastic C) When there are few firms in the market and the demand curve faced by each firm is relatively elastic D) When there are many firms in the market and the demand curve faced by each firm is relatively elastic

a

You produce stereo components for sale in two markets, foreign and domestic, and the two groups of consumers cannot trade with one another. You will charge the higher price in the market with the: A) lower own price elasticity of demand (more inelastic demand). B) higher own price elasticity of demand (more elastic demand). C) larger teenage population. D) greater consumer incomes.

a

44) An industry has 1000 competitive firms, each producing 50 tons of output. At the current market price of $10, half of the firms have a short-run supply curve with a slope of 1; the other half each have a short-run supply curve with slope 2. The short-run elasticity of market supply is: A) 1/50. B) 3/10. C) 1/5. D) 2/5. E) none of the above

b

6) A variable cost function of the form: implies a marginal cost curve that is: A) constant. B) upward sloping. C) U-shaped. D) quadratic.

b

An electric power company uses block pricing for electricity sales. Block pricing is an example of: A) first-degree price discrimination. B) second-degree price discrimination. C) third-degree price discrimination. D) Block pricing is not a type of price discrimination.

b

Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the: A) firm is maximizing profit. B) firm's output is smaller than the profit maximizing quantity. C) firm's output is larger than the profit maximizing quantity. D) firm's output does not maximize profit, but we cannot conclude whether the output is too large or too small.

b

At the current level of output, long-run marginal cost is $50 and long-run average cost is $75. This implies that: A) there are neither economies nor diseconomies of scale. B) there are economies of scale. C) there are diseconomies of scale. D) the cost-output elasticity is greater than one.

b

Consider the following statements when answering this question: I. Increases in the demand for a good, which is produced by a competitive industry, will raise the short- run market price. II. Increases in the demand for a good, which is produced by a competitive industry, will raise the long- run market price. A) I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) I and II are false.

b

Consider the following statements when answering this question: I. When a competitive industry's supply curve is perfectly elastic, then the sole beneficiaries of a reduction in input prices are consumers. II. Even in competitive markets firms have no incentives to control costs, as they can always pass on cost increases to consumers. A) I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) I and II are false.

b

Firms often use patent rights as a: A) barrier to exit. B) barrier to entry. C) way to achieve perfect competition. D) none of the above

b

If a graph of a perfectly competitive firm shows that the point occurs where MR is above AVC but below ATC, A) the firm is earning negative profit, and will shut down rather than produce that level of output. B) the firm is earning negative profit, but will continue to produce where in the short run. C) the firm is still earning positive profit, as long as variable costs are covered. D) the firm is covering explicit, but not implicit, costs. E) the firm can cover all of fixed costs but only a portion of variable costs.

b

If a monopolist sets her output such that marginal revenue, marginal cost and average total cost are equal, economic profit must be: A) negative. B) positive. C) zero. D) indeterminate from the given information.

b

If the market price for a competitive firm's output doubles, then: A) the profit maximizing output will double. B) the marginal revenue doubles C) at the new profit maximizing output, price has increased more than marginal cost. D) at the new profit maximizing output, price has risen more than marginal revenue. E) competitive firms will earn a positive economic profit in the long-run.

b

The demand curve facing a perfectly competitive firm is: A) the same as its average revenue curve, but not the same as its marginal revenue curve. B) the same as its average revenue curve and its marginal revenue curve. C) the same as its marginal revenue curve, but not its average revenue curve. D) not the same as either its marginal revenue curve or its average revenue curve. E) not defined in terms of average or marginal revenue.

b

The more elastic the demand facing a firm, A) the higher the value of the Lerner index. B) the lower the value of the Lerner index. C) the less monopoly power it has. D) the higher its profit.

b

The production function for earthquake detectors (Q) is given as follows: Q = 4K^1/2*L^1/2 where K is the amount of capital employed and L is the amount of labor employed. The price of capital, PK, is $18 and the price of labor, PL, is $2. the production function exhibits: A) decreasing returns to scale. B) constant returns to scale. C) increasing returns to scale. D) all of the above at various levels of output.

b

Under a binding price ceiling, what does the change in producer surplus represent? A) The gain in surplus for those sellers who are still willing to supply the product at the lower price. B) The loss in surplus associated with those units that used to be produced at the higher price but are no longer produced at the lower price. C) The gain in surplus associated with the excess demand created by the price ceiling policy. D) Both A and B are correct. E) Both A and C are correct.

b

Use the following statements to answer this question: I. The long-run average cost (LAC) curve is the envelope of the short-run average cost (SAC) curves. II. The long-run marginal cost (LMC) curve is the envelope of the short-run marginal cost (SMC) curves. A) I and II are true. B) I is true and II is false. C) II is true and I is false. D) I and II are false.

b

Use the following statements to answer this question: I. When the market price is held above the competitive price level, it is possible for the loss in consumer surplus to be fully captured by producers. II. When the market price is held above the competitive level, there is no deadweight loss because producer gains exactly equal consumer losses. A) I and II are true. B) I is true and II is false. C) II is true and I is false. D) I and II are false.

b

Use the following two statements to answer this question:I. For a monopolist, at every output level, average revenue is equal to price. II. For a monopolist, at every output level, marginal revenue is equal to price. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false. E) Statements I and II could either be true or false depending upon demand.

b

What is the value of the Lerner index under perfect competition? A) 1 B) 0 C) infinity D) two times the price

b

Which of the following statements about natural monopolies is true?A) Natural monopolies are only found in the markets for natural resources (like crude oil and coal). B) For natural monopolies, marginal cost is always below average cost. C) For natural monopolies, average cost is always increasing. D) Natural monopolies cannot be regulated.

b

With respect to monopolies, deadweight loss refers to the: A) socially unproductive amounts of money spent to obtain or acquire a monopoly. B) net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy. C) lost consumer surplus from monopolistic pricing. D) none of the above

b

19) Marginal revenue, graphically, is: A) the slope of a line from the origin to a point on the total revenue curve. B) the slope of a line from the origin to the end of the total revenue curve. C) the slope of the total revenue curve at a given point D) the vertical intercept of a line tangent to the total revenue curve at a given point. E) the horizontal intercept of a line tangent to the total revenue curve at a given point.

c

A firm has an increasing marginal cost curve. If the firm's current output is two units less than the profit-maximizing output, then the next unit produced A) will decrease profit. B) will increase cost more than it increases revenue. C) will increase revenue more than it increases cost. D) will increase revenue without increasing cost.E) may or may not increase profit.

c

A monopolist has set her level of output to maximize profit. The firm's marginal revenue is $20, and the price elasticity of demand is -2.0. The firm's profit maximizing price is approximately: A) $0 B) $20 C) $40 D) $10 E) This problem cannot be answered without knowing the marginal cost.

c

A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing: A) first-degree price discrimination. B) second-degree price discrimination. C) third-degree price discrimination. D) fourth-degree price discrimination. E) fifth-degree price discrimination.

c

A third-degree price discriminating monopolist can sell its output either in the local market or on an internet auction site (or both). After selling all of its output, the firm discovers that the marginal revenue earned in the local market was $20 while its marginal revenue on the internet auction site was $30. To maximize profits the firm should: A) have sold more output in the local market and less at the internet auction site. B) do nothing until it acquires more information on costs. C) have sold less output in the local market and more on the internet auction site. D) sell less in both markets until marginal revenue is zero. E) sell more in both markets until marginal cost is zero.

c

What is the welfare impact of a subsidy policy? A) Producer surplus increases, consumer surplus declines, and total welfare declines. B) Producer and consumer surplus increase, and these gains are larger than the government cost. C) Producer and consumer surplus increase, and these gains are smaller than the government cost. D) Producer surplus increases, consumer surplus declines, and total welfare increases due to the subsidy program.

c

When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private economy at the support price, the impact on total welfare is the: A) change in consumer surplus. B) change in consumer surplus + the change in producer surplus + the cost to government. C) change in consumer surplus + the change in producer surplus - the cost to government. D) change in consumer surplus + the change in producer surplus.

c

Which of the following is NOT associated with a high degree of monopoly power? A) A relatively inelastic demand curve for the firm B) A small number of firms in the market C) Significant price competition among firms in the market D) Significant barriers to entry

c

Which of the following is true at the output level where P = MC? A) The monopolist is maximizing profit. B) The monopolist is not maximizing profit and should increase output. C) The monopolist is not maximizing profit and should decrease output. D) The monopolist is earning a positive profit.

c

Which of the following is true when the government imposes a price ceiling on a monopolist? A) Marginal revenue becomes horizontal. B) Marginal revenue is linear. C) Marginal revenue is kinked—horizontal and then downward sloping. D) Marginal revenue is kinked—downward sloping and then horizontal.

c

Your local grocery store offers a coupon that reduces the price of milk during the coming week. The regular retail price of milk in the store is $3.00 per gallon, and the coupon price is $2.00 per gallon for the next week. If the store maximizes profits and the price elasticity of demand for milk is -2 for coupon users, what is the price elasticity of demand for non-users? A) -0.67 B) -1.0 C) -1.5 D) We do not have enough information to answer the question.

c

A perfectly competitive hardware manufacturer has total revenue of $85 million, total variable costs of $45 million, and fixed costs of $10 million. What is the firm's producer surplus? A) $85 million B) $70 million C) $40 million D) $30 million

c (PS= TR-TVC)

Bette's Breakfast, a perfectly competitive eatery, sells its "Breakfast Special" (the only item on the menu) for $5.00. The costs of waiters, cooks, power, food etc. average out to $3.95 per meal; the costs of the lease, insurance and other such expenses average out to $1.25 per meal. Bette should: A) close her doors immediately. B) continue producing in the short and long run. C) continue producing in the short run, but plan to go out of business in the long run. D) raise her prices above the perfectly competitive level. E) lower her output.

c

Consider the following statements when answering this question: I. If the cost of producing each unit of output falls $5, then the short-run market price falls $5. II. If the cost of producing each unit of output falls $5, then the long-run market price falls $5. A) I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) I and II are false.

c

If the regulatory agency sets a price where AR = AC for a natural monopoly, output will be: A) equal to the competitive level. B) equal to the monopoly profit maximizing level. C) greater than the monopoly profit maximizing level and less than the competitive level. D) greater than the competitive level.

c

In a constant-cost industry, an increase in demand will - in the long run - be followed by: A) no increase in supply. B) an increase in supply that will not change price from the higher level that occurs after the demand shift. C) an increase in supply that will bring price down to the level it was before the demand shift. D) an increase in supply that will bring price down below the level it was before the demand shift. E) a decrease in demand to keep price constant.

c

In the short run, a perfectly competitive firm earning positive economic profit is: A) on the downward-sloping portion of its ATC. B) at the minimum of its ATC. C) on the upward-sloping portion of its ATC. D) above its ATC. E) below its ATC.

c

In the short run, a perfectly competitive profit maximizing firm that has not shut down: A) is operating on the downward-sloping portion of its AVC curve. B) is operating at the minimum of its AVC curve. C) is operating on the upward-sloping portion of its AVC curve. D) is not operating on its AVC curve. E) can be at any point on its AVC curve.

c

Producer surplus in a perfectly competitive industry is: A) the difference between profit at the profit-maximizing output and profit at the profit-minimizing output. B) the difference between revenue and total cost. C) the difference between revenue and variable cost. D) the difference between revenue and fixed cost. E) the same thing as revenue.

c

Suppose a competitive market is in equilibrium at price P' and quantity Q'. If the demand curve becomes less elastic, but the same price-quantity equilibrium is maintained, what happens to consumer and producer surplus? A) Both PS and CS increase. B) CS increases and PS decreases. C) CS increases and PS remains the same. D) Both CS and PS decrease.

c

Suppose a plant manager ignores some implicit marginal costs of production so that the perceived MC curve is below the actual MC curve. What is the likely outcome from this error? A) Firm produces less than optimal quantity and earns lower profits. B) Firm produces less than optimal quantity and earns higher profits. C) Firm produces more than optimal quantity and earns lower profits. D) Firm produces more than optimal quantity and earns higher profits.

c

The production function for earthquake detectors (Q) is given as follows: Q = 4K^1/2*L^1/2 where K is the amount of capital employed and L is the amount of labor employed. The price of capital, PK, is $18 and the price of labor, PL, is $2. What is the (long-run) marginal cost of the 60th earthquake detector? A) 0 B) 5^1/2 C) 3 D) 5 E) none of the above

c

The production function for earthquake detectors (Q) is given as follows: Q = 4K^1/2*L^1/2 where K is the amount of capital employed and L is the amount of labor employed. The price of capital, PK, is $18 and the price of labor, PL, is $2. Which of the following combinations of inputs is on the isoquant to produce 400 units of output? A) L = 0, K = 400 B) L = 400, K = 0 C) L = 100, K = 100 D) all of the above E) A and B, but not C

c

Under perfect price discrimination, consumer surplus: A) is less than zero. B) is greater than zero. C) equals zero. D) is maximized.

c

A Cobb-Douglas production function: A) exhibits constant returns to scale. B) exhibits increasing returns to scale. C) exhibits decreasing returns to scale. D) can exhibit constant, increasing, or decreasing returns to scale.

d

A firm maximizes profit by operating at the level of output where: A) average revenue equals average cost. B) average revenue equals average variable cost. C) total costs are minimized. D) marginal revenue equals marginal cost. E) marginal revenue exceeds marginal cost by the greatest amount.

d

A firm never operates: A) at the minimum of its ATC curve. B) at the minimum of its AVC curve. C) on the downward-sloping portion of its ATC curve. D) on the downward-sloping portion of its AVC curve. E) on its long-run marginal cost curve.

d

A firm's producer surplus equals its economic profit when: A) average variable costs are minimized. B) average fixed costs are minimized .C) marginal costs equal marginal revenue. D) fixed costs are zero. E) total revenues equal total variable costs.

d

An improvement in technology would result in: A) upward shifts of MC and reductions in output. B) upward shifts of MC and increases in output. C) downward shifts of MC and reductions in output. D) downward shifts of MC and increases in output. E) increased quality of the good, but little change in MC.

d

At every output level, a firm's short-run average cost (SAC) equals or exceeds its long-run average cost (LAC) because: A) diminishing returns apply in the short run. B) returns to scale only exist in the long run. C) opportunity costs are taken into account in the short run. D) there are at least as many possibilities for substitution between factors of production in the long run as in the short run. E) none of the above

d

Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as: A) P = MR. B) P = AVC. C) AR = MR. D) P = MC. E) P = AC.

d

Consider the following statements when answering this question: I. It is impossible to shift taxes from producers to consumers without hurting the latter. II. Only polluters pay (through production taxes) for the environmental damage they cause. A) I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) I and II are false.

d

Consider the following statements when answering this question: I. Overall, the sick will always gain from a price ceiling on prescription drugs. II. The reduction of supply caused by the imposition of a price ceiling is greater the more inelastic the market supply curve. A) I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) I and II are false.

d

If a competitive firm's marginal cost curve is U-shaped, then: A) its short-run supply curve is U-shaped too B) its short-run supply curve is the downward-sloping portion of the marginal cost curve C) its short-run supply curve is the upward-sloping portion of the marginal cost curve D) its short-run supply curve is the upward-sloping portion of the marginal cost curve that lies above the short-run average variable cost curve E) its short-run supply curve is the upward-sloping portion of the marginal cost curve that lies above the short-run average total cost curve

d

In comparing the Cournot equilibrium with the competitive equilibrium, A) both profit and output level are higher in Cournot. B) both profit and output level are higher in the competitive equilibrium. C) profit is higher, and output level is lower in the competitive equilibrium. D) profit is higher, and output level is lower in Cournot.

d

In the Cournot duopoly model, each firm assumes that: A) rivals will match price cuts but will not match price increases. B) rivals will match all reasonable price changes. C) the price of its rival is fixed. D) the output level of its rival is fixed.

d

Refer to Figure 1 above. The LAC and LMC curves in the diagram below are consistent with a production function that exhibits: A) decreasing returns to scale. B) constant returns to scale. C) increasing returns to scale. D) increasing returns to scale for small levels of output, then constant returns to scale, and eventually decreasing returns to scale as output increases. E) decreasing returns to scale for small levels of output, then constant returns to scale, and eventually increasing returns to scale as output increases.

d

Short-run supply curves for perfectly competitive firms tend to be upward sloping because: A) there is diminishing marginal product for one or more variable inputs. B) marginal costs increase as output increases C) marginal fixed costs equal zero. D) A and B are correct. E) B and C are correct.

d

Suppose the market supply curve is upward sloping and market demand is perfectly inelastic. If the market price is held above the equilibrium level, which of the following statements about the resulting outcome is NOT true? A) The decrease in consumer surplus is fully captured by the producers. B) There will be an excess quantity supplied. C) Quantity demanded will remain the same. D) Quantity demanded will decline.

d

The demand curve facing a perfectly competitive firm is: A) the same as the market demand curve. B) downward-sloping and less flat than the market demand curve. C) downward-sloping and flatter than the market demand curve. D) perfectly horizontal. E) perfectly vertical.

d

When the price faced by a competitive firm was $5, the firm produced nothing in the short run. However, when the price rose to $10, the firm produced 100 tons of output. From this we can infer that: A) the firm's marginal cost curve must be flat. B) the firm's marginal costs of production never fall below $5. C) the firm's average cost of production was less than $10. D) the firm's total cost of producing 100 tons is less than $1000. E) the minimum value of the firm's average variable cost lies between $5 and $10.

e

Consider a good whose own price elasticity of demand is 0 and price elasticity of supply is 1. The fraction of a specific tax (i.e., tax burden) that will be passed through to consumers is: A) 0 B) 0.25 C) 0.5 D) 0.75 E) 1

e (when supply more elastic than demand buyer bears most of the tax/when supply less elastic than demand seller bears most the tax)

The production function for earthquake detectors (Q) is given as follows: Q = 4K^1/2*L^1/2 where K is the amount of capital employed and L is the amount of labor employed. The price of capital, PK, is $18 and the price of labor, PL, is $2. The production function exhibits: A) diminishing returns to labor. B) diminishing returns to capital. C) decreasing returns to scale. D) all of the above E) A and B, but not C.

e

5) A variable cost function of the form: VC = 23 + Q + 7Q^2 implies a marginal cost curve that is: A) linear. B) downward sloping. C) U-shaped. D) quadratic.

a

8) The key assumption required for us to use a linear variable cost function of the form VC = bq is that: A) marginal cost must be constant and equal to b. B) marginal cost must be increasing at rate b. C) fixed costs must be zero. D) marginal cost is always greater than average variable cost.

a

A monopolist has determined that at the current level of output the price elasticity of demand is -0.15. Which of the following statements is true? A) The firm should cut output. B) This is typical for a monopolist; output should not be altered. C) The firm should increase output. D) None of the above is necessarily correct.

a

A situation in which each firm selects its best action, given what its rivals are doing, is called a: A) Nash equilibrium. B) Cooperative equilibrium. C) Stackelberg equilibrium. D) zero sum game.

a

An effective price ceiling causes a loss of: A) producer surplus for certain and possibly consumer surplus as well. B) consumer surplus only. C) producer surplus only. D) consumer surplus for certain and possibly producer surplus as well. E) neither producer nor consumer surplus.

a

The production function for earthquake detectors (Q) is given as follows: Q = 4K^1/2*L^1/2 where K is the amount of capital employed and L is the amount of labor employed. The price of capital, PK, is $18 and the price of labor, PL, is $2. Suppose that you receive an order for 60 earthquake detectors. In the long-run, how much labor will you use to minimize the cost of 60 earthquake detectors? A) 1 B) 5 C) 10 D) 45 E) none of the above

d

Use the following two statements to answer this question: I. A firm can exert monopoly power if and only if it is the sole producer of a good. II. The degree of monopoly power a firm possesses can be measured using the Lerner Index: A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false.

d

What is the difference between a price support and a price floor? A) A price support is below equilibrium; a price floor is above it. B) A price support is above equilibrium; a price floor is below it. C) Government buys the excess supply to maintain a price floor, but not a price support. D) Government buys the excess supply to maintain a price support, but not for a price floor. E) There is no difference between the two.

d

When a firm charges each customer the maximum price that the customer is willing to pay, the firm: A) engages in a discrete pricing strategy. B) charges the average reservation price. C) engages in second-degree price discrimination. D) engages in first-degree price discrimination.

d

he marginal cost of a monopolist is constant and is $10. The marginal revenue curve is given as follows: MR = 100 - 2Q; The profit maximizing price is: A) $70. B) $65. C) $60. D) $55. E) $50.

d

7) Which of the following is true of cost curves? A) The ATC curve goes through the minimum of the MC curve. B) The AVC curve goes through the minimum of the MC curve. C) The MC curve goes through the minimum of the ATC curve, to the left of the minimum of the AVC curve. D) The MC curve goes through the minimum of the AVC curve, to the right of the minimum of the ATC curve. E) The MC curve goes through the minimum of both the AVC curve and the ATC curve.

e

A price taker is: A) a firm that accepts different prices from different customers. B) a consumer who accepts different prices from different firms. C) a perfectly competitive firm. D) a firm that cannot influence the market price. E) both C and D

e

Government intervention can increase total welfare when: A) there are costs or benefits that are external to the market. B) consumers do not have perfect information about product quality. C) a high price makes the product unaffordable for most consumers. D) all of the above E) A and B only

e

If price is between AVC and ATC, the best and most practical thing for a perfectly competitive firm to do is: A) raise prices. B) lower prices to gain revenue from extra volume. C) shut down immediately, but not liquidate the business. D) shut down immediately and liquidate the business. E) continue operating, but plan to go out of business.

e

Import tariffs generally result in: A) higher domestic prices. B) less consumer surplus. C) more producer surplus for domestic producers. D) a deadweight loss. E) all of the above

e

Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the: A) price-taking assumption. B) homogeneous product assumption. C) free entry assumption. D) A and B are correct. E) A and C are correct.

e

Suppose the state legislature in your state imposes a state licensing fee of $100 per year to be paid by all firms that file state tax revenue reports. This new business tax: A) increases marginal cost. B) decreases marginal cost. C) increases marginal revenue. D) decreases marginal revenue. E) none of the above

e

The U.S. government currently imposes a $0.54 per gallon tariff on all ethanol imported into the country. If this tariff were removed, then: A) the domestic ethanol price falls. B) the domestic quantity of ethanol supplied declines. C) domestic consumer surplus increases. D) domestic producer surplus decreases. E) all of the above

e